What Millennials Want: The Future of Millennials in the Credit Union

REPORT

What Millennials Want: The Future of Millennials in the Credit Union SystemAndrew Turner

Lecturer, University of Wisconsin Law School

Acknowledgments

The author would like to acknowledge Filene’s Ben Rogers and Luis Dopico of Macrometrix, who generously contributed guidance and assistance in the research.

Filene thanks our generous supporters for making this important research possible.

Table of Contents

4 EXECUTIVE SUMMARY

7 INTRODUCTION

9 CHAPTER 1

The Importance of Recruiting Millennials

11 CHAPTER 2

The Millennial Experience

18 CHAPTER 3

Millennials’ Views of Banks

24 CHAPTER 4

Millennials’ Views of Credit Unions

30 CHAPTER 5

Closing the Gap: Can Credit Unions Provide What Millennials Want and Need?

37 CHAPTER 6

Disruption

39 CHAPTER 7

Conclusion: Solving the Millennial Puzzle—A Few Thoughts

46 ENDNOTES

61 LIST OF FIGURES

63 ABOUT THE AUTHOR

65 ABOUT FILENE

Andrew TurnerLecturer, University of Wisconsin Law School

MEET THE AUTHOR

Overview

Many young millennials are unaware of the core principles of the credit union system. Credit unions can capture this young demographic by providing them with personalized products of great need and relevance.

We’re all familiar with the stereotypes of 18- to 24-year-olds: cconfident, coddled, open-minded, ambitious, entrepreneurial, naive, intelligent, and technology-focused to a fault. One could spend hours listing adjectives. As baby boomers transition into retirement and Gen X prods along, millenni-als are quickly becoming the leaders and innovators of today.

In a competitive marketplace, attracting the youngest generation is not just good business; it’s a survival imperative. Millennials 18–24 years old have been a key focus for credit unions over the last 10 years—and for good reason: There are nearly 71 million millennials, born between the late 1970s and early 1990s, in the United States today. The potential for credit unions to capture a significant market share of this demographic is pretty high by even the most conservative estimates or projections. And yet, the flood of new members has never really happened.

Why, then, have credit unions struggled in capturing the hearts and minds of millennials throughout the last decade? After all, the financial meltdown of 2008 should have been the turning point for credit unions to overtake banks as the primary financial institution of choice for young adults. The stigma of the word “banks” should have been enough to drive millennials toward credit unions. Do the youngest millennials understand the credit union concept as well as their parents and grandparents do?

What Is the Research About?

This study addresses what has been done and what can be done to help the youngest millennials—particularly the 18- to 24-year-olds—better under-stand the credit union system and the principles it operates on. Using a mix of primary research and literature review, we were able to create a foundational study that outlines how 18- to 24-year-olds currently perceive credit unions, whether they differentiate between banks and credit unions, and whether credit union characteristics such as nonprofit status and member governance matter to them.

The primary research relied on multi- platform surveying tools to survey a broad segment of youth. This was supplemented with an online scan of discussions, blog posts, and other content produced by youth about finan-cial issues.

Executive Summary

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What Are the Credit Union Implications?

No one is going to “solve” millennials. This is a huge generation, facing unique and new challenges. At the same time, we are all hurtling into a new globalized, networked future that none of us yet fully understand. Having said that, the information, statistics, and studies do suggest some strategies worth considering:

→ Technology isn’t enough to impress. Going mobile is effectively meaningless as a differentiator because everyone should be—and soon will be—doing it. Given that the cell phone is one of the fastest- spreading technologies in history, defining millennials as the “mobile generation” is shortsighted. It doesn’t define just them; it defines us all.

→ Social media is crucial for engagement. Social media can’t be a halfhearted effort or something that doesn’t spring from the authentic nature of the organization. Credit unions that have had success with social media use it as a natural extension of their work, not as a pure marketing effort.

→ Focusing on price will cost you the game. Let’s stipulate that lower prices and fair treatment are critical. Credit unions recognize

34.4% (+4.5/–4.2)I don’t know much about them

27.2% (+4.3/–3.9)I do use a credit union

18.5% (+3.8/–3.3)Why bother?

13.0% (+3.4/–2.8)They’re inconvenient

5.1% (+2.4/–1.7)Banks are more sophisticated

1.8% (+1.7/–0.9)Other

FIGURE 1

WHY DON’T YOU USE A CREDIT UNION INSTEAD OF A BANK?

Source: Conducted by Google Consumer Surveys, December 30, 2014–January 9, 2015, based on 453 online responses.Note: Results are for all respondents; weighted data were unavailable for this view. Winner is statistically significant. Sample: general population filtered to 18- to 24-year-olds.

PAGE 6 EXECUTIVE SUMMARY FILENE RESEARCH INSTITUTE

that these are absolutely essential to successful recruitment and retention of millennials. But that doesn’t mean price and fair treat-ment are the best differentiators when trying to recruit millennials. If honesty and fair treatment are credit unions’ only calling card, then an honest, inexpensive bank can eat their lunch. Put another way, credit unions have to be effective at showing that a credit union is something more than an inexpensive and fair bank, or they will be unable to compete with such institutions.

Credit unions that capture millennials and hold them for the long term are those that spend time and effort to deeply empathize with the problems, challenges, and opportunities that face them, and find ways to offer solu-tions that only a credit union could. Offering products like small balance, low transaction cost savings accounts, preloaded debit cards, and credit- builder loans is a good way to start. In the end, banks can never be credit unions—and it’s the system’s challenge to make that a living reality for today’s millennials.

If there were ever a time when credit unions might have reasonably expected external events to bring in new millennial membership—to capture hearts and minds by simply not being a bank—it was in the last decade. For millennials under 25 years old (current adults who were younger than 11 years old on September 11, 2001), the 2008 financial melt-down, and ensuing economic recession, was perhaps the defining event in their living memory. While the meltdown was complex with many facets and contributing factors, in the popular reckoning, the cause of the col-lapse could probably be summed up by a single word—“banks.” One might be forgiven, then, for thinking that recruiting millennials would be easy, or at least easier than it has been.

And yet, the flood of new members has never really happened. By at least some measures, credit unions actually experienced a decrease in aware-ness in the years immediately after the meltdown. In late 2011, the Credit Union Times noted that “the window of opportunity created by the finan-cial crisis and distrust for banks is closing on credit unions while at the same time, credit unions experienced decreased awareness.”1 Though events like Bank Transfer Day have encouraged (and succeeded at) move-ment away from large, national banks, it would be hard to argue that the fundamental market for financial services has shifted away from for- profit banks and toward credit unions.

The last decade underlines that, for credit unions, just being “not a bank” isn’t enough.

Still, everyone knows that the future of credit unions depends in large part on their ability to recruit new members from the youngest millennials, those young adults aged 18–25 years.2 In a competitive marketplace, figur-ing out how to attract the youngest generation is not just good business; it’s a survival imperative.

While many industries can survive (and even prosper) with short-term transactional interactions, credit unions develop financial relation-ships that are longer and carry greater weight for both partners in the relationship. Such relationships are difficult to develop. They require a foundational basis of mutual understanding, compassion, and respect.

Introduction

PAGE 8 INTRODUCTION FILENE RESEARCH INSTITUTE

Exploring and understanding the intersection between credit unions’ fundamental values and those of millennials is at the heart of building these durable relationships. The credit unions that succeed will be those that mesh with millennials’ lives, thoughts, and expectations, designing products and services that respond to their worldview, their experiences, and the unique pressures they face.

PAGE 9 THE IMPORTANCE OF RECRUITING MILLENNIALS FILENE RESEARCH INSTITUTE

CHAPTER 1

The Importance of Recruiting Millennials

We know that millennials matter, but the actual figures are rather astounding. The mil-lennial generation is enormous—41% of the US population is under 30. That works out to nearly 84 million people between the ages of 10 and 29. Baby boomers have always been thought of as the generational giant, but they are now outnumbered by millennials.3 By 2020, millennial consumers will make up 40% of the US workforce.4

By 2020, millennial consumers will make up 40% of the US workforce.

What Millennials Want: The Future of Millennials in the Credit Union System

PAGE 10 THE IMPORTANCE OF RECRUITING MILLENNIALS FILENE RESEARCH INSTITUTE

Connecting with this generation is critical for credit unions, not just because of its size, but because, as the youngest generation, it is building banking relationships today that may last a lifetime. Twenty- five percent of millennials under age 30 are searching for their first checking account.5 To be healthy and successful in decades to come, credit unions must bring in these millennials now, at the dawn of their adult financial lives. Of those adults under age 30 who are shopping for checking accounts, a full 72% is also in the market for other banking products.6 This window closes pretty quickly. According to a report by Min-tel, only 56% of 18- to 24-year-olds own any banking product, but this figure jumps to 70% among those 25–29.7

The Demographic ChallengeSo where does the credit union system stand now? Despite external events that drove renewed interest in alternative banking opportunities and the huge “bubble” of millenni-als coming up through the population, the 18- to 24-year-old demographic makes up only about 9% of credit union membership.8 Though one-third of Americans are members of a local credit union, older generations are more likely than millennials to use them (38% of boomers, 33% Gen Xers, and 26% of millennials).9

Though one-third of Americans are members of a local credit union, older generations are more likely than millennials to use them.

These trends are vividly seen in credit union demographics. Most notably, credit unions are aging faster than the general population. North Americans have an average age of 37, but the average age of a credit union member is almost 50.10 That is actually older than the audience median age of National Public Radio (NPR), an institution widely thought of as a bastion for older listeners.11 One might be tempted to hope that credit unions are like fine wine (or NPR)—most fully appreciated by those old enough to understand their special characteristics and nuances. But, this simply isn’t true, as the historical record shows. In 1985, the average age of a credit union member was 40.12 At this somewhat astonishing pace, members’ average age is increasing one year for every three years of chronological time. At this rate, when millennials are entering retirement around 2060 they’ll be just about ready to become an average credit union member.13

This trend can be reversed, and credit unions across the country are taking on the chal-lenge. Whether it’s opening branches in high schools14 or executing humorously hip engagement campaigns,15 many credit unions are making concerted efforts to bring youth into the fold.16 These efforts are showing some positive glimmers. For instance, 2011 saw a small increase in overall growth (1%), and, most importantly, the number of credit union members aged 18–24 increased from 6% to 9%.17

PAGE 11 THE MILLENNIAL EXPERIENCE FILENE RESEARCH INSTITUTE

Canaries in the Coal MineIt is common sense that recruiting millennials is important for credit unions, but what might not be as immediately obvious is that engaging effectively with millennials is critical for another reason—in many respects they likely represent the future for all of us.

Ten years ago Facebook was a disruptive technology. Restricted to college campuses and mostly unknown to anyone over 25, it exemplified what youth was and how it was differ-ent and unique from those generations that came before it. Now, I, a middle- aged lawyer, receive regular Facebook updates from my 73-year-old Bolivian mother- in-law. We’re not outliers. Sure, 89% of youth between 18 and 29 use social media, but the portion of online adults between the ages of 30 and 49 using social media is now 82%.18 A Global Web Index study found that millennials and Gen Xers have essentially identical usage statistics for Facebook, and boomers are not far behind.19

It is likely that many of the characteristics that we identify as “millennial” are really just examples of youth’s endless ability to be ahead of the curve. They are early adopters and pioneers of the trends that affect all of us. “In many ways, millennials embody what people tend to blame for the perceived American decay in the 21st century: tech addiction and a growing culture of mistrust and individualism.”20 Or, as one millennial writer noted recently, “You don’t hate millennials; you hate the 21st century.”21

It is likely that many of the characteristics that we identify as “millennial” are really just examples of youth’s endless ability to be ahead of the curve.

CHAPTER 2

The Millennial ExperienceIn order to meaningfully understand what millennials think about credit unions, it is critical to first understand who millennials are. That understanding forms the basis for engaging with millennials on a deeper level, one that goes beyond superficial marketing into truly thoughtful engagement and finally onto lasting relationships.

The past few years have seen the rise of a cottage industry around explaining millennials.22 Everyone has a theory about millennials, who they are, and what they want.


Yet, it is hard not to come to the conclusion that no one really has a finger on the pulse of millennials.23 Headline studies from people across the scientific, political, and social spectrums declare entirely contradictory findings. Millennials are the most narcissistic generation ever. (An “increase in narcissism has promoted a generational trend toward ‘more extrinsic values (money, image, and fame) and away from intrinsic values (com-munity feeling, affiliation, and self- acceptance).’”24) Or maybe not. (Studies have shown that millennials’ self- esteem, individualism, time spent working, political activity, and life satisfaction are about the same as those of young people in the past,25 and some studies suggest that narcissistic behavior is not related to generation but to the natural develop-mental stages we all go through.26) They’re incredibly self- focused. (You don’t need a quote for that one.) Unless they’re not. (Eighty percent of 18- to 29-year-olds agreed with the state-ment “It is more important for me to enjoy my job than to make a lot of money,” while 86% agreed that “it is important to me to have a career that does some good in the world.”27 A 2010 survey of high school seniors found that from 1976 to 2006, there were no meaningful changes in egotism, self- enhancement, individualism, self- esteem, or antisocial behav-ior.28) They don’t care about anyone but themselves—except that millennials are highly politically engaged (more than other generations at a comparable age), and 70% of college freshmen believe that it is “essential or very important to help people in need,” the highest rate since 1970.29 They’re impulsive, immature, and lazy—except that millennial investors are “markedly conservative, more like the WWII generation who came of age during the Great Depression,” and are significantly more likely than non- millennial investors to list hard work, being a go- getter, and saving and living frugally as keys to success. Then again, four out of five of the millennial investors, more than any other generation, believe money can buy happiness.30

Social science studies are inherently tricky and often burdened by unintentional (or some-times intentional) bias, but the truth is that we’re dealing with a huge, geographically and ethnically diverse population, and generalizations can be dangerous.31

Yet, millennials are different from past generations in unique ways, mostly shaped by the era in which they were raised. Each generation is deeply marked by the social, eco-nomic, and political realities of its youth. At any given time, we all face the same social and economic forces, but those forces often affect the young more. Older generations have built up enough physical, emotional, and economic support to weather many of the storms that burst around them. Older generations are like large ships on the ocean. They feel the storms but are buffered from some of their effects. The young are rowboats—their experi-ence of the weather is visceral and immediate.

