Service Credit Union On Overcoming Digital Speed Bumps To Win Younger Consumers

It’s no secret that credit unions (CUs) tend to appeal to consumers from older generations, with members being 47 years old on average. CUs around the world have worked hard to lower this number by attracting younger consumers, though — and with good reason. Millennials spent $1.4 trillion last year — more than any other generation. Despite the eagerness to appeal to this desirable demographic, however, many credit unions are still coming up short.

Dan Clarke, senior vice president of member experience at Portsmouth, New Hampshire-based Service Credit Union (SCU), recently told PYMNTS that he knows the problem well. SCU, which was established in 1957 to support U.S. military personnel and their families, has 51 branches in New Hampshire, North Dakota, Massachusetts and on U.S. military bases in Germany.

Clarke said that credit unions shoulder some blame for failing to adequately explain their benefits to prospective members, especially younger consumers who are just starting to find their financial footing. “Teenagers certainly wouldn’t know the difference between a credit union and [a] bank,” he said. “I don’t believe the credit union industry as a whole has done a good job [of] educating the public. It’s been a tough haul.”

And this is not the only challenge CUs face. Clarke explained that competition for younger consumers has become particularly fierce as more FinTechs launch daily, relying on their reputations as technology-focused institutions to find favor among this demographic. “I don’t think you can go five minutes without [seeing] a new FinTech app that you can download, one that’s catered to young customers,” he said.

Overcoming Technological Challenges

Competing with FinTechs and other digitally savvy financial institutions (FIs) means that credit unions will have to get innovative, especially as younger consumers value and expect technologies that can help them bank digitally. This has become even more crucial during the pandemic, as consumers of all ages avoid brick-and-mortar branches.

Despite these considerations, many CUs have struggled to stay up to date with the latest technologies. Clarke noted that they tend not to rush toward digital transformation, instead taking more measured approaches to such innovations. “Certainly, credit unions are not known for their high-end technology as a whole, so you don’t see a lot of credit unions on the cutting edge of technology,” he said about online banking capabilities. “I mean, as far as even dial-up banking, going back to the mid-’90s, it was a big deal for credit unions.”

CUs also tend to be risk-averse and more conservative than other FIs because they hold members’ money, he said. This means their approaches are often different than those of banks beholden to shareholders, who expect to see a return on their investments when certain stock prices rise or when companies are sold or merge. “Credit unions are actually using their members’ money,” Clarke said. “The last thing we would want to do is make a very bad investment decision, because that would impact our ability to offer our members a good dividend rate or a good loan.”

CUs therefore must carefully consider the benefits of certain technologies before investing in them. Outreach efforts must also hit the mark, as failure to notify potential or existing members about these new tools and what they offer could undercut their usage. “Are people going to use it?” he said. “How do we get the word out? I’m still amazed at how many people don’t realize that credit unions offer mortgages.”

Finding What Works for Younger Consumers

Taking note of the technologies that younger consumers seek is the first step toward helping CUs reach new demographics. As Clarke noted, these consumers value the ability to do almost everything on their phones. SCU is trying to meet this need with a mobile banking experience that allows members to accomplish tasks that would normally be handled in-person at brick-and-mortar branches.

Partnerships can also help credit unions tout their offerings and benefits to potential members, he said. SCU recently signed on as a sponsor for the University of New Hampshire’s athletics program, for example. The credit union also has a branch at the university intended to help build membership among younger consumers. It previously offered free pizza on Fridays at events that allowed students to learn more about the advantages of opening accounts with CUs and to enter contests for unique prizes, such as dormitory room makeovers.

Credit unions that are eager to buck their demographic trends are working to appeal to younger consumers as they bring their operations into the future. Rather than relying on baby boomers and other long-term members to get the word out for them, CUs must invest in the technologies and outreach efforts that can help them curry favor with younger generations in an increasingly digital world.