Gen Y and Credit Unions: Debate
Credit unions make no secret about their desire to attract Gen Y members. But are the Millennials worth the effort? On the one hand, the generation's emphasis on business ethics and supporting local businesses are a custom-fit for financial cooperatives. But on the other hand, the generation is burdened with unemployment or underemployment, as well as historically high student loan balances. Neither is good news for credit unions attempting to grow lending programs.
Read two opinions below that argue both sides of the Gen Y debate.
Why Gen Y? Because credit unions can’t wait.
By Ryan Ruud
A few weeks ago there was an opinion piece in Credit Union Times ("Gen Wait: Millennials Underbanked, Underfunded." Jan. 13, 2014) that seemed to suggest that the Millennial generation, those born somewhere between the early 80s and the early 2000s, were a lost generation.
In many ways the net generation has its fair share of battle scars. The piece correctly cites the mile-high student loan debts, however arguably provides some questionable advice to credit unions adapting to the digital era and what role millennials play in influencing digital strategy.
The largest generation, not the small and over-indulgent
Ignoring what’s become the largest generation since the boomers puts any business, especially credit unions at risk. Depending on where you look and how they mark the beginning and end of the generation, the size of the population ranges from the same as the boomers according to Pew Research, 76.3 million or 27.4% of the population (1% more than boomers) to 86 million or 7% larger than the boomers according to Barron’s. The Brooking’s Institute even reports the generation is 30% larger than the boomer’s.
Ignoring a generation of this size just for the shear buying power alone would be foolish. But it’s not just buying power we’re discussing. The piece also claimed pundits have been “scaring credit unions into millennial-oriented products like mobile banking, mobile wallets and NFC.”
Ignoring early adopters is equally as risky.
Let’s examine the data and popular opinion around both buying power and the digital influence of this generation and why ultimately credit unions can’t wait.
The facts: Economic power
The great recession provided a front row ticket to finance and economics in motion for the millennial generation. Just as most of the generation was coming of age and entering the early years of adulthood, the ground beneath them and the rest of the country gave way. Arguably, living through the crises of 2008 and the years that followed would shape how the generation felt about money. Joblessness and financial discomfort are not indicators of how a generation behaves. They are indicators of how an economy raised the generation.
But interestingly enough, that big ol’ generation has big ol’ buying power and now that the economy is turning the corner and the generation is starting to age, key life moments are occurring which also are triggering key financial moments.
Getting jobs and being successful at them
According to research by Badgeville, by 2025, Millennials will be 75% of the global workforce. Today 15% are already in management with 1 in 10 making over $100,000.
Millennials age 25 -34 have recovered nearly 75% of jobs lost during the recession according to Dick Hokenson, an economist who heads ISI Group's Global Demographics Research team, cited in a Barron’s article last year.
In the same report previously cited from the Pew, the top priorities for the Millennial generation is not texting or partying as some jaded pundits might argue. Instead the top 4 concerns point to socio-economic opportunities. According to PEW data millennial priorities are:
- Being a good parent
- Having a successful marriage
- Helping others
- Owning a home
In 2012, clothing retailer Macy’s launched a new strategy aimed at Millennials. Not to capture Facebook attention or Twitter. But to capture a share of the more than $65 billion spending power of Millenials. Yes, Millennials are spending. Yes, they have money to spend.
As Millenials continue to recover from the recession shock and achieve their goals of marriage and family, they will spend more. It’s a scenario that Macy’s is not alone in betting on. Ford Motor Co. and Chevy are also staking big claims for the dollars (that some say Millennials don’t have and aren’t spending). In fact, Ford saw a whopping 80% increase from the first half of 2009 to the first half of 2013 in sales among shoppers 18-34. Millennials are buying cars.
It’s slow going for sure, for a generation with more than $1 trillion in student loan debt, however there are signs that the largest generation is starting to move. Signs that can’t be ignored. Regardless of how you want to slice the data, when the generation is ready to spend, do you want to be closed for business? Let’s just table whether or not Millenials as a buyer, matter.
The facts: Digital influence
Get your snake oil! Get your snake oil here!! No one likes a snake oil salesman and no one likes to be scared either but the truth is that there is no such thing as a millennial-oriented product when it comes to digital strategy. One only needs to look at the myriad reports, data and trends to see that mobile, social and digital adoption is not a millennial-only trend.
Mobile phone and smartphone usage is not a millennial only trend. A report from Forrester and broken down by emarketer sheds some interesting light. Assume you ignore “millennial-only” products related to mobile banking, mobile wallets and NFC. You’ve now ignored 93% of the U.S. market that has mobile phones, not to mention the 50% that has smart phones as of January last year. (In all honesty, these numbers are substantially higher today, as the rate of mobile adoption has increased at a blistering pace.)
Even debating mobile strategy seems risky. Mary Meeker, a venture capitalist and former Wall Street securities analyst now famous for her internet trends reports has some interesting data around mobile adoption.
Boiled down. Smartphone use is in its infancy.
Those annoying little devices at dinners and meetings may seem ubiquitous, but globally we’ve only reached 1.5 billion subscribers, a growth rate of 31% and penetration of 21%. But hold your horses ... tablet adoption is even more rapid, at a rate of 3 times.