In this way, building productive relationships with millennials might be less about reading tea leaves and entrails to divine the content of their souls and much more about appreciat-ing the unique and specific challenges that define the world in which they live and that


shape their reactions to it. “Perhaps today’s young people are products, rather than drivers, of the cultural saturation of narcissism. . . . They’re not leading the charge—they’re simply evolving with the times.”32

So what are those environmental characteristics that are unique to this generation and make it what it is? As cliché as it may sound, the truth is that the millennials are coming of age in a quickly changing, hyper- connected, globalized world in the throes of radi-cal transition. Though it may sound hyperbolic, it’s hard to argue that the world is not in something like a “phase transition” as globalization, migration, and 24-7 connectedness are reworking the world in ways none of us yet fully grasp.

Radical ConnectednessIt is not an exaggeration to say that the Internet is one of the most disruptive technologies in the history of the world, and the youngest millennials are the first generation to grow up with the Internet as a given in their lives. It is hard to overstate the importance of technol-ogy and connectedness to millennials, and the pace is accelerating. Even “the Internet” feels a bit like an archaic concept, conjuring images of a person sitting at a static PC in his or her basement. Now, the Internet is like electricity—so omnipresent that it becomes invisible. Connectedness, particularly for millennials, has become both ubiquitous and persistent. “The smartphone has really become the conduit for a young person’s connect-edness to the world. Without it, they feel naked and alone.”33

Connectedness, particularly for millennials, has become both ubiquitous and persistent.

I discovered this anecdotally myself as a college professor. I mentioned to my students (average age around 23 or 24) that I had prohibited my son from using his smartphone in his room after 10:00 p.m. My students seemed slightly put off by the idea, but willing to go with it—until a student asked me how old my son was. “Seventeen,” I replied. The reaction was general pandemonium. There were gasps. Hands were (literally) clutched to chests. What seemed to us as parents as a somewhat strict but reasonable curtailment for the ben-efit of his health and sanity was seen by my millennial students as something bordering on child abuse. (The only person supporting my stance was a student in his mid-30s.) One student looked me in the eye and, with only a twinge of jest, said, “Anything but the phone. The phone is sacrosanct.”

No example illustrates the explosive growth of persistent, connected technology more than the photos comparing the 2005 announcement of Pope Benedict XVI and the 2013 announcement of Pope Francis. In the first photo, a single flip phone can be seen, but the second photo shows a sea of glowing tablets and smartphones.34 This photo caused much


commentary and consternation, mostly concern that we’d finally reached a tipping point—can’t we even watch a pontification without turning it into a smartphone event?

And yet, the use of the Internet—particularly through mobile devices—is a far deeper phenomenon than the simple tech addiction we are often tempted to dismiss it as. As one commentator noted about these same photos and the view that millennials are tech addicted:

They’re not surfing the web. . . . They’re taking photos and video, they’re live chatting,

Facetiming, Skyping, Google Hangout- ing. They’re actively sharing their experiences . . .

with their friends, families, followers, and perfect strangers all over the world. . . .

[Capturing the pontification] wasn’t about the device, it was about the basic need to

share. To be a part of a community. To make connections with other human beings. It

was about shared experiences. . . . In this sense, it’s not about mobile. It’s not even

about social. It’s about the way we live our lives, the things we choose to surround

ourselves with.35

Jeff Avallon, the vice president of business development at IdeaPaint, a workplace tech-nology firm in Boston, “points out that each generation has a common set of human needs—for community and communication, in particular—that are uniquely shaped by their life experiences but are foreign to anyone outside that age group.” Of course, it is tempting to have a negative reaction to seeing millennials tethered to their devices, texting incessantly, but if we do so we are “overlooking what the technology represents: an effi-cient means to maintain community and communication” and not appreciating that it is “totally functional for the world they inherited.”36

For millennials, the Internet, smartphones, and the rest are just portals that connect them to the reality of communications in the twenty- first century—we are now, and always will be, radically connected.

This interconnectedness has important implications for understanding how millennials make decisions. Humans are, by nature, information gatherers. It’s what we do. We don’t make decisions in a vacuum. Instead, we lean on the information that we’ve gathered to seek the best possible outcome for ourselves.37 This new hyper connectedness allows mil-lennials to rely on a wider set of people and sources to help make those decisions, often in real time. “Many grew up immersed in online communities, where the wisdom of the group, the ethic of crowdsourcing, and DIY culture are highly valued, and where analysis of information is as ubiquitous as raw information itself.”38 That said, don’t confuse a net-worked world with an impersonal one. Social media is still built around human networks.


It accelerates and reduces friction in communication, but does not necessarily remake it. And the old standbys still stand by—a multi- country survey found that “millennials overwhelmingly turn to their parents for advice and guidance on financial planning.”39 Mil-lennials’ longer runways mean parents may play a role longer and deeper into adulthood than they might have in the past.

This new hyper connectedness allows millennials to rely on a wider set of people and sources to help make those decisions, often in real time.

New Financial RealitiesTo have any understanding of how millennials think about credit unions, we also have to understand the financial ecosystem that millennials inhabit. Their lives are made up of challenges that go beyond anything we’ve seen in recent generations—globalization, automatization, job insecurity, wealth stagnation, and student debt load are challenges that millennials confront on a daily basis.

In the most direct terms, millennials have it very rough economically. “Median household income in the United States today remains below its 1999 peak, the longest stretch of stag-nation in the modern era, and during that time income and wealth gaps have widened.”40 Income doesn’t even tell the whole story. “Millennials aren’t much more poorly paid than young adults who came before us. But we are stretching the same wages to pay off a bigger heap of loans. We don’t seem exceptionally broke if you just look at our pay stubs, but, col-lectively, we are deep in a hole.”41

This points to the biggest catch-22 of all for millennials—student debt. Never before have so many students gone to college. The high school graduating class of 2009 saw 70% of its members enroll in college, the highest portion on record, up from just 45% 50 years ago.42 The reason is clear—the wage gap between college and noncollege individuals is stark and growing. College, an aspirational opportunity for prior generations, has become the new price of admission for a shot at a middle- class life. The pay gap between college graduates and everyone else was the largest ever in 2013, with four-year college degree holders making 98% more per hour than people without a degree (up from 89% five years earlier, 85% a decade earlier, and 64% in the early 1980s).43 And yet, college has never been more expensive. Millennials are entering adulthood with record levels of student debt. Two-thirds of recent bachelor’s degree recipients have student loans, and the aver-age student debt load is about $27,000. Compare these figures with those from two decades ago, when only about half of recent graduates had student loans and the average student debt was $15,000.44 This catch-22 is breeding increasing resentment among millennials


who—understandably—feel trapped.45 It’s like we’re telling a huge cohort of our youth that the price for any type of future is to start the race with crippling debt.

Millennials are entering adulthood with record levels of student debt. Two-thirds of recent bachelor’s degree recipients have student loans, and the average student debt load is about $27,000.

It’s not just the most obvious economic metrics like debt and income, either—it goes much deeper. It’s hard to escape the sense that we are living through a radical reorganization of our social and economic lives. Millennials’ difficult economic circumstances reflect both the impact of the Great Recession and the longer-term effects of globalization and rapid technological change on the American workforce.46 Millennials live in a world that is vastly larger than the ones that prior generations grew up in. Trends like globalization are often viewed on a macro, abstract level—products and money moving across borders. But for all of us—and millennials in particular—globalization has become a much more immediate and present phenomenon. People are less moored to specific geographic communities, are telecommuting to jobs, and are living with the expectation that frequent job changes are the rule rather than the exception. They, in a very real sense, live, work, compete, think, and share with people from across the globe. Automatization was once a vague idea on the horizon. Now it is commonplace, replacing manual jobs and every day looking more and more like a threat to white- collar professional work. Unemployment, while reaching the lowest rate since the recession, has left a deep scar on this generation. Millennials not only had a hard time finding jobs, but were often underemployed, failing to gain experience necessary to climb the professional ladder. Previously “sure” professions like law (which has traditionally served as the last, best refuge for social science majors of all descriptions) continue to be mired in a protracted slump, one that many observers think reflects perma-nent restructuring of entire professional sectors.

Unemployment, while reaching the lowest rate since the recession, has left a deep scar on this generation.

All of these trends contribute to the stereotypical millennial phenomenon of a “failure to launch.” The median age at first marriage has reached 29 for men and 27 for women, the highest in modern history, and millennials are unique in their slow family formation, with just 26% of millennials married.47 At these same ages, 36% of Gen Xers, 48% of boomers, and 65% of the silent generation were married.48 As a result, by early 2013, only about one in three millennials headed their own household, a rate even lower than the level in the depths of the recession.49 While some continue to stereotype millennials as the coddled video-game- playing twentysomething in mom’s basement, the “failure to launch” is often a


much more pragmatic and natural response to these largely external forces. In reality, “mil-lennials’ attitudes about money, risk and success have been shaped by two unprecedented phenomena: (1) access to lightning- fast technology innovation and (2) dramatic economic and market volatility that constrained their job prospects and earning abilities, as well as disrupted their parents’ real estate values, investment portfolios and retirement savings.”50 Millennials don’t want to live in mom’s basement any more than mom wants them to, but financial exigencies often require it. More than two-thirds of unmarried millennials want to get married, but many believe they lack the necessary economic foundation.51 This has a disproportionate impact on those with lower educational and economic attainment. “The economic hardships of young adults may be one reason that so many have been slow to marry. . . . In contrast to the patterns of the past, when adults in all socio- economic groups married at roughly the same rate, marriage today is more prevalent among those with higher incomes and more education.”52

These economic difficulties ripple through the economy and, of course, affect credit unions. The slow household formation among millennials reduces demand for housing and everything else that comes with independent living.53 Of course, as a corollary to this, lower spending and independence leads to a lower demand for financial services and products.

Putting all these factors together results in a rather grim picture: “Millennials are also the first in the modern era to have higher levels of student loan debt, poverty and unem-ployment, and lower levels of wealth and personal income than their two immediate predecessor generations (Gen Xers and boomers) had at the same stage of their life cycles.”54

And Yet . . .When looked at from this perspective, it is easy to forgive millennials their negativity and pessimism. Except that we don’t have to. Against all odds (and maybe logic) they remain extremely confident about their financial future. More than 80% say they currently have enough money to lead the lives they want or expect to in the future.55 A multi- country survey of millennials found that they are “wildly optimistic that they will have sufficient income in retirement.”56 Despite having it worse than older generations in many ways, they are also generally more positive. More of them (49%) believe the country’s best years are ahead than do Gen Xers (42%), boomers (44%), or silents (just 39%).57 The eternal opti-mism of youth, right? Not so fast. When boomers were this age, they were sourpusses in comparison. A 1974 survey found only half of adults under the age of 30 reported “quite a lot” of confidence in America’s future, as compared with 70% of those ages 30 and older.58

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CHAPTER 3

Millennials’ Views of BanksThe common perception is that banks are facing a crisis of bad publicity and hurt feelings. The evidence shows that people are skeptical and frustrated, particularly with big banks. It stands to reason that credit unions are well positioned to grow in this environment. Young millennials are establishing their financial relationships in a world where negativity and skepticism about banks are high. Yet the evidence also shows that frustration with tradi-tional banking will not drive young millennials into the arms of the credit union without significant, sustained, and creative effort by the credit union system.

The evidence also shows that frustration with traditional banking will not drive young millennials into the arms of the credit union without significant, sustained, and creative effort by the credit union system.

Yes, People Hate Banks . . .The perception is true. People just don’t like banks very much. The reasons are myriad—unexpected fees, a sense of being manipulated, and, of course, a perception that big banks were major contributors to the economic recession. “Spend 10 minutes perusing any of the more than 23 million links that come up when you Google ‘banks suck’ and it quickly becomes apparent just how much residual ill will there is among the general public toward the banking industry.”59 Of course, not all of those links come from millennials (we think), but they might as well have. A poll of 10,000 millennials found that banks make up four of millennials’ least loved brands.60 Seventy- one percent of millennials said they would rather go to the dentist than listen to what banks are saying.61

A poll of 10,000 millennials found that banks make up four of millennials’ least loved brands.

Of course, negative feelings about the financial sector aren’t focused solely on banks. Credit unions have also felt the impact of the public’s frustration with financial institu-tions. Eighteen percent of American adults have lost confidence in credit unions over the past few years.62 That said, credit unions continue to have a much more positive reputation than banks. Over the same time period, the number of Americans that lost trust in banks was nearly triple.63 Credit unions also enjoy the best-in-class customer retention rates with more than 85% either extremely or very likely to continue their relationship.64 Compare


this percentage with those of the mega- banks: just over 50% for Wells Fargo/Wachovia, under 50% for JP Morgan Chase, and only about 40% for Bank of America.65

. . . But Not as Much as You Think They Do . . .Though these statistics are undoubtedly encouraging for credit unions hoping to attract millennial converts, they are more complex and less straightforward than they seem at first glance. As a result, they are likely very poor predictors of what millennials are doing now and what they are likely to do in the years to come.

First, the distaste for banks might not be as deep as it appears. While people unsurprisingly have less confidence in banks than in things like the military and the Supreme Court, the general public’s confidence rating of the banking industry is higher than that of newspa-pers or labor unions, and comparable to that of public schools.66 Some data even suggest that, despite frustrations and skepticism, people are largely satisfied with banks—even those who are also credit union members. Data from Credit Union National Association (CUNA) show that 90% of credit union members who use banks are somewhat or very satis-fied with their experience using banks.67 And credit union members are not drastically less likely to be loyal promoters of their bank than their credit union (52% to 34%), this despite the fact that these individuals were motivated enough to join a credit union in the first place and have fully experienced the benefits of credit unions.

While people unsurprisingly have less confidence in banks than in things like the military and the Supreme Court, the general public’s confidence rating of the banking industry is higher than that of newspapers or labor unions, and comparable to that of public schools.

Millennials follow these general trends. Ninety- six percent of millennials are satisfied with their credit union. But then again, 88% are satisfied with their bank.68 Surprisingly, it looks as though banks may have at least partially succeeded in connecting with youth. A 2009 study found that millennials were more likely than boomers to say that the banking sector was “in touch with their generation.”69

Despite being perhaps hardest hit by the economic downturn, millennials trust banks more than older generations trust them. Anyone expecting idealistic, firebrand youth to take up the cause of abandoning banks might be waiting a while. In fact, millennials trust banks more than any other generation trusts them. Twenty- five percent of millennials say that they have a “great deal of trust in banks,” a percentage higher than that of any other gen-eration and double that of boomers.70 Fully 59% have a “great deal” or “quite a lot” of trust


in banks, versus only 8% who have “very little,” all percentages that place them among the most trusting of any generation.71 Furthermore, despite the problems they’ve faced, they are still financially optimistic, which makes them less likely to lead a charge away from the bank- dominant paradigm. Contrary to the view of youth as being activist and anti- institutional, millennials today are “about as likely as their elders to have a favorable view of business.”72

Millennials trust banks more than older generations trust them.

