Widespread consumer outrage over big-bank greed and new customer fees led to Bank Transfer Day, a social media-driven movement of young people who moved their money into credit unions and out of the big banks. But when the movement concluded on the anniversary of the Guy Fawkes’ Gunpowder Plot, it seemed little had changed. Fees keep appearing and banks are no less profit-driven. More importantly, American credit unions took on only 214,000 new members after all was said and done — a bit of a disappointment.
Young people are an important commodity in banking — because youth is fleeting, and soon enough the young turn old and need mortgages, retirement savings and the like. Our nationwide banks are always there for young people: plastered on the left field fence at the ballgame, on the bus, the radio, the TV, Facebook, everywhere. For credit unions, courting young customers is a bit more difficult
Credit unions are for old people
Consider this: according to the Credit Union National Association, the average age of a credit union member is 47. According to the CIA, the median age in the United States is about 36. Credit unions are old, and old-fashioned seeming (but not in a good way) and that makes it difficult for them to bring in new members.
One company in Canada, Currency Marketing, is working to fix that with a marketing campaign and range of services they call Young & Free. The campaign, which can be sold to any credit union in theory, works like this: one young person is elected to be brand ambassador of a credit union through a process not dissimilar to American Idol, said Tim McAlpine, president and creative director of Currency Marketing. The contestants enter video submissions, and McAlpine and his client credit unions create a short list of their three favorites. After that, the public votes on their favorite and the winner becomes an employee of the credit union, tasked with marketing the credit union to local youth.
Take Alabama’s Lee Taylor, for instance, who is currently promoting an after-school party contest to Alabama high schools — careful, Lee! — along with a local radio station as part of his Young & Free marketing gig. Taylor will be a guest on 94.9′s Dumb Fun Show, offering tips on how to save money on outdoor recreation during the summer months.
Taylor is an employee of Listerhill Credit Union, which has several locations in Alabama. He does the recruiting of young people that Listerhill can’t or won’t do otherwise. And Currency Marketing helps them along in what McAlpine describes as a “high-touch” relationship.
Straight out of Canada
The Young & Free campaign was born in Canada, as a way to market Servus Credit Union, of Edmonton, to a younger demographic. What McAlpine discovered while developing Young & Free is that a marketing campaign on its own simply does not suffice. They need to make a value proposition to young people, too. So Young & Free comes with certain banking products that are created to be more attractive to a younger clientele. In Canada, free checking was never commonplace, so Servus offered free checking through Young & Free, and they were quite successful in doing so. Since launching the campaign, Servus has added 25,000 new members.
The Young & Free campaign has been adopted by individual credit unions in Indiana, Michigan, Missouri, South Carolina and, of course, Alabama. But these are all larger credit unions that could already afford Currency Marketing’s services. In New Mexico and Maine, those states’ credit unions teamed up through the state association to buy into the campaign. Maine has lowered the average age of a credit union member by two years, said McAlpine.
In the States, because free checking was so prevalent already — though it’s rapidly fading — Young & Free campaigns have different features, though they also include free checking. Most offer somewhere between two and four overdraft reversals a year, said McAlpine.
“I know [overdrafts fees are] an income source for financial institutions but it’s also the No. 1 pain point…especially [among] young people,” he said, adding, “Nothing pisses young people off more than overdrafts.”
In addition to reversing a limited number of overdraft fees, Young & Free participants will offer complimentary savings accounts with the free checking accounts, which earn higher APY on lower balances instead of the other way around.
Still an uphill battle for credit unions
“The name itself is bizarre,” said McAlpine of credit unions, and he has a point. Unlike banks, which are obviously not associated with certain professions and unions, credit unions can be sort of mystifying to young people. Furthermore, credit unions’ local focus, while appealing on ideological grounds, can also be a handicap.
“It’s like they’re too local,” said McAlpine. “Meaning that even with things like shared ATM networks, shared branching, there’s a real perception that I can’t get at my money. Or I gotta go with Bank of America even though I don’t necessarily love them. I know that I can get my money out when I’m traveling or when I go to college or get a job across the country — I can get out my money.”
Through the Young & Free campaign, credit unions have added 75,000 new members said McAlpine, all across North America. It’s not a sea change, but it’s certainly a start. As the effects of Dodd-Frank settle into the market for nationwide banking products, lower- and moderate-income people will be not-so-subtly shown the door by the big banks, through new fees, or restrictions on branch access, or even the closing of branches. Most young people start out as people of modest means, and most of them see their incomes grow over the course of their lives. Small banks and credit unions have a small window right now to make their case to young people.