While the debate rages whether or not to take on mobile banking to appeal to those pesky Millennials, Google quietly acquired thermostat company Nest. (Maybe not that quietly.) Why on Earth would they do that?
Because. While mobile phones are at 94% adoption in the U.S and there is still 80% global market share for smartphones to capture, and tablets are growing at 3 times the growth rate of smart phones: technology innovators are on to wearables, flyables, scannables and the internet of things and early adopters will be the ones pushing ahead how the rest of us use those.
Pay attention to the early adopters, don’t ignore them.
Diffusion of innovation
In 2004 a few thousand students started joining a website. To join, you had to have an email address that ended in .edu. You know where I’m going with this. Today, with more than 1.19 billion monthly active users, Facebook has affected the way we communicate with each other; get news and brands reach us and is also a perfect example of the diffusion of innovation.
The diffusion of innovation explains how technology in particular becomes mainstream. Without diving deep into the theory, the key here is that looking at the theory and understanding adoption patterns, technology lifecycles can become great predictors of mainstream adoption. Ignoring this time tested theory is precarious for any business strategy.
94 reasons digital matters
With only 6% of the financial services market share, credit unions have an enormous opportunity to position themselves to win the battle for market share on the technology front.
Every generation has its trials and tribulations and is enlightened in it’s own way. To preclude any generation from buying power is absurd when you’re dealing with population numbers in the millions. Further, each member of each generation has a story of their own and we can’t forget that. Individually we aren’t statistics no matter what generation we belong to.
However, when it comes to strategy and how technology adoption rates play a role, this doesn’t become a discussion about generations. This becomes a discussion about trends and lifecycles.
I am a product of the millennial generation. I’ve worked hard to get where I am. I have a mountain of student loan debt that I will be paying off most likely as my children head off to college. I saw my parents’ retirement fall out from under them so I’m cautious about following the traditional retirement savings advice. Yes, I am jaded by the economic policies from the financial know-it-alls who caused many of the problems of the last recession. I’m recently engaged. I bought a car this year. I’m preparing to consider a new home.
There are a lot of things about the financial world I’m still learning. But what I don’t need is credit counseling. I need to not be talked down to by my financial partners. What I do need IS a partner.
Meet me where I am, online, social and on-the-go. I’m tired of being talked down to and treated like a generation that doesn’t matter, or that the disruption of our influence in technology to not just the financial industry but nearly every industry is something to be scoffed at or ignored.
But more importantly, I’m optimistic. I’m optimistic that the greatest days lie ahead for me, for our country and for the credit union industry that embraces change and keeps moving forward.
Ryan Ruud is vice president of marketing at the Minneapolis-based marketing firm result150.
Read the counterpoint: Gen Wait: Millennials Underbanked, Underfunded ...
Gen Wait: Millennials Underbanked, Underfunded
By Robert Bessel
Who do you love more – the Millennials, the pundits who talk about Millennials, or the credit unions who offer all sorts of products to capture the Millennial demographic?
Let’s start with the Millennials themselves – the most hyped generation of all time. They were first introduced in 1981 as the “Echo Boomers.” They evolved into “Gen Y” – a weird mix of Gen X and Y2K. When the world didn’t end on Jan. 1, 2000, Gen Y became the “Millennial Generation.” It’s more dignified – right? But to credit unions they are becoming known as “Gen Wait.”
This last moniker reflects a dawning realization that the Millennial generation is waiting to do everything that matters to a credit union. Millennials are simply not buying cars or houses. They’re not getting married, having children or planning for retirement. Why? Because college debt, high unemployment or underemployment has crowded everything else out of the typical Millennial’s wallet.
According to demographer Ken Gronbach, the Millennials or Gen Y will need to become far more entrepreneurial or face upwards of 50% unemployment. A startling forecast.
The pundits have made quite a living from scaring credit unions into Millennial-oriented products. Mobile banking, mobile wallets and NFC are all great products. There’s just one problem: The Millennial audience doesn’t have enough disposable income to take that first bite of the credit union’s apple.
All the mobile banking in the world won’t bring a horde of underbanked Millennials to a credit union’s door. And guess what? Not having mobile banking isn’t preventing them from visiting. They simply don’t have the money to get started!
Credit union managers – let’s not all weep at once. The Millennials are missing out big time, too. They have little to no exposure to financial basics – like shared draft accounts, budgeting and nickel-at-a-time savings plans. Case in point – my Millennial son who thought that standing in line to buy money orders was the best way to pay his bills.
What’s the scariest part of the story? Every time I tell it to the parents of a Millennial, they nod their heads and tell me, “Mine, too.”
Given that the last enlightened generation – the Baby Boomers (and the small and over- indulgent Gen X, the group between the Boomers and Y) – whose finances have been challenged by difficult economies and overall poor planning, what hope do we have for the Millennials’ financial future? They will awaken to financial reality later than any generation before them. As a result, they are guaranteed to have even fewer assets saved for retirement when they need them.
All the talk about banking channels ignores one simple fact – the Millennial generation needs credit counseling more than anywhere, anytime banking. They need knowledge. They need tools to model their future. They need advice. They need products that will help them escape their financial black hole. They need ongoing support.
Does your credit union want to attract and retain the Millennial generation? These ideas might be the most effective way to do it.