How can this be? How can people claim to hate banks, yet continue to use them and even be satisfied with them?

One likely contributing factor is the tendency for people to regard an individual from a group differently than they judge the group itself (sometimes called the “proximity effect”). Much like the racist who thinks their ethnic friend an exception to the rule, statistics show that people do dislike banks—just not their bank.73 A recent study reassured bankers that the majority of their customers have a positive view of their primary bank. Despite the fact that only 18% of Americans had a “great deal” or “quite a lot” of confidence in US banks in 2010, 6 in 10 bank customers expressed “a great deal” or “quite a lot” of confidence in their primary bank. And they talk about it too: “Despite the negative feelings Americans have toward banks in general, 67% of what customers are saying and writing about their primary bank is positive, while only 11% is negative.”74

“Despite the negative feelings Americans have toward banks in general, 67% of what customers are saying and writing about their primary bank is positive, while only 11% is negative.”

It is also true that hate for one thing doesn’t imply love for another. Even terrible services survive and thrive if people don’t know about or like the alternatives (Hello cable televi-sion providers!). It’s not really relevant how unhappy bank customers are unless that unhappiness actually drives them to select (or recommend that others select) credit unions.75 Being unhappy with a bank only speaks to the potential for change, not its likelihood, let alone inevitability. There is no reason people can’t remain perpetually unhappy with a service while continuing to use it. I was desper-ately—almost angrily—displeased with my cell

69.3% (+5.1/–5.7)Citibank

30.7% (+5.7/–5.1)Prosper NationalCredit Union

FIGURE 2

WHICH FINANCIAL INSTITUTION IS MORE TRUSTWORTHY?

Source: Conducted by Google Consumer Surveys, January 3–9, 2015, based on 286 online responses.Note: Results are for respondents with demographics and are weighted by gender and region. Order is statistically significant. Sample: general population filtered to 18- to 24-year-olds.


phone company and continued to be a desperately unhappy, yet paying, customer for years in large part because I wasn’t truly aware of a better option.76 A common Argentinian say-ing is “Mas vale lo malo conocido que lo bueno por conocer,” or roughly “A known evil is better than an unknown good.” This is clearly borne out by an interesting finding from our surveys—despite mega-banks’ poor reputation, young millennials would trust Citibank or Wells Fargo over a fictitious credit union by a factor of more than two to one.77

While this seems intuitively obvious (people gravitate to a known rather than an unknown entity), it also underlines the reality that a negative view of one institution is not enough to drive positive feelings toward an alternative. Credit unions across the country are working hard to engage millennials, but these statistics suggest just how important that work is. When customers revolt over new bank fees or unfair treatment, it’s hard not to feel a bit of “big bank schadenfreude,” but the reality is that banks can’t fail their way into credit union success. Unless credit unions can actively engage with millennials, increase awareness about the credit union model generally, and bring to bear highly convincing products tai-lored to millennials’ needs, they will be competing in a field that looks exactly like Figure 2.

Finally, it appears that some of the confidence in banks that was lost as a result of the economic meltdown has started to return. The perception that any one institution or group of institutions is the villain tends to wane in time, and the anger and frustration with banks may be circumstantial and short term. “A couple years ago it was BP that was the great villain in the United States . . . then it became the banks. . . . That will go away, too.”78 Yes, confidence in the banking sector is down drastically from a pre- recession high of 53% to just 26% today. However, confidence is trending upward from a low of 21% in 2012. More importantly, the last few decades have shown that dips in consumer confidence may be temporary. Banks also suffered a huge dip in confidence in the early 1990s, halving from 60% confidence in 1979 to just 30%. Yet, within a decade, confidence had rebounded almost completely.79 Again, millennials do not appear to be exceptions to this general trend. Surprisingly, while 27% of young adults have a lower degree of confidence in finan-cial services firms and the overall financial market since the 2008 crash, that is outstripped by the 31% who now have more trust.80 This underlines the notion that it is one thing to lose faith in a particular set of banks at a particular moment in time, and an entirely differ-ent thing to lose faith in the for- profit banking model itself.

. . . And It Doesn’t Mean Millennials Will Select or Switch to Credit Unions

Still, even if people like their personal bank more than other banks, won’t the general distaste for banks influence millennials, particularly as they start to create new financial relationships? Maybe not.


First, people often make decisions based on the advice of others—and millennials do so more than most. Typical millennials’ purchasing decisions are influenced by five people, as compared with just three for boomers. What is more, millennials are typically less impressed by experts and more by family, friends, and strangers.81 Thus, even if the general view of banks is poor, any individual millennial is likely to take the advice of a friend who says she has had a good experience with her bank. As a result, the general perception of banks is less important than the specific perception that a millennial’s trusted network members have about their own banks—numbers we’ve already seen are surprisingly posi-tive for banks. Also, the popularity of banks with their own clients may make it perversely advantageous for the general view of banks to be terrible. After all, if the general consensus is that banks are untrustworthy and cutthroat, then a friend’s recommendation to use her bank (which she likes) makes that bank appear to stand out as a shining light against the black background of other poor choices (each of which, in turn, is recommended by its customers).

Typical millennials’ purchasing decisions are influenced by five people, as compared with just three for boomers.

Second, people don’t need to love banks to respect them or believe they can get the job done. Take the protection of personal data, an area of growing concern for everyone, partic-ularly those—like millennials—who are disproportionately Internet based. “Even in the face of an uphill battle to regain public confidence, the [banking] industry leads many other businesses that collect personal information by 13 percentage points in establishing trust with customers that their personal information will be protected,” a particularly important topic in the face of many data security breaches in recent years.82 It’s not unreasonable to suspect that many millennials believe that some banks are frustrating, even corrupt, insti-tutions, but ultimately safe ones—so they hold their noses and keep doing business with them.83

Finally, and perhaps most importantly, there is simple human nature. It’s one thing to dislike an organization. It’s another to dislike it enough to truly drive behavior. For any number of reasons, people are perfectly capable of disliking something yet continuing to use it extensively. In short, complaining is one thing, doing is another.

There are myriad reasons for this “transitional friction.” For one, once a millennial is established at a bank, he faces significant barriers to change. Changing banks requires researching and comparing alternatives, making difficult choices, and then going through the hassles of changing cards, PINs, direct deposits, and bill pays.84 For established bank customers, it simply isn’t enough for credit unions to be a better choice than a bank—they have to be enough better to absorb the significant transactional costs of switching and the risk of the unknown.85 This may explain why “only one- quarter to one-third of Big Bank


customers are experiencing a positive overall relationship, [yet] almost half are likely to continue to use the same institutions.”86

Changing banks requires researching and comparing alternatives, making difficult choices, and then going through the hassles of changing cards, PINs, direct deposits, and bill pays.

For another, banks may be giving consumers enough other benefits (real or perceived) that they ultimately choose to stick it out and deal with the negatives. Examples of consumers vocally hating something with their words, yet voting in favor of it with their wallets are not uncommon. For instance, few things are more reviled in the consumer sector than airlines’ new fees, smaller spaces, removal of on-board services, and other curtailments and penny- pinching—and yet this behavior continues to proliferate. As a buying public we truly hate these behaviors. It’s just that we love low fares even more.87 Hate isn’t always a good metric for consumer behavior, and despite big national banks being viewed as untrustworthy institutions, “they retain the highest percentage of customers, with 45% of Americans stat-ing they are a customer of one of these institutions.”88

Finally, and perhaps most importantly, comparisons between banks and credit unions are largely meaningless if millennials don’t understand what they are comparing. Given the low level of understanding that millennials have regarding credit unions (as more fully discussed below), it is highly likely that most of them will fall into the arms of large banks by default—and if they fall out of love with one bank, they will just move along to another.

Given the low level of understanding that millennials have regarding credit unions, it is highly likely that most of them will fall into the arms of large banks by default—and if they fall out of love with one bank, they will just move along to another.

Taken together, these factors suggest that even motivated, angry, and frustrated millenni-als are a lot less likely to choose (or switch to) credit unions than we might expect. Bank Transfer Day was an interesting test case of how these interacting factors play out in the real world. In the lead-up to Bank Transfer Day, professional pollsters noted the traction the concept was getting and its potential impact. “Big Banks may be vulnerable to los-ing customers to credit unions on November 5th, Bank Transfer Day, where according to social media, tens of thousands have signed up to drop Big Banks in favor of joining a credit union.”89 The publicity was intense—CUNA CEO Bill Cheney alone did broadcast interviews on CNN, Fox Business, NPR, and ABC Nightly News.90 The ultimate impact, however, was much more complex. In many ways, it worked. There is no doubt that it had

PAGE 24 MILLENNIALS’ VIEWS OF CREDIT UNIONS FILENE RESEARCH INSTITUTE

an important role in revving up the debate and level of consciousness around the problems with for- profit banks and the advantages of credit unions. Many, including Bill Cheney, are unabashedly bullish about the results, noting that the months leading up to and after Bank Transfer Day saw the biggest increase in new credit union members in more than a decade.91 This was clearly excellent news for credit unions. Yet from a pure numbers stand-point, Bank Transfer Day also points out how difficult it is to alter the playing field. Credit unions gained approximately 210,000 new members during the weeks leading up to Bank Transfer Day.92 A quarter of a million members is a quarter of a million members, converts, and possible evangelists. That said, more than 100 million US households have a checking account.93 Even assuming that each new member represented an entire household, a shift of 210,000 households from banks to credit unions equates to something like 0.2% of the market. Of course, many more switched in the months after Bank Transfer Day, and this event was meant to raise consciousness about credit unions—not change the entire market landscape in a single day. Still, Bank Transfer Day had unprecedented media attention and grassroots support, and it happened at perhaps the moment in time when banks were most vulnerable. Changing behavior is a long and tough row to hoe.

CHAPTER 4

Millennials’ Views of Credit UnionsBefore we move on to examining how well credit unions fit into millennials’ lives, let’s first examine the most basic question—how do millennials perceive credit unions?

Millennials Don’t Really Understand What Credit Unions Are and Do

Millennials’ clear and accurate understand-ing of what credit unions are is perhaps the threshold issue. Simply put, if millennials don’t know what credit unions are, then they can’t and won’t seek them out to help solve their problems.

55.9% (+5.0/–5.1)Financial institution

36.0% (+5.1/–4.8)I have no idea

4.0% (+2.9/–1.7)Labor union

2.6% (+2.5/–1.3)Educational institution

1.5% (+2.8/–1.0)Specialty retailer

FIGURE 3

A CREDIT UNION IS A TYPE OF . . .

Source: Conducted by Google Consumer Surveys, December 30, 2014–January 9, 2015, based on 371 online responses.Note: Results are for respondents with demographics and are weighted by gender and region. Winner is statistically significant. Sample: general population filtered to 18- to 24-year-olds.


One might approach this question with a bit of pessimism, as many have noted that the general public is not very well versed in credit unions. “Other than those in the industry, polls have shown time and again, very few have any clue.”94 Our survey shows mixed but somewhat more optimistic results. Our data suggest that a narrow majority of the youngest millennials have at least a basic understanding of what credit unions are.

That said, it is still startling to see that more than a third of millennials freely admit they can’t even identify that a credit union is a financial institution, and something going on 10% think it might be a labor union, educational institution, or specialty retailer. Furthermore, not even half of the youngest millennials think they are eligible to open a checking account at a credit union.

What understanding millennials do have is only skin deep. Membership is a key pillar in credit union identity, yet millennials—even those who know broadly what credit unions are—don’t appear to understand the idea very well. Some commentators have suggested that the very term “member” is a problem. (“Members, another term to get rid of.”95) Our data tend to agree. Despite the fact that more than half of millennials know that credit unions are financial institutions, only about 30% think they are eligible to become a member of one.

Nearly half have no idea if they can become a member, and, more alarmingly, a full quarter assume they are likely ineligible to become a member.96

In other words, many millennials have no understanding of perhaps the most basic and fundamental of credit union attributes—common ownership and an open door. The implications of this may be deeper than simple misunderstandings. For instance, this

44.0% (+5.5/–5.4)I think so

29.1% (+5.3/–4.8)I don’t think so

26.9% (+5.1/–4.5)I have no idea

FIGURE 4

ARE YOU ELIGIBLE TO OPEN A CHECKING ACCOUNT AT A CREDIT UNION?

Source: Conducted by Google Consumer Surveys, January 2–9, 2015, based on 339 online responses.Note: Results are for respondents with demographics and are weighted by gender and region. Winner is statistically significant. Sample: general population filtered to 18- to 24-year-olds.

43.7% (+5.3/–5.1)I have no idea

29.8% (+4.8/–4.4)Probably

26.6% (+4.9/–4.4)Probably not

FIGURE 5

DO YOU QUALIFY TO BE A MEMBER OF AT LEAST ONE CREDIT UNION?

Source: Conducted by Google Consumer Surveys, December 30, 2014–January 9, 2015, based on 374 online responses.Note: Results are for respondents with demographics and are weighted by gender and region. Winner is statistically significant. Sample: general population filtered to 18- to 24-year-olds.


suggests that even talking about membership may subtly alienate a large segment of mil-lennials. If we assume many or most millennials have only a vague notion of credit unions or credit union membership, then hearing something as simple as an ad encouraging them to “become a member today!” may fly straight in one ear and out the other on the uncon-scious assumption that it doesn’t apply to them. It also means that one of the deepest differentiators between banks and credit unions—common ownership through membership—is currently lost on approximately 70% of millennials.

As one might expect, a lack of knowl-edge about credit unions can be mortal to their ability to recruit new members.

When we asked the youngest millen-nials why they use banks instead of credit unions, we found that 34% said they didn’t know much about them, and an alarming 18% simply said, “Why bother?” These data underline the idea that not only do most millennials not know much about credit unions, but many don’t appear motivated to find out more.

When the level of credit union comprehension is this low, promoting credit unions over competing alternatives may not resonate among the youngest millennials. An effort to pro-mote the consumption of wheatgrass instead of milk is likely doomed to fail if no one really knows what wheatgrass is or cares much to find out.

