Younger credit union brands take risks . . . will you?

Many credit union leaders want it more than anything. It’s a top strategic objective in planning sessions, a top niche in branding sessions and a top target audience for marketing pieces.

What is it? Well, I already spoiled it in the title—it’s market penetration with younger demographics. But what does a “younger demographic” even mean? There are three main groups credit union leaders refer to when discussing how to appeal to this market:

One caveat: Millennials are hardly a younger demographic anymore, many of them already well into their careers and raising children. Still, they are younger than the average age of most credit union members (53 years old).

But whether you target older Millennials or the ultra-young Gen Alpha . . . you need to take some risks to reach them. Risks with your marketing, yes, but also risks with your products and services.

According to a recent Bankrate survey, 55% of parents with kids under 18 years old, 59% of Millennials and 65% of Gen Z were likely to receive credit denials in the past year. Out of those denied, 14% took payday loans to meet their needs. This data suggests the risk appetite for many institutions (including some credit unions) is still too conservative to effectively capture these groups.

It's time for credit unions to reduce that average age, and that means it’s time to accept some risk.

As mentioned above, you may need a less conservative risk appetite regarding your products. But before you get there, you need to double check that your brand attracts younger folks in the first place.

Remember: a brand is more cultural than collateral. It’s important to ask yourself if you’re fostering the positive, cause-oriented environment many younger people appreciate. If that nasty word “toxic” gets out to your membership about your internal culture . . . good luck getting younger.

Once you establish an incredible brand culture, transition that into sleek designs that can work dynamically across digital avenues (desktop, mobile, etc.). Create something people like seeing on their phone, credit card or other swag you hand out. Don’t underestimate aesthetics.

After you establish a solid brand direction, you need relevant marketing. The same principles apply here as they would to other groups:

Except those pain points and benefits differ from older crowds . . . and they even differ across the three younger generations. Gen Z is just starting adult life, so products like used auto loans may appeal to them. Life stage specific benefits like cell phone insurance or renter’s insurance attached to premium accounts are a good incentive.

However, targeting Gen Alpha really means targeting their parents (probably Millennials) and grandparents (probably Gen X). Early financial literacy, budgeting and college savings are important here.

The point: stick to the fundamentals but don’t assume they equally apply to everyone.

Let’s say you updated your brand and maximized your marketing—excellent work! You now have younger folks walking through your physical and virtual doors. But are they welcomed with open arms?

It’s one thing to attract people. It’s another to keep them.

Successfully marketing to younger groups only to deny them credit later sours their perception of you and pushes them to incipient fintechs and neobanks. Yet, it happens all too often. A board member will tell us how their credit union saved them in their 20s . . . but in the same breath, they talk about how the risk profile for younger generations is too high.

True. It is higher risk. You must accept that risk to make inroads with these groups. There may be more delinquencies and charge-offs. But should you pass by the orchard that is younger markets due to a few bad apples lying on the ground?

Obviously, be smart about it. Price these loan products so you don’t lose money but give a few more applicants a chance. Build relationships now that will bear incredible fruit in the future.

The biggest risk to your credit union today is not taking any risks at all. The financial industry is accelerating. Fast. Don’t let yourself fall several steps behind banking competitors. It’s time to recapture the youth market and drive your membership age down. Anything else just isn’t sustainable. Are you ready to take the leap?