Getting Younger Important, But So is Staying Older

Maybe one of the most common “wish list” items of credit unions these days is the desire to “get younger.”

The average age of a credit union member is 47 years old. That average has been going up not down over the years. Back in 1989 it was 42.8 and in 2000 it was 44.7.
There are two core reasons credit unions want to get younger:

• A person’s peak borrowing years are between the ages of 25 and 44.
• Younger members are the building blocks of the future membership base.

I am on board. I think credit unions must get younger and it’s no mystery how to do it. Credit unions need to have the technology services younger consumers crave. It’s hard for seasoned CU leaders to understand this, but you can have younger members coming in the doors now who never lived without the Internet. In a few years the same will be said about younger members who never knew a world without the iPhone! They will require remote services, ranging from the basic online banking all the way up to Remote Deposit Capture (snapping pics of checks and depositing via mobile devices). Using “Apps” for them is as common as using the U.S. Postal Service for older Americans. Marketing needs to consider social media and the less traditional channels to reach this segment.

But beyond the services, credit unions have a secret advantage over banks in attracting younger consumers. They tend to be more values-based. They have seen the toll big bank miscues had on our economy and their families. They are more apt to be conscious of “going green.” As nonprofit financial cooperatives that exist solely for the savings and lending needs of their members—with no outside shareholders to please—credit unions offer young consumers that value proposition as “values-based”.

It’s an old story talking about getting younger. If credit unions want to get there they need the technology, the “values-based”story, and the products (student loans, green auto loans, all the tech bells and whistles, financial literacy programs, etc.) to do it. They need a strategic commitment to getting there that is backed up by measurable goals. Credit unions can do it.

But credit unions should not discount the other end of the spectrum. Consider that a whopping 50 million Americans will retire within the next 10 years. Consider a CUNA survey that showed two-thirds of pre-retirees lack a retirement plan and one-third of credit union members would leave their credit union for a financial institution that offered formal retirement expertise. The same survey showed Baby Boomers do not feel credit unions play a significant role in their financial lives.

With all the talk of getting younger, credit unions must stay attune to the needs of their older members. Credit unions certainly want loans above all else, especially in this market, but older members can drive revenue in other ways. The credit union system now sees approximately 25% of its revenue driven by non-interest income.

That’s a startling number. The top sources of non-interest income are the following:

• NSF/Overdrafts
• Credit/Debit Interchange
• Servicing Rights/Mortgage Sales
• ATM Fees
• Investment and Insurance Sales

Consider that the two top sources of non-interest income (NSF/overdraft and credit/debit interchange) have been in the crosshairs of Congress and regulators. New overdraft regs were put into place in 2010 that aim to ensure members are aware of overdraft potential at the ATM and point-of-sale. And last year Congress passed legislation that allows the Fed to basically price-fix interchange. Though there is an exemption for smaller institutions, the bottomline is interchange revenue may trend down, especially with more consumers using PayPal and alternative payment methods.

A quality source of non-interest income could come from services designed at the retirement needs of older members. In times of low-lending like today, credit unions need more transaction based non-interest income. Couple that with the lack of retirement planning for the 50 million Americans nearing retirement and you have a compelling story for credit unions getting deeper into retirement planning/investment sales and service. We know credit unions are trusted by their members, so who better to offer investment sales and service.

Credit unions must find a way into that niche, whether through CUSO partnerships or partnerships with local broker/dealers, etc. They also need to improve their storefronts to look more retirement minded with online retirement calculators, retirement content, and consider the power of providing education to members on retirement.

It’s true that credit unions must get younger. The average age of 47 years old will have to trend down, but the older segment of membership needs its credit union now more than ever and they provide an opportunity for credit unions to drive non-interest income.

Strategic planning that Gets Younger and Helps Older Members should be our new mantra.

Paul Gentile is the president/CEO of the New Jersey Credit Union League, the state trade association for New Jersey’s credit unions. New Jersey is home to 215 credit unions serving 1.2 million credit union members and with a combined $10 billion in assets. Gentile has helped re-energize the New Jersey Credit Union League by launching new branding efforts, programs, and political action. Prior to his role with NJCUL, Gentile served as the editor and publisher of Credit Union Times, a national weekly publication covering the credit union movement. He is a well-know figure in the credit union industry and has written hundreds of stories on all aspects of the industry.