The Messy Brand Perception of Credit UnionsDespite the somewhat fuzzy idea of what credit unions are, we wanted to see what millen-nials’ more general “brand perception” was. After all, even our unfocused, unconscious, and unarticulated perceptions about products, services, and other ideas float on the periphery of our consciousness and affect our decision making.97 Our data show that, again, millennials’ perception of credit unions is not very accurate.

When asked to identify the key differences between banks and credit unions, nothing struck millennials as compelling. While millennials did show some recognition for credit

34.4% (+4.5/–4.2)Don’t know much about them

27.2% (+4.3/–3.9)I do use a credit union

18.5% (+3.8/–3.3)Why bother?

13.0% (+3.4/–2.8)They’re inconvenient

5.1% (+2.4/–1.7)Banks are more sophisticated

1.8% (+1.7/–0.9)Banks are better . . .

FIGURE 6


Source: Conducted by Google Consumer Surveys, December 30, 2014–January 9, 2015, based on 453 online responses.Note: Results are for all respondents; weighted data were unavailable for this view. Winner is statistically significant. Sample: general population filtered to 18- to 24-year-olds.


52.3% (+4.9/–4.9)None of the above

18.5% (+4.1/–3.5)Are run for profit

15.8% (+3.9/–3.2)Are more trustworthy

11.8% (+3.5/–2.8)Have lower fees and and charge less

8.3% (+3.1/–2.3)Are more sophisticated

8.0% (+3.1/–2.3)Are owned by their clients

FIGURE 7

BANKS ARE DIFFERENT FROM CREDIT UNIONS BECAUSE BANKS...

Source: Conducted by Google Consumer Surveys, December 30, 2014–January 9, 2015, based on 400 online responses.Note: Results are for all respondents; weighted data were unavailable for this view. Respondents could provide more than one answer. Confidence is too close to call. Sample: general population filtered to 18- to 24-year-olds.

49.0% (+4.9/–4.9)None of the above

25.8% (+4.5/–4.0)Have lower fees and and charge less

20.5% (+4.2/–3.7)Are owned by their clients

19.0% (+4.1/–3.5)Are more trustworthy

8.5% (+3.1/–2.4)Are run for profit

7.3% (+3.0/–2.2)Are more sophisticated

FIGURE 8

CREDIT UNIONS ARE DIFFERENT FROM BANKS BECAUSE CREDIT UNIONS...

Source: Conducted by Google Consumer Surveys, December 30, 2014–January 9, 2015, based on 400 online responses.Note: Results are for all respondents; weighted data were unavailable for this view. Respondents could provide more than one answer. Confidence is too close to call. Sample: general population filtered to 18- to 24-year-olds.


unions’ traditional strengths, even those low numbers were somewhat undercut. Only one-fifth of the respondents correctly noted that credit unions are owned by their clients, even less impressive when one notices that 8% thought the same thing about banks. Only a quarter of the respondents saw lower fees as a distinguishing feature of credit unions—while more than 10% said the same of banks. “Trustworthiness,” a feature credit unions would certainly like to be distinguished on, was essen-tially a wash.

Interestingly, millennials did not see banks as more sophisti-cated—a common concern about the image of credit unions. (Data from Figures 7 and 8 show similar results.)98

Perhaps more concerning for credit unions is that the institu-tions that appear most poised to benefit from big-bank backlash aren’t credit unions but community banks. When asked about their perception of different types of financial institutions, “none of the above” continued to be the number one response, again suggesting a lack of clear (or at least deeply felt) opinions among a significant percentage of young millennials. Of those who did select one of the offered options, their opinion about large national banks trended toward the stereotype. While within the margin of error, the leading opinions included “cutthroat” and “fast and efficient.”

Credit unions, in contrast, were seen as more friendly (as well as fast and efficient). This suggests that in the minds of a significant per-centage of millennials there is a nice contrast between credit unions and large banks.

However, community banks were overwhelmingly described as “friendly” among those young millennials making a selection, well beyond the margin of error over the second- place finisher, and at a rate almost double that of credit unions. What is more, the partici-pants were ranking community banks ahead of credit unions on being “my kind of people” and as less cutthroat than credit unions.

Though there are many ways to interpret these statistics, it is hard to avoid the conclusion that the sharpest contrast in millennials’ minds is not between banks and credit unions, but between large banks and community banks. This is not surprising, given the low level

20.4% (+5.4/–4.5)Cutthroat

18.4% (+5.3/–4.3)Fast and ecient

13.2% (+4.8/–3.6)Friendly

11.2% (+4.5/–3.3)Technologically advanced

4.4% (+3.3/–1.9)“My kind of people”

FIGURE 9

WHICH OF THE FOLLOWING DESCRIBES LARGE NATIONAL BANKS LIKE CITIBANK OR WELLS FARGO?

Source: Conducted by Google Consumer Surveys, January 3–13, 2015, based on 250 online responses.Note: Results are for all respondents; weighted data were unavailable for this view. Respondents could provide more than one answer. Confidence is too close to call. Sample: general population filtered to 18- to 24-year-olds.

19.6% (+5.4/–4.4)Friendly

15.2% (+5.0/–3.9)Fast and e�cient

8.4% (+4.1/–2.8)“My kind of people”


7.2% (+3.9/–2.6)Cutthroat

FIGURE 10

WHICH OF THE FOLLOWING DESCRIBES CREDIT UNIONS?

Source: Conducted by Google Consumer Surveys, January 3–13, 2015, based on 250 online responses.Note: Results are for all respondents; weighted data were unavailable for this view. Respondents could provide more than one answer. Confidence is too close to call. Sample: general population filtered to 18- to 24-year-olds.


of understanding that millennials have about credit unions. “Big and national” versus “small and local” is an intuitive comparison and fits comfortably with trendy modern ideas like “buy local.”99 This is the challenge that credit unions face—many young millennials still have to learn what credit unions are, whereas the concept of “community bank” is instantly recognizable and resonant by its name alone.

Furthermore, the “bank versus credit union” dynamic may exist more in the hearts and minds of bank and credit union leadership than in the hearts and minds of consumers. For con-sumers, the divide seems to be less about the underlying organizational form and more about the size and scale of the organization. A 2009 study found that credit unions out-paced large banks among millennials with 80% reporting a “somewhat favorable” or “very favorable” opinion against 57% for large banks. However, unfortunately for credit unions, the highest- rated organiza-tions were community banks, with an 89% favorable rating.100

Yet, despite all these somewhat glum numbers, the playing field is not nearly as tilted as it might appear. When millennials were asked who they preferred to use for certain types of transactions, credit unions were not particularly far behind other options.

While banks were running ahead of credit unions, all of the options were within 10 percentage points and often within the margins of error, suggesting that mil-lennials aren’t locked into one type of institution, nor are they so motivated by price or convenience that it will override

36.4% (+6.1/–5.7)Friendly

17.2% (+5.2/–4.2)Fast and e�cient

11.6% (+4.6/–3.4)“My kind of people”


5.6% (+3.6/–2.2)Cutthroat

FIGURE 11

WHICH OF THE FOLLOWING DESCRIBES LOCALLY BASED COMMUNITY BANKS?

Source: Conducted by Google Consumer Surveys, January 3–13, 2015, based on 250 online responses.Note: Results are for all respondents; weighted data were unavailable for this view. Respondents could provide more than one answer. Winner is statistically significant. Sample: general population filtered to 18- to 24-year-olds.

24.1% (+4.4/–3.9)Whoever is cheapest

19.1% (+4.2/–3.6)Large national bank

18.3% (+4.0/–3.4)Community bank

12.3% (+3.5/–2.8)Community credit union

10.0% (+3.3/–2.6)Most convenient (ATM, apps)

8.7% (+3.2/–2.4)Large national credit union

7.4% (+3.1/–2.2)Other alternative (e.g., online)

FIGURE 12

WHICH TYPE OF FINANCIAL ORGANIZATION DO YOU PREFER FOR CAR LOANS, MORTGAGES, AND OTHER LARGE TRANSACTIONS?

Source: Conducted by Google Consumer Surveys, January 3–9, 2015, based on 432 online responses.Note: Results are for respondents with demographics and are weighted by gender and region. Confidence is too close to call. Sample: general population filtered to 18- to 24-year-olds.

PAGE 30 CLOSING THE GAP: CAN CREDIT UNIONS PROVIDE WHAT MILLENNIALS WANT AND NEED? FILENE RESEARCH INSTITUTE

any other concerns. Even assuming the highest end of the margin of error, for both large and small transactions, only about 40% of respondents are primarily moti-vated by price or convenience.101

What is perhaps most frustrating—but also exciting—is that when we asked millen-nials if they would prefer credit unions, but didn’t call them credit unions, they jumped at the opportunity. A significant majority would not just prefer a “com-munity, member- owned nonprofit” over an “investor- owned for- profit” but would actually be willing to pay more to work with such an institution. (See the end of chap-ter 5 for more.)

The problem is that millennials don’t seem to know such institutions exist.

CHAPTER 5

Closing the Gap: Can Credit Unions Provide What Millennials Want and Need?

Credit unions look at millennials and ask, “Why aren’t they knocking down the doors?” It’s tempting to focus on millennials’ lack of knowledge about credit unions and assume that alone is the problem. “If they only knew us better,” goes the logic, “they’d come run-ning.” Another variation of this theme is to wonder if credit unions don’t “get” millennials enough—that credit unions need to be more youthful and technologically hip (you know, twit, or tweet, or tumble a bit more).

18.6% (+4.0/–3.4)Community bank

17.3% (+4.0/–3.4)Most convenient (ATM, apps)

17.2% (+4.0/–3.4)Large national bank

15.6% (+4.0/–3.3)Whoever is cheapest

14.4% (+3.9/–3.2)Community credit union

10.6% (+3.3/–2.6)Other alternative (e.g., online)

6.3% (+2.8/–2.0)Large national credit union

FIGURE 13

WHICH TYPE OF FINANCIAL ORGANIZATION DO YOU PREFER FOR CHECKING, DEBIT CARDS, AND OTHER DAILY NEEDS?

Source: Conducted by Google Consumer Surveys, January 3–9, 2015, based on 440 online responses.Note: Results are for respondents with demographics and are weighted by gender and region. Confidence is too close to call. Sample: general population filtered to 18- to 24-year-olds.


And undoubtedly these things are part of the story. Anyone can look at the percentage of millennials who have no idea what a credit union is and know that marketing and outreach are critical components.

But that can also be too easy of an answer. What if the issues—and solutions—are more fundamental? What if a smart marketing campaign, social media dominance, and superior mobile banking aren’t enough? Credit unions (correctly) believe that they have a lot to offer to a generation mired in economic hardship and a world in transition, yet still optimistic about the future. The big question for credit unions is, can they bridge the gap between who millennials are, their needs, and their perceptions and what credit unions are able to provide?

Three Fundamental Reasons Why a Millennial Would Work with a Credit Union

Why would a millennial—or anyone else for that matter—choose to work with a credit union to meet his or her financial needs? It’s tempting to start by focusing on what credit unions are.102 Instead, let’s turn it around and ask what might motivate the millennial and see how the “credit union difference” matches up.

For instance, CUNA lists seven specific differences that make credit unions unique: not-for- profit status, taxation, ownership, volunteer boards, membership eligibility, financial education for members, and social purpose.103 If we think about it from the perspective of what would attract young millennials, we can immediately eliminate two that do not have any real benefit to them as consumers: taxation and membership eligibility. They may be interesting and relevant at many levels—but not at the level of selecting a financial institution.104

Looking at the remaining characteristics from the perspective of what a millennial might seek, we can see three basic categories:

1. Qualities that benefit a millennial’s immediate and tangible self- interest.

2. Qualities that benefit a millennial’s long-term and tangible self- interest.

3. Qualities that have an intrinsic value to millennials.

Of the CUNA differentiators, one (nonprofit status) is primarily about immediate, tangible self- interest; three (ownership, volunteer boards, financial education) are primarily about long-term, tangible self- interest; and one (social purpose) is primarily about intrinsic value. Of course, these all work in harmony with each other, but they are helpful categories for thinking about how credit unions and millennials relate to each other in today’s world.


Immediate, Tangible Self-Interest as a Motivating Reason to Become a Member

One of the main reasons that a millennial would become a credit union member is the same reason he or she would use at any other financial institution—immediate, tangible self- interest. The clearest example would be lower fees and more advantageous interest rates (on both the depository and lending sides). This makes particular sense for millenni-als because it responds to one of the millennials’ toughest problems—financial stress.

Despite many social and community benefits that credit unions provide, the system is not shy (nor should it be) about saying that nonprofit status drives tangible, immediate benefit to consumers. Certainly, the credit union system itself promotes lower costs and fees as an important reason to select credit unions. Nonprofit status and its effect on fees and interest rates is the first thing listed on both CUNA’s “credit union difference” page and the Smarter Choice website.105

How important is price to millennials? All indications—and all logic—suggest that this is a major driver of millennial behavior. Millennials are facing tough economic sledding, and 83% of millennials say the most important factors to consider when choosing a financial services provider are fee- related.106 Anecdotal evidence also suggests that it is a major driver of consumer behavior. Comments across the Internet discussing why one might choose a credit union over a bank often focus on fees and costs.107 “According to data on FindABetterBank, the top criteria for most consumers shopping for checking accounts are fees and features. But shoppers under 30 are more likely to select an account that offers the best fees and features than any other segment.”108

This is generally good for credit unions recruiting millennials because, in many cases, credit unions can compete on price and win.

Yet there is also a great danger in trying to woo millennials on this basis. If price becomes the overwhelming reason people gravitate to credit unions, then “cheap” may be the con-cept that eats the credit union model. If the attraction and retention of members is based on fees and rates, then the credit union is dependent on its ability to continue to com-pete on price and win. What if someone (say Google) invents a cheaper mousetrap? More profoundly, competing primarily on price suggests that there is nothing fundamentally different about a credit union other than its ability to drive a cheaper deal. As one commen-tator notes, “If credit unions wish to continue basking in the glimmer of their brand’s halo, then they must define their brands to stand for something more than ‘higher deposit rates’ and ‘lower loan rates.’ ”109


Existing credit union members and leaders have a deep commitment to the model, which is precisely why growing a robust and lively membership base among millennials means taking care to also develop those memberships on the basis of shared values. Even Bank Transfer Day recruits may not be as advantageous to credit unions as they could be if, as some commenters suggest, they have motives that don’t match with the credit union model. “Most people aren’t switching financial institutions over a sense of semi- socialistic injustice. They just don’t want to pay for something they are used to getting free.”110 It is certainly not in credit unions’ best long-term interest to develop a membership base whose only real affiliation to the organization is low fees.

