Credit unions are attracting a new generation. Here’s what other businesses can learn from their success.
Alec McEuen is tasked with teaching youths from middle school to college about personal finance.
But McEuen, 19, has only been old enough to have his own checking account for two years. He’s Tropical Financial Credit Union’s “spokester,” and is employed by the Miramar-based credit union to teach other millennials about money.
“Being as young as I am, there is a lot I don’t know about finances,” McEuen said. But for him, the credit unions’ hands-on, for-the-member approach aligns with his ideals as a fledgling businessman.
McEuen’s passion is racecar driving, which he got into at about 15. He needs sponsors, so he’s amassing a following and selling branded products. Tropical, meanwhile, is capitalizing on McEuen’s charisma, entrepreneurial spirit and age to attract millennials.
“When you’re jump-starting a business, you’re just trying to break even and keep reinvesting money back into the company,” McEuen said. “That’s how a credit union works. Instead of the money going to shareholders, the money goes back to customers.”
Three days a week, McEuen is posted at his desk in Tropical’s offices, listening and learning about finances for a new generation. Tropical, in turn, is listening to him.
About 75.3 million people in the U.S. were born between 1980 and 2000, and that group is hitting the markets today, impacting the workforce, retail, lending and more.
Savvy businesses are constantly seeking ways to understand and capture millennials as customers. Credit unions, it seems, are doing a better job at retaining and attracting the in-demand generation than traditional big banks.
Studies show millennials – also known as Generation Y – are more satisfied with credit unions than with banks. They’re suspicious of large financial institutions after the financial crisis of 2008, and they remember missteps like Bank of America’s infamous attempt to charge $5 a month in debit card fees in 2011. Consequently, millennials are shunning big banks for smaller community banks and credit unions.
South Florida credit unions’ efforts to attract millennials is working, even as they operate on tiny marketing budgets.
After years of losing in the 18- to 25-year-old bracket, financial institutions such as Tropical have seen an uptick in millennial membership, thanks to programming like the spokester. There’s also an online video campaign hinged around the “League of Financial Goodness,” a promotion that will reward one local hero $2,500 in cash and $1,000 to donate. The nomination is online, and the word was spread through the millennial toolbox – Twitter, Instagram and Facebook.
“Eighteen to 25 years old is the target group,” Tropical President and CEO Rich Helber said. “You make it fun. And then you put that out there.”
Growth of Tropical’s Gen Y segment was stagnant in the years leading up to 2013, when the credit union launched its Young and Free program. The credit union then saw rapid growth in its target segment, jumping nearly 4 percent to reach 18.1 percent of total membership as of Dec. 31, 2014, VP of Marketing Amy McGraw said.
Young and Free, which included Tropical’s original spokester, Alysha Klein, was so successful that, even though the program ran its course, the credit union is keeping a millennial point person around in Klein’s younger, racecar-driving counterpart.
“The biggest problem with millennials is that credit unions had a bit of an identity crisis,” McGraw said. “That has been getting better due to the big bank blunders over the last few years.”
There are two ways to think about credit union’s success with millennials, said Jacques Hart, president and CEO of Miami-based Roar Media, a digital marketing and public relations company. “One is around why millennials would consider the credit union. The flip side is, ‘What are they doing right?’”
Credit unions have at least one major advantage when it comes to attracting millennials, Hart said. Millennials are attracted to the hyper-local, to the smaller businesses, to the institutions where there’s familiarity and trust. That feeling is lost at a bigger bank.
“There is a lot that goes into the psychology and mentality of millennials that jibes well with a credit union,” Hart said.
In some ways, banks are helping credit unions win over millennials – by driving them away. About one-third of millennials are open to switching their banks in the next quarter, and 53 percent don’t think their banks offer anything different than competitors, according to a survey from Viacom Media Networks, previously MTV Networks.
Perhaps the biggest millennial disruption coming for banks: One-third of millennials don’t believe they need a bank at all, according to the survey.
“Millennials have a fair degree of mistrust with large financial institutions, particularly coming out of the Great Recession, where there was a lot of information surrounding larger banks in terms of how they took advantage of customers,” Hart said.
In a study from California-based CO-OP Financial Services, 81 percent of credit union members reported “outstanding customer experience.”
CO-OP is, admittedly, a nationwide credit union service organization. But another survey, from California-based J.D. Power and Associates, found that just 78 percent of Gen Yers report satisfaction with banks.
And J.D. Power found that big banks were losing customers at a faster rate to smaller banks and credit unions due to poor service and increased fees.
Big banks do not believe they’re losing the battle to attract millennials. They say Gen Yers stay because of technology.
“We see that more and more people want the opportunity to do finances on the go,” said Maribel Ferrer, a spokeswoman for JPMorgan Chase & Co.
