The Millenial Power of Prepaid
Between the ages of 13 and 19, teens begin to make more of their own decisions – everything from what clothing to buy to which college to attend. Unfortunately, credit unions aren’t always on the winning side of teen independence.
My own experience is a perfect illustration. A legacy member, I never questioned my family’s credit union membership until I got a job at a mall. One of the megabanks had a branch next to the store where I worked, so out of convenience, I left my credit union to open a checking account with the megabank.
The credit union had given me no reason to stay, so I didn’t give the decision much thought.
Credit unions know losing touch with this demographic is no longer an option. Carrying a relationship from the teen years through young adulthood is crucial to the sustainability of their businesses. How to maintain those relationships, however, is less understood.
Enter prepaid products. Two products in particular – reloadable cards and gift cards – have the potential to solidify existing teen relationships, as well as draw in new Gen Y members.
Reloadable Prepaid Cards for Teens
While features and benefits are valid marketing messages; it’s tapping into the emotional side of the equation that really sells the concept. Reloadable cards hold the key to satisfying the most important desire for teens – independence. For parents, they deliver an entirely different, yet equally as valued need – protection.
Another bonus, teen reloadable cardholders have the freedom to make online purchases. Keeping track of those purchases in a modern way is also possible, including free text message services to reloadable cardholders that make checking balances simple and accessible in a way teens prefer to communicate.
And, a reloadable card enables parents to easily provide emergency funds for their traveling teen – either online, in an issuer’s branch or at many retail and convenience-store locations.
For a credit union, the reloadable card offers the opportunity to keep an eye on the potential profitability of these coming-of-age members. A credit union can pull income and spending pattern details for a teen reloadable card carrier – with data made available through backend reporting tools. The cards essentially allow teen members to build internal credit with their credit union, further encouraging a lasting relationship.
Reloadable cards also provide issuers with an option for less-than-profitable checking members because of the potential for fewer fees —less interchange, no overdraft charges and there is never an account minimum to be maintained. Introducing these members to a reloadable card may allow the issuer to maintain what could become a mutually beneficial and long-term relationship.
Gift Cards for Teens
For their part, gift cards continue to be a preferred gift among teens. Again, we are back to freedom of choice. What’s more, consumers have a high perceived value of gift cards. When asked by First Data whether a recipient would prefer a $30 gift or a $25 gift card, nearly 80% opted for the gift card.
An advantage gift cards offer parents is the inability to use them at ATMs. This may sound negative, but some parents are interested in monitoring their child’s spending. With a gift card, a parent can give a child access to a secure payment method that works at most major retailers – online and off – but doesn’t allow for ATM use.
Given the above, it’s easy to see why parents may be attracted to gift cards, but how does this translate to retaining relationships with the Gen Y market?
It boils down to branding. As recipients of a credit union-issued gift card, teens continue to positively associate their CU with financial freedom.
Is There Room for Both?
A fear of some credit unions is that offering a reloadable card could steal gift card sales. In fact, reloadable and gift cards complement one another.
Not only is there room for both at a community credit union, there is a need for both. While gift cards are generally used to satisfy the short-term needs of a member, reloadable cards are designed to begin or to solidify a long-term relationship.
Of the 13- to 19-year-olds in your member base, how many are lifelong fans of your credit union?
Konrad Christensen is retail payments product manager at The Members Group in Des Moines, Iowa.