It is certainly not in credit unions’ best long-term interest to develop a membership base whose only real affiliation to the organization is low fees.

Long-Term, Tangible Self-Interest as a Motivating Reason to Become a Member

One of the greatest benefits of credit unions—and one that resonates with millennials—is their impact on clients’ long-term, tangible self- interest. Even fees have a long-term angle. Self- interest is not just about a fee being low today, but about fees being fair, predictable, and nonexploitative across the life of a financial relationship.

Self-interest is not just about a fee being low today, but about the fee being fair, predictable, and nonexploitative across the life of a financial relationship.

Many individuals are willing to pay more to work with an honest institution—partly because of moral indignation, but also because the long-term benefits of working with an honest institution outweigh the short-term gains from lower fees.111

While it is no surprise that 83% of millennials say the most important factors to consider when choosing a financial services provider are fee- related, the key word is “related.” When one looks at the numbers in more detail, more nuances emerge. The highest- rated response was not “no or low fees” but rather “no surprise fees.” While 56% did go for the lowest fees, 48% went for “easy to understand fees,” and 43% went for “no overdraft fees.” All of these, except for low fees, are less about expense than about fair and predictable fees.112

One of the most important drivers of a lasting relationship is trust. Trust relates directly to long-term self- interest. Can I trust an institution to treat me fairly over the long term?


Do I trust the institution to care about me, to do right by me, to play fair, to stick with me through ups and downs rather than taking me for a ride, gouging me unexpectedly, or abandoning me when I most need it? Put another way, one of the greatest draws that mil-lennials have toward credit unions is—not to put too fine a point on it—not getting ripped off.113

Qualities That Have Intrinsic Value to Millennials as a Motivating Reason to Become a Member

Members have been coming to credit unions for decades, and doing so for reasons more complex and nuanced than simply short- or long-term self- interest. Are these deep and profound differences between banks and credit unions resonant with the needs and desires of the youngest millennials?

First, it is worth noting that banks and credit unions agree with each other on most stated principles, including high reported value on honesty, commitment, respect, excellence and service, and integrity.114 The extent to which these are true aspirations versus marketing puffery is open to interpretation, yet it is certain that, at the very least, many community banks do legitimately strive for (and achieve) these goals. And even those banks that are less than honest (or at least consequent) with their value statements will certainly market on that basis—they’re perceptive enough to know that it counts, and at least over the short term, that may be sufficient to convince millennials.

Yet beyond these common goals, credit unions continue to have unique values that com-mercial banks simply cannot match—namely, shared governance and social purpose. Simply put, credit unions are more than a set of products and service whose value we can reduce to economic self- interest. Woven into the DNA of credit unions is a notion of mission. “Credit unions exist to help people, not make a profit. Our goal is to serve all of our members well, including those of modest means—every member counts.”115 Despite their great variety and distinctions among them, credit unions remain, in their heart, a movement. We may argue about how deeply this DNA runs, whether it means more to some credit unions (and members) than to others, and what role it will play in the future as credit unions continue to evolve. But it is fair to say that it means something and that that something is part of what we hope millennials value when they select their financial services provider.

But do they? Do things like common ownership and social purpose have weight in their decision- making process?


Millennials’ generally positive view of banks and institutions masks a broader trend. Yes, millennials are more trusting of banks than other generations, but overall trust across soci-ety has dropped over the last forty years. “Levels of trust and confidence, key indicators of social capital, reached all-time or near-all-time lows in 2012.”116 Studies show that people have become more individualistic and more wary of both political leaders and large institu-tions of all types.117

Even more interesting, millennials sharply depart from older generations in that they have a much less favorable view of people in general. When it comes to their view of human nature and community they are simply less trusting.118 “Asked a long- standing social science survey question, ‘Generally speaking, would you say that most people can be trusted or that you can’t be too careful in dealing with people,’ just 19% of Millennials say most people can be trusted, compared with 31% of Gen Xers, 37% of Silents and 40% of Boomers.”119

When it comes to their view of human nature and community they are simply less trusting.

At first blush, the general trend away from social trust noted above would seem to benefit credit unions—what better refuge in a stormy sea? If I distrust others socially, then perhaps a credit union would appeal to me because it allows me to band together with a subset of trustworthy neighbors. But, it is also possible that low levels of trust actually hurt credit unions. Some studies suggest that community solidarity may be less of a factor than we might hope given that “only one-fourth of Americans consider an institution’s role in the community (24%) to be greatly influential” when they decide with whom to bank.120 Stack on millennials’ low social trust, and it is not unreasonable to expect that they may be less than excited about what is a fundamentally collective endeavor.

We may also overestimate the importance of these intrinsic values for millennials when it comes to actually choosing a financial institution. Statistics show that if you take care of clients, they love you regardless. “Demonstrating an interest in improving the customer’s financial well- being is the biggest driver of consumers’ confidence in their banks. Custom-ers who say their bank looks out for their financial well- being are also much more likely to be fully engaged with their bank.”121

Statistics show that if you take care of clients, they love you regardless.

Finally, it is important to note that intrinsic differences can be a hard sell, not because people don’t care, but because intangible things are hard to measure and quantify. For one, intrinsic differences are meaningless if the word isn’t out. “If no one knows what you are,


no one knows why you’re different; it’s irrelevant.”122 For another, it’s extremely hard to tell if an institution “cares” about you, particularly if—like millennials—the majority of your interactions are short term and transactional. Furthermore, banks are now doing things that may be (but certainly feel like) examples of the institution looking out for the clients’ well- being. Consider new features attached to small, transactional services, like rounding purchases on a debit card and depositing the change into a special account, fee notifica-tions, and other small services that may amount to so much hocus pocus but nonetheless feel meaningful to a person whose primary financial relationship is transactional.

At least on paper, a significant majority of millennials not only prefer community- based organizations but are willing to pay for them.

61.9% (+4.8/–5.1)Community,

member-ownednonprofit

38.1% (+5.1/–4.8)Slightly cheaperinvestor-owned

for-profit

FIGURE 14

ASSUMING YOU NEEDED A NEW CAR OR HOME LOAN, WHICH BANK WOULD YOU CHOOSE?

Source: Conducted by Google Consumer Surveys, December 30, 2014–January 9, 2015, based on 379 online responses.Note: Results are for respondents with demographics and are weighted by gender and region. Order is statistically significant. Sample: general population filtered to 18- to 24-year-olds.

60.1% (+4.9/–5.1)Member-owned nonprofit

at 5.0%

39.9% (+5.1/–4.9)Investor-owned for-profit

at 4.5%

FIGURE 15


Source: Conducted by Google Consumer Surveys, December 30, 2014–January 9, 2015, based on 372 online responses.Note: Results are for respondents with demographics and are weighted by gender and region. Order is statistically significant. Sample: general population filtered to 18- to 24-year-olds.

PAGE 37 DISRUPTION FILENE RESEARCH INSTITUTE

But before we get too cynical, note that our data show encouraging receptivity among mil-lennials on topics related to group and community. At least on paper, a significant majority of millennials not only prefer community- based organizations but are willing to pay for them.

Even when we put in specific numbers (to emphasize the cost difference), millennials are still willing to pay more.

CHAPTER 6

DisruptionThe courtship of millennials is occurring at a time when the world is changing at a rapid pace. If millennials are the “canaries in the coal mine” of our future world, connecting with them is not so much about capturing a generation (which is important enough) but about whether institutions are prepared for the new world into which we are all transitioning.

Many of us are used to thinking about the challenge ahead as one of credit unions versus banks, but that debate may overlook even more fundamental challenges ahead. In fact, not being closely attuned to the true changes that are coming could be the death knell for credit unions and banks alike, at least as we know them. A study of over 10,000 millennials judged that out of many industries, banking is the one industry most “ripe for disrup-tion.”123 It might be the ultimate irony that the old rivals find themselves together on the wrong side of historic changes.

Predicting the future is a fool’s game, of course, but we can intuit some of the basics. It is not surprising to learn that trust in online banking is growing, particularly among millen-nials. Forty- two percent of both millennials and Gen Xers trust online- only banks (though note that 37% of boomers and 30% of those over 69 do as well).124 What is more alarming is to realize the depth of this change. A poll of 10,000 millennials found that a third of them believe they’ll be able to live a bank-free existence in the future. “Half of respondents said they were counting on startups to overhaul how banks work, and three- quarters said they would be more excited in financial services provided by Google, Amazon, Apple, PayPal, or Square than from their own banks.”125 Not just banks—from their own banks. This process is not hypothetical—it’s occurring now. “While nearly all (92%) Millennials report that they currently use a bank, almost half (45%) indicate that they have supplemented bank-ing services with some form of alternative financial product or service (e.g., prepaid debit

PAGE 38 DISRUPTION FILENE RESEARCH INSTITUTE

card, money transfer service, check cashing, pawn shop, payday loan, etc.) within the past year.”126 For the first time, young adults don’t just assume they need a checking account—and they’re finding alternatives.127

It is unpredictable enough to guess where we’re all going with things like Square Payments and Google Pay, but we’re also now dealing with digital currencies and other unique new products and processes. “Millennials are more likely than any other age demographic to use digital currencies now and in the future—13% use them today and 26% project using them by 2020.”128 Even today, some of the top Internet companies frequented by millenni-als use and accept bitcoin, including Reddit, WordPress.com, and OK Cupid.129 Many other transformations are in the works. While peer-to-peer lending has many issues to overcome, I wouldn’t line up to bet against it in the long run. Currently, 22% of millennials use wear-ables as a payment device daily or weekly.130 Not to show my age, but I’m not even sure I know what that means.131

“Millennials are more likely than any other age demographic to use digital currencies now and in the future—13% use them today and 26% project using them by 2020.”

The future is already here in some places. MobilePay, a smartphone payment app launched by Denmark’s Danske Bank, was judged by Danish public radio as the best new word of the year for 2014. “It now has 1.8 million users in a nation of 5.6 million people.”132

It also bears considering whether millennials will interact with their financial institutions differently as a result of these changes and develop new expectations. For instance, one way to think about mobile banking is simply as a faster and easier way for consumers to access their accounts. But, mobile banking may have other, deeper effects on how pro-viders and consumers relate to each other. It may weaken relationships as interactions between service provider and consumer becomes less “relational” and more transactional. Service can become unmoored from people and location.133 It is also possible that mil-lennials will start to view products as detached from a particular institution. In a world of quickly downloadable apps and buffet- style consumption of media across multiple platforms, millennials may start to focus on products the same way—as distinct units that can be selected, evaluated, mixed, and matched. Perhaps financial products will become increasingly “platform independent.” It’s hard to predict exactly what new businesses might bring to market and how that might affect the landscape, but today’s millennials are flexible and open not just to “firms that want to create me-too checking accounts, but that want to create different types of accounts.”134

PAGE 39 CONCLUSION: SOLVING THE MILLENNIAL PUzzLE—A FEW THOUGHTS FILENE RESEARCH INSTITUTE

CHAPTER 7

Conclusion: Solving the Millennial Puzzle—A Few Thoughts

No one is going to “solve” millennials, but the information, statistics, and studies do sug-gest some possible ideas—if not strategies—worth considering.

Technology Isn’t the SolutionFirst, let’s get one of the biggest ideas out of the way: increased technology is not the answer.

Of course, it is absolutely essential that credit unions become fully technologically able. However, technology isn’t a solution for recruiting millennials; it’s just the modern price of doing business. Going mobile is effectively meaningless as a differentiator because every-one should be—and soon will be—doing it.

Technology isn’t a solution for recruiting millennials; it’s just the modern price of doing business.

Further, it’s important to realize that, in the end, going mobile isn’t really about millen-nials. Sure, millennials are more wired than any generation before them, but statistics suggest that it’s not because they’re somehow different—they’re just earlier adopters. It doesn’t really make them unique in the long term. Currently, “a majority of Americans in their mid- forties through mid- fifties are now smartphone adopters,” and “every major demographic group experienced significant year-to-year growth in smartphone ownership between 2012 and 2013.”135 Given that the cell phone is one of the fastest- spreading technol-ogies in history, defining millennials as the “mobile generation” is shortsighted. It doesn’t define just them; it defines us all. In fact, we may be most of the way there already. A study across four major industrialized nations (the United States, France, the UK, and Germany) among the older edge of the millennial cohort (25–34) found that 44% use online- only statements, but then again 33% of the oldest generations do, too.136 Three out of four baby boomers used online banking services in the past six months, and the percentage of boomers who use online banking weekly (71%) is virtually identical to the percentage of millennials and Gen Xers who do (72% and 70%, respectively).137

Within a few years, asking clients to be excited about your mobile bank offerings will be like asking them to be excited because you offer debit cards (or electric lights in the lobby).


Social Media Should Be More Than a Marketing TechniqueEveryone knows how important social media has become. Yet, more than one organiza-tion has twisted an ankle trying to jump on the social media bandwagon. “While some of the larger banks and credit unions have been able to find traction on the world’s #2 social media network, the overwhelming majority have enjoyed little- to no success. Indeed nearly 1 in 3 credit unions that once had an active presence on Twitter have abandoned their accounts.”138 Social media can’t be a halfhearted effort or something that doesn’t spring from the authentic nature of the organization. Credit unions that have had success with social media use it as a natural extension of their work, not as a pure marketing effort. “Credit unions have less success with advertising through social media, yet more success using social media as a forum where the online young adult community engages with ques-tions and feedback for the credit union.”139

Nearly 1 in 3 credit unions that once had an active presence on Twitter have abandoned their accounts.

Technology can be a dangerous siren, particularly when the implementer doesn’t fully understand how its efforts will be perceived by its target.140 In the UK, studies have shown that “less than 1% of millennials want financial services providers to connect with them through social media.” Insurance providers have also been looking for ways to engage millennials, yet have concluded that “rather than being the remedy for insurers’ prob-lems with engaging with millennials, many think it makes them look ‘silly’, ‘pally’ or ‘creepy.’”141 Multi- country studies have shown that millennials use social media to see what friends are up to, and not as a place where they want to make life decisions or be commercially active.142 Developing millennial- specific marketing materials and slogans can be both helpful and thoughtful. Yet, it is a deceptively small half step from creative and engaging to being the old guy at the millennials’ house party putting on the Hawaiian shirt and trying to look cool. As the Millennial Marketing website put it, “Gen Y does not want to be pandered to, they just want easy access to straightforward, clear information . . . Finan-cial Institutions will never be ‘cool’—this should not be your goal.”143

“Gen Y does not want to be pandered to, they just want easy access to straightforward, clear information . . . Financial Institutions will never be ‘cool’—this should not be your goal.”