A Javelin Strategy & Research study found that more than half of millennials bank at the nation’s largest institutions.
“Wells Fargo’s millennial customers use all of our channels,” said Joe Atkinson, the bank’s South Florida Region president.
“Our member banks continually serve the needs of all their customers,” said Maggie Seidel, a spokeswoman for the Washington, D.C.-based Consumer Bankers Association.
One thing big banks have to their advantage is a marketing budget to match their size. Credit unions don’t, but by capitalizing on the natural meshing of a credit union’s mantra with millennials, institutions like Pembroke Pines-based Power Financial Credit Union keeps Gen Yers coming back.
“The tough thing for a credit union is that it’s really hard to compete, from a marketing standpoint, with a major competitor. Two 60-second commercials on prime-time television is pretty much our marketing budget,” said Brian Warfel, executive VP of retail delivery and branding at Power Financial. The company instead relies on “blue-collar advertising, like social media and a clean website.”
Credit unions also rely on word-of-mouth marketing; 70 percent of new members are referrals, Warfel said, which means that customer service and attention to detail is paramount to retaining and attracting members.
Power Financial has quarterly meetings with its members to determine what they want in a financial institution and, because of the hands-on nature, the results often mimic actual member desires, not what executives in a boardroom several states away think.
Nikolay Lendman, 17, was born at the tail end of the millennial generation. But he has a credit union to thank for his entry into the U.S. His parents relied on the personal nature of a credit union for one of the more important withdrawals of their lives.
“When I was adopted from Russia, my parents went to get money out of a credit union for the adoption,” Lendman said.
For his first paycheck, he started an account at Power Financial. He’s about to start his senior year in high school, but he’s already thinking about college.
“I do plan on using Power Financial for the possibility of a student loan. I would go to them,” he said. “Credit unions give you a better personal level of service than a big corporate bank.”
There’s one last thing credit unions rely on to keep millennials: loyalty. Warfel knows that millennials like to shop around for the best deal, but in comparable situations, a millennial will be loyal to the institution that treats them best.
Danielle Sarentino, 24, was a Tropical member before going to college in Tallahassee, where she added an account at Wachovia, which had more branches.
“I had Wachovia … but I got overdraft fees,” she said. “Tropical doesn’t do that.”
When she moved back to South Florida after school, it was back to Tropical.
Tactics for attracting millennials
Use a meme. Miramar-based Tropical Financial Credit Union’s millennial “spokester” Alec McEuen knows how to tailor his presentations to the audience’s demographics. For high school and college students, McEuen knows that using memes is an entirely appropriate way to break down account fees and the importance of college planning. When approaching millennials, say good-bye to the dry PowerPoint, and hello to Grumpy Cat.
Listen. Pembroke Pines-based Power Financial Credit Union hosts quarterly meetings with its members, breaking out segments of different age demographics. By listening specifically to what each demographic wants, the credit union is better able to tailor services to its members.
Mirror. Tropical found that the Young and Free Florida program and millennial spokester, launched in April 2013, helped to increase its proportion of Gen Y membership by almost 4 percent over a two-year period. There’s nothing like having a representative of a business that is the same age as the group you’re trying to attract.
Engage. At Sunrise-based BrightStar Credit Union, events such as a springtime scavenger hunt spreads the word about the institution’s business. BrightStar offered $100 and $200 prizes over a five-day period for participants over the age of 18 that live, work or go to school in Broward County. Participants were updated daily on Facebook, which is one way to drive social media engagement for a business.
Create shareable content. Tropical’s latest marketing push is its “League of Financial Goodness” campaign, complete with an online animated video that’s shareable across social media platforms such as Facebook and Twitter. Millennials will spread the word if the message is something they like and, for businesses, that’s free marketing. The campaign also allows South Floridians the chance to nominate a local hero for a contest, the winner of which will receive $2,500 in cash and $1,000 to donate.
Since launching Young and Free Florida and its “spokester” program in early 2013, Tropical Financial Credit Union has seen an almost 4 percentage-point increase in its Gen Y membership. That’s not bad, considering the average age of the credit union’s members hovers somewhere around 46.
The Young and Free program came to an end in September 2014, which may account for the slowdown in growth afterward. But the spokester was so successful that Tropical brought on a newer, younger model – 19-year-old Alec McEuen, who began at the beginning of the summer and is gearing up to start making the rounds in the 2015-2016 school year.
By the Numbers
A survey of over 10,000 participants about companies in 15 industries found that banking is at the highest risk of disruption among millennials. For credit unions, that’s good news.
1 in 3 millennials are open to switching banks in the next quarter
33% of millennials don’t believe they need a bank at all
53% don’t think their bank offers anything different than competitors
71% would rather go to the dentist than listen to bank-speak
Source: Scratch, Viacom Media Networks