As The 2020s Dawn, Why Credit Unions Need Millennials

Three months away from the end of 2019 and the dawn of the 2020s, the state of the credit union is stable, due to a healthy foundation that is already in place, according to Charles E. (Chuck) Fagan, CEO of PSCU.

As Fagan noted in an interview with Karen Webster, membership in credit unions based in the United States tops 115 million and loan volume continues to grow, as does asset size.

“You’re seeing membership grow in the 4 percent range pretty consistently,” he said. As has been seen in other industries across financial services, credit unions, too, are consolidating, which means that scale is solidifying, too. CUs are no longer confined to operating primarily as regional players, moving beyond the confines of original charters that had limited them to, say, specific communities or employers.

The Millennial Challenge

Among the greatest opportunities for CUs lie some significant challenges, too — namely, tapping into and serving the financial needs of millennials.

There’s a younger generation in the U.S. that has yet to learn what a credit union is — and what CUs can do for them, Fagan told Webster. To get there, to increase awareness and interest on the part of younger consumers, CUs, of course, must look to digitize their products and services.

Drilling down into the services that help capture share of mind and wallet of the next generation, Fagan pointed to the fact that hundreds of CUs can, and do, partner with PSCU to leverage technology and scale to increase demographic penetration.

Digitization, he said, helps level the playing field for CUs competing with bigger players. Traditionally, he said, CUs have been well known when it comes to auto lending, and they have been making inroads into mortgage lending.

Pairing those strengths with robust credit card offerings, he said, helps CUs market a full suite of financial offerings that are comparable to marquee FIs.

“As the consumer looks to broaden the relationship,” and sign on to more credit, checking and savings accounts, he said, “they can come back to that trust factor. Digital enablement has occurred and allowed that value to be obvious to them 7/24/365 no matter where they are.”

By way of example, he said, PSCU can help partners gain traction with offerings such as digital wallets and mobile payments. Credit unions need not be on the bleeding edge when it comes to technology, he said, but they need to do more than exist as fast followers. He added that CUs need to be cutting edge with technology, especially as FinTechs make it a goal to gain market share from traditional FIs, who are, of course, also focused on delivering satisfying customer experiences.

“And now loyalty has to take on a new form,” he said, cemented through bits and bytes, especially as the networking giants such as Visa and Mastercard report that 65 percent of terminals in the United States will be enabled for contactless transactions as early as the end of this year.

He said CUs could drive loyalty by delivering seamless experiences that cut across physical and digital channels. Depending on demographics, some members may wish to conduct business primarily via phone, others in person at the branch, and still others may embrace self-service options.

Gone, then, are the days when multi-year relationships could be forged from the fact that the CU had a consumer’s checking account and direct deposit of paychecks set up. Now the relationship has moved beyond writing checks to credit and debit cards. Add in mobile banking and rewards programs, and he said a complete member experience needs to be built around payments, and eventually, faster payments.

About faster payments, Fagan noted that PSCU has representation on the Faster Payments Council. “Obviously we are in touch with the Fed now that they are announcing new rails,” he said, “and with all the work that is being done around this … there’s an opportunity for credit unions to be active players. Being fast followers will not be enough.” PSCU’s partnerships with Visa, Mastercard and Fiserv will shape strategy as the faster payments landscape continues to evolve, he said.

Beyond the drive to retain and grow membership and tackle faster payments, Fagan said CUs must be ever-vigilant in the fight against fraud.

“If you think about all of the ‘cyber things’ that have been happening — it seems like new ones come out every day. And one credit union experiencing a cyber hit is always a huge concern. So from the industry perspective, one of the great assets we have is collaboration,” he told Webster.  Even amid collaboration, and sharing of best cyber practices, he said, “it’s a new report card every day and those fraudsters are not willing to take pay cuts.”