This is not to suggest that credit unions avoid social media. When social media “fits” and is an authentic extension of what a credit union is or how it works, it can be thoughtfully developed into a wonderful addition to a credit union’s engagement efforts. The real key


is authenticity, and authenticity comes from doing things that match the spirit and mes-sage of the organization, while committing the necessary time and resources.144 Probably based on their lower levels of social trust and the rise of viral marketing efforts, millennials appear to be hyper- attuned to things that appear inauthentic. Few things get shouted down as vociferously and aggressively on the peer network Reddit as anything that even vaguely appears related to marketing. Ads feel like ads and millennials know it.

Focusing on Price or Fair Treatment Is a Dangerous GameLet’s stipulate that lower prices and fair treatment are critical. Credit unions recognize that these are absolutely essential to successful recruitment and retention of millennials. Millennials’ tough financial situation makes them even more price sensitive than other generations. Further, as discussed above, millennials’ low levels of social trust and high dependence on shared recommendations and credibility make it extraordinarily impor-tant to avoid alienating them. An unhappy millennial has an unrivaled ability to express displeasure to the world. Anyone who has spent 10 minutes on Twitter or Facebook knows how easily bad (and good) experiences can go viral in a way that wasn’t possible a decade ago.

But that doesn’t mean price and fair treatment are the best differentiators when trying to recruit millennials. If honesty and fair treatment are credit unions’ only calling card, then an honest, inexpensive bank can eat their lunch. Put another way, credit unions have to be effective at showing that a credit union is something more than an inexpensive and fair bank, or they will be unable to compete with such institutions. Two years ago I was ripe for being recruited for a new type of cellular phone plan. I felt I was overpaying, and every month opening the bill was an adventure—the bills were obtuse, unfair, and predictable only in that I knew they’d be large. Had a cooperative, nonprofit cell-phone carrier offer-ing low prices and fair treatment been available, I would have taken it in a heartbeat. But I wouldn’t today, because I’m now a happy customer of Ting Mobile, a private company making a tidy profit by offering low prices and fair treatment. I’m happy. Competing just on price and fairness is fine—but as more and more alternative financial options become available, credit unions that hang their hat on just those two aspects might very well get “Ting’ed.”

If honesty and fair treatment are credit unions’ only calling card, then an honest, inexpensive bank can eat their lunch.


The Silver Bullet: Be What Millennials Need in a Way That Only a Credit Union Can

Credit unions that capture millennials and hold them for the long term are likely those that spend time and effort to deeply empathize with the problems, challenges, and opportuni-ties that face them and find ways to offer solutions that only a credit union can.

It is easy to focus on marketing as the key to attracting more millennials, but it may not be the right focus. For one, crafting an identity is difficult, particularly in a crowded market-place. “Like most companies, banks and financial institutions invest enormous amounts of time and money crafting what they think is a unique identity. That identity is meant to appeal in an emotionally engaging manner, build deeper customer relationships, and positively affect market share and profitability. It’s a good idea—so good that every bank does it.”145

Perhaps more importantly, marketing can easily slip into promoting the credit union concept or a particular credit union’s identity at the expense of focusing on millennials’ problems. As Sarah Snell Cooke pointed out in the Credit Union Times, “Being a credit union is a great thing to be, but marketing your credit union as such is a waste of time.”146 Of course, marketing will always be a critical part of business, but the lesson may be that credit unions cannot assume that marketing what they are is enough. People don’t care about credit unions in the abstract—they care about the meaning credit unions have in their lives and how well they respond to their unique needs. “Members . . . use credit unions to do their banking, fulfill their financial services needs, however you want to put it. Members do not use credit unions to do their credit unioning.”147

People don’t care about credit unions in the abstract—they care about the meaning credit unions have in their lives and how well they respond to their unique needs.

The future is for those credit unions that can live the credit union difference authentically on a radically changed playing field, finding ways to deliver products and services that for- profits simply cannot emulate. For instance, credit unions will be hard- pressed to beat the Citibanks and Wells Fargos of the world in terms of the sheer brute force they can apply to solving technological problems and providing slick new banking interfaces and products. This is not to say that credit unions can’t create wonderful and highly functional applica-tions and services, but it is unlikely that they will ever be able to conquer problems by throwing millions of dollars and thousands of developer hours at any challenge. Citibank will always be able to deploy more resources and developers.


What Citibank can’t do, however, is be a credit union. Those credit unions that take a deep, thoughtful look at millennials’ needs and match them with credit union–specific solutions are the most likely to win in the long term. While this seems commonsensical to the point of absurdity, researchers in other industries have found that organizations often fail to do it. For instance, insurance industry researchers have lamented that “we were struck by the fact that there was virtually no interest in shaping products for millennials let alone finding out what their needs are.”148

Credit unions can focus on building products that really respect the specific realities that face millennials and that can help them achieve their personal objectives and goals.149 For instance, credit unions that have offered products like small balance, low transac-tion cost savings accounts, preloaded debit cards, and credit- builder loans lead to “young adults express[ing] the same gratitude as their parents toward the credit union for help-ing them establish their credit and their first loan for a vehicle or home.”150 This type of relationship- building effort will bring in millennials at the front end of their financial lives by understanding them and providing uniquely “credit uniony” products. Credit unions can do financial education in a way that for- profit banks simply can’t. Summit Credit Union recently opened two limited- services branches in high schools in Madison, Wisconsin. Sure, for- profit banks can do and have done similar things (for instance, Union Bank in Los Angeles and Capital One in the New York area), but only credit unions credibly do it for the benefit of youth and not simply for their bottom line.151

Credit unions can do financial education in a way that for- profit banks simply can’t.

Credit unions will also face new pressures on their traditional models and values. How will shared governance remain relevant in the face of a world where close networks are no longer defined solely by geography? As credit unions continue to consolidate into larger and larger institutions, they become ever less local and the benefits of member ownership risk becoming more diffuse—more of a political statement than a real, concrete benefit to individual members.152

Yet, these same factors also offer new opportunities for engagement that are unique to credit unions. We may be seeing the emergence of new ideas about community and how social trust is created, maintained, and shared. Millennials are “tak[ing] the lead in seizing on the new platforms of the digital era—the internet, mobile technology, social media—to construct personalized networks of friends, colleagues and affinity groups.”153 This is a challenge for all financial institutions, but one that credit unions might leverage to their advantage. As an example, credit unions might develop innovative ways of creating and maintaining trust by finding unique ways to involve millennials in credit union manage-ment and policy development through networked decision making and online peer groups.


Instead of being solely a service provider, credit unions could use technology to draw members into decision making on a regular basis. Online technology might allow a credit union to convoke referenda on a wide array of credit union decisions—even on very granu-lar issues. Overdraft fees are often perceived by banking clients and credit union members alike as an institutional imposition, if not a downright money grab. But a credit union could explain how overdraft fees fit into the institutional revenue stream and how they positively influence member behavior—and then let members vote on whether to increase interest rates on loans to remove overdraft fees. Allowing members to become participants in balancing costs and benefits of different fee structures not only empowers them to participate but, perhaps more importantly, emphasizes for them that they can participate. In a world where institutions are so large that clients can often feel they are at the mercy of others’ decisions and priorities, the feeling of empowerment is as important as—perhaps more important than—the act of actually using that power. (Even if one never opens a door, one likes to know it’s not locked.)

Such a system would surely be difficult to implement and credit unions attempting it may get a few bruises along the way. But this is a true competitive advantage because it is some-thing members would value—and it is a path that a Wells Fargo simply cannot follow.

Take, for example, another lesson from an unusual place—the National Football League’s Green Bay Packers. As the United States’ only nonprofit, community- owned major league professional sports team, the Packers have unique advantages over every other club in the league (all of which are privately owned and run for profit) despite residing in by far the smallest metropolitan area. The Packers have found unique ways to use member ownership to their advantage. Similarly, member ownership can be a powerful core differentiator for credit unions, one that banks cannot emulate. Credit unions should seek every opportunity to emphasize this as a living reality rather than a rhetorical discussion point. Something as simple as increasing the quality and visibility of the actual, physical documentation of members’ ownership interest may help cement a sense of belonging. This could be something akin to an actual embossed stock certificate, signed by the credit union leader-ship. Sound far-fetched? That’s what some people said of the Green Bay Packers’ plan to sell stock in the team—stock with essentially zero practical value. In the most recent sale, the stock sold for $250 per share with the only tangible benefit being an attractive certifi-cate to hang on the wall and entry to a (gigantic) shareholders meeting each year. This was a perfect experiment to gauge the pure emotional value people place on the sense of belonging to and membership in the institution. The answer came from the 250,000 new stockholders who bought shares, generating $67 million in new revenue for the team.154 This example provides two interesting lessons. First, a sense of membership and belonging matters to people. Sure, sports teams create irrational levels of loyalty, but as anyone who has been a fan of a rock band or waited in line dressed as a hobbit for a movie premiere recognizes, humans have a strong desire to belong to groups. Finding ways to make this


connection real made a huge difference. The Packers gave stockholders something tan-gible to represent their membership. Even though these fans could buy jerseys, paint their homes Packers’ colors, and watch the game every weekend, the physical stock certificate created a sense of membership that was worth $250 to a quarter of a million people. Sec-ond, the Packers recognized their own competitive advantage vis-à-vis every other team in the league—and set about engaging fans in a way that no other team could. Though we do not have the data to prove it, it seems very likely that those shareholders watch the team, buy team gear, and do other things to support the ongoing success of the team. Similarly, the credit unions that are most likely to succeed are those that find ways to make member ownership feel real, alive, and relevant to millennials. This might take shape in something as simple as an ownership certificate or a call from credit union staff to ask for a vote (not opinion) on a pending issue.

Credit unions can think flexibly and use their nonprofit credibility in ways that would make a bank blanch. As another example, credit unions could do something that a for- profit bank couldn’t and wouldn’t ever do—knowingly and openly charge clients more in fees and interest. For instance, a credit union might offer members the opportunity to participate in a special loan program where they pay a higher rate on a car loan in exchange for driv-ing the interest rate down for low- income families in the community. This emphasizes the community- building, nonprofit nature of the credit union and helps cement the unique attributes of the institution in members’ minds. (Again, the Packers provide a curious comparison point. In an age where players can become free agents and shop their services, two recent players chose to remain in Green Bay at a lower salary than they were offered elsewhere. This is often attributed to the quality of the team and opportunities to win. But consider that it may also be because they knew—even subconsciously—that taking less money meant giving it to team operations and other players, not to a billionaire owner.)

The opportunities are endless. Just as credit unions can’t be banks, banks can never be credit unions—and it’s the industry’s opportunity and challenge to make that a living real-ity for today’s millennials.

PAGE 46 ENDNOTES FILENE RESEARCH INSTITUTE

Endnotes

1 “Member Growth in Long Decline: Slide Show,” Credit Union Times, Septem-ber 20, 2011, www.cutimes.com/2011/09/20/member-growth-in-long-decline- slide-show.

2 This research report includes data from many sources and surveys, each of which was done at a slightly different time and which defines “millennial” or “generation y” slightly differently. As a result, statistics from different sources are not always apples-to-apples comparable. Data collected for this report focus exclusively on the youngest millennial cohort, individuals aged 18–24 at the time of publication.

3 101 Things: Credit Union Insights from the Filene Research Institute (Madison, WI: Filene Research Institute, 2012).

4 Rob Rubin, “Why Gen-Y Is Passing You By,” The Financial Brand, October 1, 2013, thefinancialbrand.com/33908/younger-consumers-smaller-banks- and-credit-unions.

5 Rob Rubin, “Meh . . . Consumers Who Don’t Care Choose Regional Banks,” November 14, 2013, blog.novarica.com/?p=2270.

6 Rob Rubin, “Cross-Selling to Gen-Y Banking Consumers,” March 18, 2014, blog.novarica.com/?p=2403.

7 Cited in Millennial Marketing, “Why Credit Unions Are Winning with Millenni-als,” www.millennialmarketing.com/2010/01/why-credit-unions-are- winning-with-millennials.

8 “Member Growth in Long Decline.”

9 Allyssa Birth, “Americans Report Declining Trust in Banks,” The Harris Poll, October 30, 2014, harrisinteractive.com/NewsRoom/HarrisPolls/tabid/447/ctl/ReadCustom Default/mid/1508/ArticleId/1515/Default.aspx.

10 Tim McAlpine, “Getting Gen-Y,” CUES, March 2011, www.cues.org/article/view/id/Getting-Gen-Y.


11 It is 49 for radio, 40 for web visitors, and just 36 for podcast listeners. Alan D. Mutter, “Newsosaur: How NPR Lures Younger Digital Audiences,” Editor & Publisher, December 3, 2013, www.editorandpublisher.com/Columns/Article/Newsosaur—How-NPR-Lures-Younger-Digital-Audiences.

12 The Financial Brand, “The Echo Project: A Credit Union Blueprint to Attract Gen-Y,” September 8, 2011, thefinancialbrand.com/19641/raoust-partners- echo-project-marketing-strategy.

13 Aging membership and the strong need to engage youth is not a uniquely American problem. See, e.g., Olive McCarthy, Robert Briscoe, and Michael Ward, “Redesigning the Credit Union for the New Millennium: A Case Study of Ireland,” The World of Co- operative Enterprise 2000 (2000).

14 Summit Credit Union, Madison, Wisconsin.

15 For example, Mazuma Credit Union. See also FRANK by Singapore’s OCBC, www.frankbyocbc.com/.

16 Other efforts may not be directed specifically at youth, but nonetheless seem likely to be attractive to the younger demographic. For instance, IntegrUS Credit Union has a new branch called “Caisse Café,” which doubles as a Wi-Fi–enabled coffee shop. According to its website (www.integruscu.com/2014/05/were-brewing-up-something-for-the-new-branch/), it pro-vides “gourmet and flavored coffees, specialty beverages, and a limited assortment of baked goods and breakfast items as well as [being] a full service branch providing a wide range of financial services including savings and checking accounts, consumer loans and home mortgages.”


