How can a credit union stay relevant as things change with checking, cards and digital—and among generations?
The diversion of funds from checking accounts to such alternative accounts as PayPal, Amazon, Playstation, health savings accounts and robo-advisor tools is negatively impacting credit unions by diverting money away from checking accounts, according to Tony DeSanctis, senior director for CUES Supplier member and strategic provider Cornerstone Advisers, Scottsdale, Arizona. Cornerstone’s director of research, Ron Shevlin, calls this negative trend “deposit displacement.”
“Growing deposits, tied with a strong payments strategy, should be a top priority,” DeSanctis says. “Our research shows that the median new checking accounts per branch is down 18 percent year over year. Paying attention to generational differences can help to inform strategy and ensure you are acquiring customers in the channels they chose to interact, he notes.
“Chime Bank, for example, has entirely reframed its onboarding approach for direct deposit with customers,” DeSanctis says. “Rather than a method of forwarding someone’s pay to the bank, a staid and frankly boring presentation, it approaches direct deposit as a way for the customer to get paid two days early.”
DeSanctis recommends adopting a forward-focused payments strategy that moves towards a holistic view of the checking account instead of it being a primary payments vehicle for all of a member’s transactions.
Payments Strategy: Cards and Digital
The top 20 institutions own over 90 percent of the outstanding credit card totals, DeSanctis says, and CUs may be losing out on their piece of the pie.
“There’s potential to tap into with your members by creating unique and personalized offers—whether through an integrated product strategy or a more robust rewards infrastructure. The bottom line is, are you meeting member needs and offering attractive options that embrace changing technology and payments demands?”
Consider the Chase Sapphire card. It offers a robust value proposition, a sign-up bonus and valuable rewards—including 50,000 bonus points after spending $4,000 in the first three months.
“Chase didn’t market this card at the beginning but, instead, reached out to the bloggers to preview,” says DeSanctis. “It let this group decide the features most compelling for users, which included a huge sign-up bonus and incredible travel benefits. By finding new ways to parse consumer preferences, Chase was able to design a unique, attractive and innovative package.”
Credit card offerings should be differentiated and meaningful to a CU’s member base and support a broader strategy around growth in the overall relationship. And what makes a member choose a certain payment method—the payments “influencers”—are many. “Generation matters, though to what degree is debatable,” adds DeSanctis. “It’s due, in part, to age, experience and creditworthiness.”
DeSanctis offers these generational distinctions in the payments arena overall:
- When it comes to millennials and Gen Y, student debt in the U.S. is higher than it has ever been. Some people have student loan payments as large as a mortgage payment. Debt of this magnitude significantly impacts an individual’s borrowing power and budget and ultimately influences his/her choice of payments. This trend has led to credit cards not being adopted so quickly by this generation as by members of older generations.
In addition, such regulation as the Credit Card Accountability and Responsibility Act of 2009 makes it harder to approve credit cards for people under age 21, DeSanctis says. In the past, a credit card was front and center in many member transactions. Alternative payment methods like Venmo and Square will further disrupt payment methods for these younger generations and add to the loyalty disconnect.
- Baby boomers are more set in their ways, but willing to try new payment methods based on what’s in it for them. “For these individuals, it may be less about generational differences and more about crafting an improved experience,” says DeSanctis. “Also consider how older age segments are embracing Alexa, smartphones and social media; their use by older segments is on the rise.”
- According to DeSanctis, members of the “any-age, anywhere generation” buy what Google tells them to buy. This generation “dominates e-commerce and digital shopping and has forever changed how people buy and pay—and should create an evolution within the CU in how it positions and markets its payment products. This requires a deep understanding of what the consumer is experiencing or doing, whether it’s traveling, eating or shopping.” Responding to this generation may “require a shift in thinking – accepting that many transactions aren’t necessarily ‘owned’ by the card consumers carry in their physical wallets; instead, the transaction is owned by the card loaded in their digital wallets,” DeSanctis adds. “Top-of-wallet strategies, such as recurring payments, subscriptions and digital commerce, are essential for success with members of this group.”
Members are members for a reason, and it’s not all about price, concludes DeSanctis. “It’s really about your value proposition. CUs need to appreciate and better compete with their value proposition in the payments space, providing the best value proposition across the deposit, debit and digital platforms.”
Stephanie Schwenn Sebring established and managed the marketing departments for three CUs and served in mentorship roles before launching her business. As owner of Fab Prose & Professional Writing, she assists CUs, industry suppliers, and any company wanting great content and a clear brand voice. Follow her on Twitter @fabprose.