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More credit unions are attempting to become as relevant as mainstream banks by offering innovative products such as contactless debit cards and mobile-banking services, according to industry insiders.
Offering such products, the credit unions believe, can help attract younger customers, especially those who fall into the Generation Y demographic.
Credit unions commonly have trouble finding new customers, especially younger ones, according to a report by Boston-based Aite Group LLC, whose research suggests attracting new members remains a "critical challenge" for more than 55% of credit unions. Aite based that finding on the results of a July survey it did of 93 U.S. credit unions in conjunction with the Credit Union Executives Society, an independent membership association for credit- union executives worldwide.
"While [credit unions] do say they want to attract younger members, they are not expecting the changes to come very quickly," Christine Berry, the report's author and an Aite research director, tells ATM&Debit News.
Credit unions recognize the recruitment challenges they face, so they are altering their marketing strategies.
In January, PSCU Financial Services, one of the nation's largest credit-union organizations, launched a campaign to help promote contactless debit cards to existing and potential customers, including Gen Y consumers (2/5, ADN). Gen Y represents some 76 million individuals ages 29 to 33, according to industry estimates. The average credit-union member is 47 years old, according to industry insiders.
PSCU's contactless campaign came a week after it announced it would begin reselling mobile-banking services to its 1,100 member credit unions.
More recently, Co-op Financial Services, which services nearly 3,000 credit unions, last week signed partnership agreements to promote mobile banking to credit unions.
"Going forward, we need to find ways to become more relevant," Kim Hester, Co-op Financial executive vice president of network services, tells ATM&Debit News. "We can't continue to operate and be their parents' credit union because we won't be relevant and we won't reach [younger customers]."
Co-op also is experimenting with contactless debit cards. Earlier this year, two credit unions tested such products with their employees. Co-op already has the infrastructure to process those transactions, Hester says.
"We're beginning to hear a lot of talk about [contactless payments] from credit unions, and that's why we're ready if our members want to add that product," she says.
More credit unions soon may choose to convert to contactless debit cards now that several big-box merchants such as Home Depot Inc. and Best Buy Co. Inc. accept the payments, says Ron Silvia, PSCU director of debit and ATM product services.
"[Contactless cards] are one of those products, like PIN-debit, that was slow because of the investment. But once the return on investment is proven, the merchants seem to be moving swiftly into it," he says.
Gen Y consumers may find contactless payments appealing because [they] "want quick payment," Silvia says. "When they want to check out, they want to do it fast and you don't want to lose them at the checkout lane."
Recent Co-op and PSCU technology initiatives may not matter if credit-union awareness is not increased, says Hester, who believes a national campaign may help credit unions increase membership if approached properly. "But the challenge [with that] is getting the funding and getting credit unions to participate and cooperate," she says.
Some credit unions already have begun increasing their marketing through such social-networking services as Facebook and Twitter, according to Aite's report. Though 32% of credit unions surveyed said they were considering using social-networking Web sites somewhat, 18% said using such services is a high priority. ATM