18 Pew Research Center, “Social Networking Fact Sheet,” www.pewinternet.org/fact-sheets/social-networking-fact-sheet.

19 Global Web Index, Generations, 2014, http://insight.globalwebindex.net/hs-fs/hub/304927/file-918728067-pdf/Content_Marketing/GWI_Genera-tions_Summary_Report_Q2_2014.pdf?subissionGuid=a18cfa4f-7731- 447f-a234-4259035fbb38.


20 Laura Bradley, “People Don’t Hate Millennials,” Slate, December 26, 2014, www.slate.com/articles/technology/future_tense/2014/12/you_don_t_hate_millennials_you_hate_21st_century_technology.html.

21 Ibid.

22 Though thoroughly unscientific, a quick Amazon search on “generation Y” and “millennial generation” brings up twice as many titles as “boomer generation.”

23 “There are data to find pretty much whatever you are looking for, as the data are varied and sometimes contradictory.” U.S. Chamber of Commerce General Foundation, “The Millennial Generation Research Review,” www.uschamberfoundation.org/millennial-generation-research-review.

24 Jean Twenge (professor of psychology, San Diego State University), quoted in Brooke Lea Foster, “The Persistent Myth of the Narcissistic Millennial,” The Atlantic, November 19, 2014, www.theatlantic.com/health/archive/2014/11/the-persistent-myth-of-the-narcissistic-millennial/382565.

25 Kali H. Trzesniewski and M. Brent Donnellan, “Rethinking ‘Generation Me’: A Study of Cohort Effects from 1976–2006,” Perspectives on Psychological Science 5, no. 1 (2010): 58–75, cited in Foster, “The Persistent Myth of the Narcissistic Millennial.”

26 Brent W. Roberts, Grant Edmonds, and Emily Grijalva, “It Is Developmental Me, Not Generation Me: Developmental Changes Are More Important Than Generational Changes in Narcissism—Commentary on Trzesniewski & Donnellan (2010),” Perspectives on Psychological Science 5, no. 1 (2010): 97–102.

27 Jeffrey Jensen Arnett and Joseph Schwab, Clark University Poll of Emerging Adults, 2012, www.clarku.edu/clark-poll-emerging-adults/pdfs/clark-university-poll- emerging-adults-findings.pdf.

28 Trzesniewski and Donnellan, “Rethinking ‘Generation Me.’”

29 NDN, “Millennials Lead the Nation in Service to Our Country,” August 19, 2009, ndn.org/blog/2009/08/millennials-lead-nation-service-our-country.


30 UBS Investor Watch, Think You Know the Next Gen Investor? Think Again, 2014, www.ubs.com/content/dam/WealthManagementAmericas/ documents/investor-watch-1Q2014-report.pdf.

31 In an NIH study to investigate whether twentysomethings are more narcissis-tic than those over 65, “researchers sat down with both age groups and interviewed them about their narcissistic behaviors. But here’s the rub: While the younger people polled were asked about their current lives, those over 65 were asked to remember how they behaved decades ago—not an entirely reliable account of whether or not they acted in a narcissistic manner.” Foster, “The Persistent Myth of the Narcissistic Millennial.”

32 Ibid.

33 Jeremy Rasmussen, “Just Don’t Take Away My Smartphone,” Landpower Essays, Institute of Land Warfare, October 2012, www.ausa.org/publications/ ilw/ilw_pubs/landpoweressays/Documents/LPE_12-1_web.pdf.

34 It really has to be seen to be appreciated. instagram.com/p/W2FCksR9-e.

35 Clay Delk, “On That Photo from the Vatican with All the Mobile Phones,” March 15, 2013, claydelk.com/2013/03/photo-vatican-mobile-phones.

36 Abby Ellin, “The Beat (Up) Generation,” Psychology Today, March 11, 2014, www.psychologytoday.com/articles/201402/the-beat-generation.

37 As an example, I’d argue that it makes no difference whether a purchase is well thought out or an “impulse” purchase. Impulse purchases (by defini-tion) are momentary and ill-thought through, but that doesn’t mean they are made in a vacuum. They rely on a mix of emotions, perceptions, and remembered details—a set of information that is accessed and used emotionally and reflexively, but nonetheless undergirds the decision.

38 Michael Liersch, Millennials and Money, Merrill Lynch Wealth Management, 2013, www.pbig.ml.com/Publish/Content/application/pdf/GWMOL/PBIG_Millenials_and_Money.pdf.

39 Paul Traynor, The Generation Game: Savings for the New Millennial, BNY Mellon, September 2014, www.sbs.ox.ac.uk/sites/default/files/Press_Office/Docs/whitepaper-generation-game.pdf.


40 Pew Research Center, Millennials in Adulthood, March 7, 2014, www. pewsocialtrends.org/files/2014/03/2014-03-07_generations-report-version-for-web.pdf.

41 Jordan Weissmann, “How Broke Are Millennials? This Broke.” Slate, Decem-ber 8, 2014, www.slate.com/blogs/moneybox/2014/12/08/broke_ millennials_the_decline_of_young_adult_incomes_since_the_recession.html.

42 Catherine Rampell, “College Enrollment Rate at Record High,” April 28, 2010, economix.blogs.nytimes.com/2010/04/28/college-enrollment-rate-at- record-high/?_r=0.

43 David Leonhardt, “Is College Worth It? Clearly, New Data Say,” New York Times, May 27, 2014, http://www.nytimes.com/2014/05/27/upshot/is- college-worth-it-clearly-new-data-say.html?abt=0002&abg=1.

44 Pew Research Center, Millennials in Adulthood.

45 Weissmann, “How Broke Are Millennials?”; Richard Fry, “Young Adults, Student Debt and Economic Well-Being,” Pew Research Center, May 14, 2014, www.pewsocialtrends.org/2014/05/14/young-adults-student-debt- and-economic-well-being.


47 Ibid.

48 Ibid.

49 Richard Fry, “Millennials Still Lag in Forming Their Own Households,” Pew Research Center, October 18, 2013, www.pewresearch.org/fact-tank/2013/ 10/18/millennials-still-lag-in-forming-their-own-households.

50 UBS Investor Watch, Think You Know the Next Gen Investor?

51 Bruce Drake, “6 New Findings about Millennials,” Pew Research Center, March 7, 2014, www.pewresearch.org/fact-tank/2014/03/07/6-new-findings- about-millennials.



53 Fry, “Millennials Still Lag in Forming Their Own Households.”


55 Drake, “6 New Findings about Millennials.”

56 Traynor, The Generation Game.


58 Ibid.

59 Beth Youra, “Banks: To Earn Customer Confidence, Make the Conversation about Their Financial Well-Being,” Gallup, April 4, 2014, www.gallup.com/opinion/gallup/173609/banks-earn-customer-confidence-conversation-financial.aspx.

60 Scratch, “The Millennial Disruption Index,” 2014, www.millennialdisruption index.com; Alice Truong, “Sorry Banks, Millennials Hate You,” Fast Company, March 6, 2014, www.fastcompany.com/3027197/fast-feed/sorry- banks-millennials-hate-you.

61 Scratch, “The Millennial Disruption Index.”

62 Birth, “Americans Report Declining Trust in Banks.”

63 Ibid.

64 Carol M. Gstalder, “Big Banks at Risk on ‘Bank Transfer Day,’” The Harris Poll, November 3, 2011, www.harrisinteractive.com/NewsRoom/HarrisPolls/tabid/447/mid/1508/articleId/904/ctl/ReadCustom%20Default/Default.aspx.

65 Ibid.

66 Gallup, “Confidence in Institutions,” June 5, 2014, www.gallup.com/poll/ 1597/confidence-institutions.aspx.



68 CO-OP Financial Services, Unlocking the Millennial Mystery: Research Highlights, May 2014, co-opthink.org/wp-content/uploads/2014/06/ Research-Highlights.pdf.

69 Microsoft, “We Asked Your Customers About Banking (They’re Just Not That Into You),” 2010, www.microsoft.com/en-sa/download/details.aspx?id=18032.

70 Daniela Yu and Julie Ray, “Baby Boomers Put More Money Than Trust in Banks,” Gallup, January 21, 2014, www.gallup.com/poll/166979/baby-boomers- put-money-trust-banks.aspx.

71 Ibid.

72 Pew Research Center, Millennials in Adulthood, March 7, 2014, www. pewsocialtrends.org/files/2014/03/2014-03-07_generations-report-version-for-web.pdf.

73 Unsurprisingly, a recent Gallup poll found that 76% of Americans say Con-gress does not deserve to be reelected. Yet more than half support the reelection of their member of Congress. Frank Newport, “Record High Anti-Incumbent Sentiment Toward Congress,” Gallup, December 9, 2011, www.gallup.com/poll/151433/Record-High-Anti-Incumbent-Sentiment-Toward-Congress.aspx.

74 Dennis Jacobe, “Americans Confident in Own Bank, but Not U.S. Banks,” Gallup, September 24, 2010, www.gallup.com/poll/143234/Americans- Confident-Own-Bank-Not-Banks.aspx; Beth Youra, “Banks, Listen Up: Most Customers Are Talking about You,” CB Insight, November 8, 2013, www.cbinsight.com/banks-listen-customers-talking.html.

75 Also consider that some statistics showing high customer satisfaction ratings for credit unions are likely tinged by at least some selection bias. For instance, “credit union members are three times as likely as customers of Bank of America to experience a trustworthy relationship (74% vs. 25%) and feel valued as a customer (72% vs. 24%).” Gstalder, “Big Banks at Risk on ‘Bank Transfer Day.’” These statistics are absolutely a feather in the system’s cap and a reflection of what the credit union system gets right. However, credit union members are, almost by definition, not your average American consumer. A typical consumer might have a limited understand-ing of credit unions and thus reflexively select banks. In contrast, many


credit union members joined their credit union with a purpose and have developed an emotional connection to their credit union that is closer than the connection between an average bank consumer and his or her bank. People who sought out something that was beyond the average default option are—unsurprisingly—excited about it.

76 But stay tuned . . .

77 Of course, “trustworthy” could mean several different things (such as morally trustworthy versus monetarily secure), but none of the potential interpreta-tions is particularly heartwarming for credit unions. Results from a smaller sample showed similar results when we tried several variations of this test, changing names of banks and credit unions.

78 Ron Shevlin of Aité Group, quoted in Brett King, Breaking Banks: The Innova-tors, Rogues, and Strategists Rebooting Banking (Singapore: Wiley, 2014), 98. He went on to note that “what might not go away are the assumptions on the part of the emerging Gen-Ys that there are alternatives to the traditional banking system that are perfectly acceptable.” See more on this in Chapter 6.

79 Rebecca Riffkin, “In U.S., Confidence in Banks Remains Low,” www.gallup.com/poll/171995/confidence-banks-remains-low.aspx.

80 Liersch, “Millennials and Money.”

81 The Boston Consulting Group, “How Millennials Are Changing the Face of Marketing Forever,” www.bcgperspectives.com/content/articles/marketing_center_consumer_customer_insight_how_millennials_ changing_marketing_forever/?chapter=3.

82 John H. Fleming and Elizabeth Kampf, “Few Consumers Trust Companies to Keep Online Info Safe,” Gallup, June 6, 2014, www.gallup.com/poll/171029/few-consumers-trust-companies-keep-online-info-safe.aspx. This tends to hold true even if the overall level of trust is low: “Consumers trust banks to protect their personal data at levels considerably higher than their overall confidence in the institutions themselves.” Ibid.

83 A perception that large banks are more technically proficient might also lead to the view that they are more reliable for large transactions like mortgages. It was sobering to realize that the observation that credit unions “continue


to make relatively small loans and that members’ needs for larger loans are taken care of by other financial institutions” comes from a study done more than half a century ago. Ronald M. Gardner, “Notes and Brief Reports: Purposes for Which Credit Union Loans Were Made, 1961,” Social Security Bulletin, October 1962, www.ssa.gov/policy/docs/ssb/v25n10/v25n10p22.pdf.

84 To my wife’s eternal consternation, I’m going on my seventh month of not finding a moment to change my paycheck direct deposit to a more conve-nient account. It’s a one-page form.

85 A comment from Reddit seems to sum this up nicely. When asked why the poster maintained an account with a bank instead of switching to a credit union, the poster replied: “I use a bank because there’s no incentive for me to switch to a credit union. My accounts are free. The interest rate on my savings account is good. My credit card is free. My bank is owned by a much larger bank which lets me use their ATMs for free too. And there’s a bank branch down the road from my house, as well as one on campus at my university.”

86 Gstalder, “Big Banks at Risk on ‘Bank Transfer Day.’”

87 Airlines that have offered a slightly nicer ride at a slightly higher price have been punished by the consumer—Virgin America “bled money” from 2010 to 2012, and JetBlue’s operating profits have been mediocre since 2010. Alison Griswold, “Frequent Criers,” Slate, December 24, 2014, www.slate.com/articles/business/moneybox/2014/12/cheap_airlines_why_americans_will_suffer_worse_service_on_flights_in_order.html.


89 Gstalder, “Big Banks at Risk on ‘Bank Transfer Day.’”

90 Bill Cheney, “Bank Transfer Day One Year Later: Yes, It Worked!” Huffington Post, November 1, 2012, www.huffingtonpost.com/bill-cheney/bank- transfer-day_b_2056292.html.

91 Ibid.

92 Claude R. Marx, “CUNA Revises to 210,000, Not 650,000, New Members in Bank Transfer Day Runup,” Credit Union Times, December 5, 2011, www.cutimes.com/2011/12/05/cuna-revises-to-210000-not-650000-new-


members-in-b. Different sources quote different figures (some significantly different) and possible interpretations, but the differences aren’t big enough to change the underlying point made here.

93 FDIC, 2013 FDIC National Survey of Unbanked and Underbanked Households, October 2014, www.fdic.gov/householdsurvey/2013report.pdf.

94 Sarah Snell Cooke, “Exclude the ‘Credit Union’ to Save the Credit Union,” Credit Union Times, March 16, 2010, www.cutimes.com/2010/03/16/exclude- the-credit-union-to-save-the-credit-union.

95 Ibid.

96 Our operating assumption is that virtually all Americans are eligible to become a member of at least one credit union. We also considered whether these data might instead indicate that the youngest millennials aren’t aware that there are any credit unions geographically nearby (also not a great finding for credit unions). However, the checking account eligibility question closely tracks understanding that credit unions are financial institutions. In other words, the best interpretation appears to be that the youngest millennials who do know what a credit union is also know that they can open a checking account at one—but a substantial number of those millennials still don’t “get” the idea of membership.

