by Christian Riepe, SVP of Insights and Analytics
Do credit unions have a generational problem? Credit union memberships are becoming increasingly older and attracting and retaining fewer Gen Z and Millennial members. What is it about credit unions that is not attracting these younger members? Based on recent research there could be a number of explanations, but two of the most common answers are dissatisfaction with fees and overall lack of awareness of credit unions and their benefits.
Fees That Feel Unfair
A recent article on Financial Brand about credit union satisfaction explains that members in their 20s and 30s are more likely to complain about fees than are their older counterparts. What is it about fees that is really bothering these younger customers? It’s hard to say for sure, but in large part it’s about their expectations. Fees are a standard part of banking, but for the younger generation they hit harder than for older members. Gen Z and Millennials are struggling economically more than their parents and grandparents generations did – it’s harder to buy a home, more of them are staying at home, and the job market is tight.
We recently completed a study for a credit union in Texas looking at redesigning its overdraft protection product. In that survey , the structure of the fee system was the primary driver of interest in the product, more so than even the amount of the fee itself. What this means is if the product is set up in a way that seems fair to the member, and the member feels like they’re getting a good deal, it will lead to satisfaction. Sounds like a no-brainer, right? But too many credit unions are designing their fees based on financial analysis and just assume that if members ask to remove a fee, then we’ll do it and they’ll be happy. But many members (especially the younger ones) are not aware that they can do that, which just feeds into the cycle of dissatisfaction. A better solution for credit unions is to actually test out their product/fee ideas with their members.
Awareness Gap Hurting Growth
Another common challenge that credit unions have with reaching younger members is a general lack of awareness. They are either unaware of their ability to join a credit union or are unfamiliar with the value that credit unions provide. Research from McKinsey highlights the challenges that credit unions have with reaching Gen Z and Millennial members. These generations have more affinity (and usage) of banks than for credit unions.
In our own research for a credit union in California, we found similar results. Gen Z and Millennials have lower overall awareness of credit unions, less familiarity, and less affinity for credit unions than do older generations. This translates directly into fewer young members.
A Generational Wake-Up Call for Credit Unions
Baby Boomers comprise too large a proportion of credit union membership to support long-term growth. Credit unions need to make a more concerted effort at building their relationships with younger generations to replace the business lost as the Baby Boomer generation ages. Build awareness about the benefits and availability of credit unions. And find ways to connect with Gen Z and Millennials on fees and designing other products that meet the needs of these younger generations.
Ready to discover if your credit union is experiencing a generation gap? Contact us today for a free consultation, and to learn how ReconMR can help you bridge the gap between you and your members.
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