Research firm Forrester predicts that the number of households that bank online will grow by 55% over the five-year period of 2006 to 2011. The total online banking penetration is projected to reach 76% of households by 2011.
While this number is amazing, the real story lies in the growth of a key demographic of online bankers. The growth rate of online banking among Generation Y members will be 136% during this same period of time. These consumers are people born from 1976 to 1990 and as they age, they are becoming an increasingly important buying force. So how should the credit union adjust to take advantage of this change? As a foundation for all marketing to Gen Y credit unions must upgrade their websites to offer up web experiences that help turn the Generation Y visitor into the Generation Y member.
A Unique Demographic
Generation Y is a unique demographic. As financial services marketers, credit unions need to understand that this group has grown up with technology and is very comfortable with it. Unlike other demographics, the television, newspapers and other mass marketing communications vehicles are not their primary source of new product information.
Today innovative financial institutions such as Wells Fargo are testing new marketing approaches such as social networking to find ways to make their brand pertinent to Generation Y. Furthermore, they understand that in order to connect with this critical audience they need to go where they are and speak their language. So investments in social networking represent the opportunity to connect.
Generation Y, like all other groups a credit union deals with, requires a great user experience. They demand that the answers to their questions be available online and expect that finding those answers will be an easy process. As a result, Generation Yers demand a quality user experience from websites they visit. Websites are the most significant touchpoint for this group and, unfortunately, they are usually the weakest link in the service delivery channel for credit unions. The bottom line is that credit unions must adapt to this market or succumb to dramatically lower growth in the future.
Credit union executive teams that understand this opportunity and take action will be serving future generations of credit union management by handing over the reins of an organization that has the right mix of generational membership. Those that do not see the opportunity or take the right action will be setting up future management teams for a more difficult operating environment.
Typically, CU websites are a mesh of information that is not structured to address the needs of Generation Y visitors. This often stems from the fact that they are designed according to how a credit union views itself. For example, it is common to see a website that mirrors the way the credit union’s departments are segmented, even though a prospective member may not care. The credit union needs first to generate awareness through education of the products and services that it offers. It is this product awareness that is the first step in developing a stronger relationship with members.
Whether visiting a credit union via a brick-and-mortar branch or online, potential members must have a positive experience and gain an appreciation for how you can help them in order for you to have any hope of turning them into a member. When someone walks into a branch for the first time, if no one answers his or her questions and the products and services don’t meet the individual’s needs, he or she has a negative experience. Chances are the prospective member will not return–would you?
In the offline world, a positive experience occurs when the visitor is greeted upon entry, the credit union employees understand his or her needs and product suggestions are made based on that information. The importance of that same welcoming experience applies for the credit union website. Just as a credit union ensures that its frontline staff is focused on customer service, the website needs to provide that same level of service and needs prediction. Most CU websites do a subpar job of courting the prospective member. The future of credit unions depends on providing great service. While many credit unions do a great job of this in branch, the problem is that this competitive advantage is not being consistently replicated online.
Exacerbating the Challenge
This challenge is further exacerbated when recent stats indicate the average age of credit union members is getting older. Fundamentally, credit unions are not capturing enough of Generation Y. Megabanks understand the opportunity, and invest heavily in serving their customers online. It is their most cost effective delivery channel. Their future depends on new account growth and they’re tapping in to the revenue potential that Generation Y presents. Financial services as an industry leads online ad spending. Credit unions will not be able to effectively compete unless they make the most of the online channel.
For credit unions that are committed to remaining relevant to their members, the credit union website can play a key role in creating a successful future. It will take an organizational mind shift and require a commensurate budgeting commitment from the credit union management to make this kind of online success a reality. Isn’t the next generation of your membership worth it?
Craig McLaughlin is CEO of Extractable, Foster City, Calif. He can be reached at cmclaughlin