97 From my exposure to rap music in the mid-1980s, I had a brand perception of Dom Pérignon before I could physically distinguish it from a bottle of Budweiser, and it was probably a good decade before I’d ever tried champagne.

98 This is entirely speculative, but it may be that millennials view banks and credit unions similarly, not because credit unions are seen as sophisticated, but because both are seen as comparatively “old school” institutions as compared with Silicon Valley high-flyers like Google and Amazon.

99 Data suggest that a financial institution’s sphere of influence might inversely relate to Americans’ trust in it, with a narrower area of influence correlat-ing to a higher amount of trust. Local financial institutions are the most trusted, with over three-quarters of Americans having some or a great deal of trust in them. Birth, “Americans Report Declining Trust in Banks.” And despite their well-earned reputation for being cybernauts, when asked whether they value local ownership, millennials are the generation that


places the highest amount of importance on a bank being family owned. Independent Community Bankers of America and the Center for Genera-tional Kinetics, LLC, The 2014 ICBA American Millennials and Community Banking Study: Unexpected Findings from the Fastest Growing Generation in Banking, October 2014, www.icba.org/files/ICBASites/PDFs/ ICBAMillennialsandCommunityBankingStudyWhitePaper.pdf.

100 Microsoft, “We Asked Your Customers About Banking (They’re Just Not That Into You).”

101 It is interesting, though not necessarily surprising, to see that convenience is more important for checking and debit cards, whereas price tends to come to the fore for large transactions.

102 Granted, credit unions are a vast movement that covers many ideas and concepts. But they are not banks, and they do share common characteris-tics that they themselves point to as a reason why a person might select them over a for-profit banking option.

103 CUNA, “The Credit Union Difference,” 2013, www.cuna.org/Thecredituniondifference.

104 It would be the rare bird indeed who selects a credit union because of its tax status, and membership eligibility (the common bond concept) may be heavily influential for certain employee groups or close associations, but it is probably not a determining factor for the average consumer comparing checking account options.

105 CUNA, “The Credit Union Difference.”; “What Is a Credit Union?” www.asmarterchoice.org.

106 Harris Interactive, Millennials Demand Better Fees and Convenience from Financial Services Providers, June 11, 2013, www.harrisinteractive.com/vault/Harris-ThinkFinance-Survey-Release6-11-13.pdf.

107 “I am very happy with my credit union,” says a typical comment, “their interest rates are always less, and their fees for loans are way cheaper than a conventional bank.” dougstephvoor, September 7, 2010 (7:33 p.m.), comment on Great Lakes 4×4, www.greatlakes4x4.com/showthread.php?p=2349733.


108 Quoted in Rob Rubin, “Why Gen-Y Is Passing You By,” thefinancialbrand.com/ 33908/younger-consumers-smaller-banks-and-credit-unions.

109 Jeff Marsico, “Perception vs. Reality: Do People Get More from Credit Unions Than Banks?” The Financial Brand, June 14, 2011, thefinancialbrand.com/18712/are-credit-unions-a-better-value-than-banks/.

110 The Financial Brand, “4 Ways ‘Bank Transfer Day’ Is Silly,” October 25, 2011, thefinancialbrand.com/20199/bank-transfer-day.

111 Paying more to work with a trustworthy institution might be seen as a highly unusual form of “insurance.” I’d pay a somewhat higher interest rate at a credit union, not because I care about the warm fuzzies but because I’d rather pay a bit more for the peace of mind that comes with it.

112 Harris Interactive, “Millennials Demand Better Fees and Convenience from Financial Services Providers.”

113 A Google search on “screwed by bank” returns 12.7 million hits, whereas “screwed by credit union” returns 310,000. A comment thread on Reddit (a messaging site popular with millennials) asked the question “What will a credit union do that my bank doesn’t?” The second most highly ranked answer was “In a nutshell, they won’t f*** you over.”

114 The Financial Brand, “Credit Union Core Values: Any Different Than Banks?” January 27, 2009, thefinancialbrand.com/4437/credit-union-core-values.

115 CUNA, “The Credit Union Difference.”

116 Jean M. Twenge, W. Keith Campbell, and Nathan T. Carter, “Declines in Trust in Others and Confidence in Institutions among American Adults and Late Adolescents, 1972–2012,” Psychological Science (October 2014), pss.sagepub.com/content/early/2014/09/08/0956797614545133.abstract.

117 Bradley, “People Don’t Hate Millennials.”


119 Drake, “6 New Findings about Millennials.”



121 Beth Youra, “Looking Out for Customers’ Financial Well-Being Is Table Stakes for Banks,” Gallup, September 4, 2014, www.gallup.com/opinion/gallup/176534/looking-customers-financial-table-stakes-banks.aspx.

122 Cooke, “Exclude the ‘Credit Union’ to Save the Credit Union.”

123 Scratch, “The Millennial Disruption Index.”


125 Truong, “Sorry Banks, Millennials Hate You.”

126 Harris Interactive, “Millennials Demand Better Fees and Convenience from Financial Services Providers.”

127 Shevlin, quoted in King, Breaking Banks, 96.

128 Accenture, My Pay. My Way. How Consumer Choice Will Shape the Future of Payments, 2014, www.accenture.com/SiteCollectionDocuments/ accenture-2014-north-america-consumer-payments-survey.pdf.

129 Jon Matonis, “Top 10 Bitcoin Merchant Sites,” Forbes, May 24, 2013, www.forbes.com/sites/jonmatonis/2013/05/24/top-10-bitcoin-merchant-sites.

130 Accenture, My Pay, My Way.

131 Wearables are defined as real-time computing devices easily worn on the body and can be in the form of watches, glasses, rings, bracelets, smart fabrics, and contact lenses. (Contact lenses!)

132 Rebecka Roos and Alister Doyle, “Nordic Countries Point the Way to Cash-less Societies,” Yahoo News!, January 9, 2015, news.yahoo.com/nordic-countries-point-way-cashless-societies-143338597—sector.html.

133 I use PayPal. I have no idea where it is located, nor do I know anything about the people who run it. I mean, I assume people run it—perhaps it’s some artificial intelligence engine in a warehouse in Vancouver. I don’t really know. I just use it.

134 Shevlin, quoted in King, Breaking Banks, 98 (emphasis added).


135 Aaron Smith, “Smartphone Ownership 2013,” Pew Research Center, June 5, 2013, www.pewinternet.org/2013/06/05/smartphone-ownership-2013.

136 GMC Software Technology, The End of the Banking Autocracy: Why Banks Must Understand and Value Their Customers to Bring Back Trust, 2014, www.gmc.net/fileadmin/downloads/papers/GMC-whitepaper-the-end-of-the-banking-autocracy.pdf.

137 Yu and Ray, “Baby Boomers Put More Money Than Trust in Banks.”

138 The Financial Brand, “Exclusive Study Reveals Brutal Realities Facing Credit Unions on Twitter,” February 25, 2013, thefinancialbrand.com/27762/credit- union-twitter-follower-tweets-study.

139 Brian Branch, “Young Adult Membership Growth: Who Are They?” CU Insights, July 3, 2014, www.cuinsight.com/young-adult-membership-growth-who-are-they.html.

140 As a professor who grades student writing, I was looking for a way to provide more in-depth feedback to my students. I proudly announced to my students that I would now be offering recorded audio feedback on their work. They could download the feedback and listen to me walking them through the pros and cons of their writing assignment. Expecting great feedback from grateful students, I instead saw looks of consternation.

“Eeeew,” said one finally, emphatically scrunching up her nose at me. “That’d just be creepy.”

141 “Creepy” seems to be the adjective of choice, probably not what credit unions are going for. “Do you think banks and other financial institutions benefit from a strong social media presence? ‘No, I think it’d be kind of creepy.’ A US millennial.” Traynor, The Generation Game.

142 Ibid.

143 Millennial Marketing, “Why Credit Unions are Winning with Millennials.”

144 Mazuma Credit Union appears to be a good example. Its online presence is about as “all in” as it gets. Blog posts about recommended Christmas movies, humorous videos, irreverent web copy, a wacky spokesman—it’s clearly marketing in its own way, but it also feels committed. It takes all of five minutes on Mazuma Credit Union’s website to realize that it’s put in


the work and that its extensive social media presence is a natural fit. (In fact, not being on social media would feel like a betrayal of the image it’s built.)

145 Jai Gill and David Helvadjian, “Think Your Bank Is Different? You’re Wrong,” Gallup, July 5, 2012, http://www.gallup.com/businessjournal/155237/think- bank-different-wrong.aspx.

146 Cooke, “Exclude the ‘Credit Union’ to Save the Credit Union.”

147 Ibid.

148 They also noted that banks have done a much better job of “playing the long game.” Traynor, The Generation Game.

149 Branch, “Young Adult Membership Growth.”

150 Ibid.

151 The highest-rated comment from an NPR story on Union Bank’s high school effort says, “I’d be okay if these were non-profit credit unions. They would teach the exact same lessons without the controversy of commercial bank monopolies in schools. Commercial banks, with their exploitative fee systems and overpaid executives who dabble in derivatives are not exactly role models I want for my kids.” Charles Davis, “Why Are Banks Opening Branches . . . in High Schools?” Salon, October 16, 2014, www.salon.com/ 2014/10/16/big_banks_target_school_kids_why_are_they_opening_ branches_in_high_schools/.

152 As a shareholder in Disney, I feel helpless to decide whether we really need another Iron Man movie.

153 Lee Rainie and Barry Wellman, Networked: The New Social Operating System MIT Press, 2012, cited in Pew Research Center, Millennials in Adulthood, March 7, 2014, www.pewsocialtrends.org/files/2014/03/2014-03-07_ generations-report-version-for-web.pdf.

154 Shareholder History & Financial History, prod.static.packers.clubs.nfl.com/assets/docs/shareholder-history-2014.pdf.

PAGE 61 LIST OF FIGURES FILENE RESEARCH INSTITUTE

List of Figures 5 FIGURE 1


20 FIGURE 2

WHICH FINANCIAL INSTITUTION IS MORE TRUSTWORTHY?

24 FIGURE 3

A CREDIT UNION IS A TYPE OF . . .

25 FIGURE 4

ARE YOU ELIGIBLE TO OPEN A CHECKING ACCOUNT AT A CREDIT UNION?

25 FIGURE 5

DO YOU QUALIFY TO BE A MEMBER OF AT LEAST ONE CREDIT UNION?

26 FIGURE 6


27 FIGURE 7

BANKS ARE DIFFERENT FROM CREDIT UNIONS BECAUSE BANKS . . .

27 FIGURE 8

CREDIT UNIONS ARE DIFFERENT FROM BANKS BECAUSE CREDIT UNIONS . . .

28 FIGURE 9

WHICH OF THE FOLLOWING DESCRIBES LARGE NATIONAL BANKS LIKE CITIBANK OR WELLS FARGO?

28 FIGURE 10

WHICH OF THE FOLLOWING DESCRIBES CREDIT UNIONS?

29 FIGURE 11

WHICH OF THE FOLLOWING DESCRIBES LOCALLY BASED COMMUNITY BANKS?

PAGE 62 LIST OF FIGURES FILENE RESEARCH INSTITUTE

29 FIGURE 12

WHICH TYPE OF FINANCIAL ORGANIZATION DO YOU PREFER FOR CAR LOANS, MORTGAGES, AND OTHER LARGE TRANSACTIONS?

30 FIGURE 13

WHICH TYPE OF FINANCIAL ORGANIZATION DO YOU PREFER FOR CHECKING, DEBIT CARDS, AND OTHER DAILY NEEDS?

36 FIGURE 14


36 FIGURE 15


PAGE 63 ABOUT THE AUTHOR FILENE RESEARCH INSTITUTE

About the Author

Andrew TurnerLecturer, University of Wisconsin Law School

Andrew is currently a lecturer at the University of Wisconsin Law School, but it is his diverse life and work experience that helps him bring a broad range of skills and insight to his work.

Andrew spent nearly a decade living and working in Tarija, Bolivia, where he researched social and political issues and oversaw projects that helped indige-nous Guarani communities navigate legal and political reforms. Since returning to the United States in 2003, Andrew has worked with the World Council of Credit Unions, spent three years as a corporate attorney with a major Wisconsin law firm, managed the minor urban and rural lending operations for a $10 mil-lion nonprofit loan fund, and is now full time at the UW Law School. A longtime educator, Andrew has taught at San Bernardo University in Tarija, Bolivia, and at Blackhawk Technical College and has worked as an ESL instructor in Bolivia and Taiwan. He also served as a legal and policy intern in the Office of the Gov-ernor of Wisconsin.

Andrew earned his law degree from the University of Wisconsin Law School and his master’s in public affairs from the La Follette School of Public Affairs in 2008, as well as a bachelor’s degree in anthropology from the University of Wisconsin–Madison in 1993. He is also a graduate of the Microfinance Training Program in Boulder, Colorado.

PAGE 64 ABOUT FILENE FILENE RESEARCH INSTITUTE

About Filene

Filene Research Institute is an independent, consumer finance think and do tank. We are dedicated to scientific and thoughtful analysis about issues affect-ing the future of credit unions, retail banking, and cooperative finance.

Deeply embedded in the credit union tradition is an ongoing search for better ways to understand and serve credit union members. Open inquiry, the free flow of ideas, and debate are essential parts of the true democratic process. Since 1989, through Filene, leading scholars and thinkers have analyzed managerial problems, public policy questions, and consumer needs for the benefit of the credit union system. We support research, innovation, and impact that enhance the well-being of consumers and assist credit unions and other financial cooper-atives in adapting to rapidly changing economic, legal, and social environments.

We’re governed by an administrative board made up of credit union CEOs, the CEOs of CUNA & Affiliates and CUNA Mutual Group, and the chairman of the American Association of Credit Union Leagues (AACUL). Our research priorities are determined by a national Research Council comprised of credit union CEOs and the president/CEO of the Credit Union Executives Society.

We live by the famous words of our namesake, credit union and retail pioneer Edward A. Filene: “Progress is the constant replacing of the best there is with something still better.” Together, Filene and our thousands of supporters seek progress for credit unions by challenging the status quo, thinking differently, looking outside, asking and answering tough questions, and collaborating with like-minded organizations.

Filene is a 501(c)(3) not-for-profit organization. Nearly 1,000 members make our research, innovation, and impact programs possible. Learn more at filene.org.

“Progress is the constant replacing of the best there is with something still better.”

—Edward A. Filene

612 W. Main StreetSuite 105Madison, WI 53703

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Publication #368 (8/15)