The Echo Boom Crosses the Digital Divide: Guest Opinion
Call them what you will. Gen X, Gen Y, Millennials or the Echo Boom. They are the next generation of consumers who have crossed the bridge from a brick and mortar world to an environment that thrives on digital interactions.
More importantly, they expect credit unions to be there to serve them digitally by putting information at their fingertips 24/7. This population, comprised of 70 million young adults 18 to 35 years old, is the market segment that will sustain credit union growth and relevance over the next 20 to 30 years. Fortunately, they also happen to embrace the same values that credit unions were built on: trust, community and service. Therefore, credit unions can be perfectly poised to meet the demands of these coveted consumers when they go shopping for financial services, provided they are able to deliver digital financial services.
Without question, opportunity for growth in this segment is abundant. Credit unions added a record setting three million new members in 2012. Now the challenge is to delight these members with engaging and innovative services that exceed their expectations for convenience and value. But it is important to note, that while younger consumers are driving early adoption of mobile technology, mobile is expected to quickly become an essential service for consumers of all ages. So, for a number of compelling reasons, now is the time to move.
A recommended first step into this market is partnering with a flexible mobile wallet solution that is not constrained to a single brand. For example, Lake Trust Credit Union in Lansing, Mich., was the first credit union in the U.S. to deploy MasterCard’s MasterPass digital wallet service. Like other mobile wallets, MasterPass provides online shoppers with a simple checkout process by eliminating the need to enter detailed shipping and card information with every purchase.
The mobile wallet is also a building block for a host of other opportunities. Credit unions can leverage the mobile channel to deliver value-added services such as rewards, coupons, location-based offers and other analytically driven services that impact the spending behavior of consumers.
There is enormous attention focused on the new entrants into the mobile payments arena with the likes of PayPal and Apple iTunes competing for the eyeballs and fingertips of consumers. The likely goal of this new breed of mobile financial services providers is to ultimately offer products that directly compete with credit unions. Their strategies center on giving consumers precisely what they demand: information, ease of use, speed and convenience. Solutions from these interlopers can cut out traditional aspects of the value chain, including the revenue from payments interchange.
So the market for mobile payments technology represents both an opportunity and a threat when viewed through this lens. The opportunity is clearly increased revenue and member loyalty. The threat is the looming recognition that credit unions that are not adopters of mobile technology can lose a significant share of both their payments income and future membership.
That’s why the real motivation for offering a mobile wallet should be more than just satisfaction of your current members. Each credit union needs to demonstrate a commitment to innovation that attracts new and younger members and creates the opportunity for enduring relationships, which is vital to the continued success of our industry.
Venturing off into this brave new world can be intimidating. The most efficient path to success for credit unions is a collaborative, strategic partnership with an organization that has already forged relationships with technology leaders and innovators. Such relationships can streamline a credit union’s entry into the digital and mobile payments game and deliver the provisions a credit union needs to survive and thrive across the digital divide.
Fredda McDonald is executive vice president of the credit union experience division at PSCU.
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