The way credit unions are spreading across the country, you might think the banking industry is trying to make a zombie movie. For years, these locally owned institutions were considered nothing more than a benign tumor on an otherwise Wall Street-dominated market. They were the outdated country cousins of the big banks that dominated finance. Recently, though, things have changed.
A new wave of anti-corporate sentiment has galvanized these once-forgotten credit unions, and now they’re rising up out of the dirt, feasting on the accounts of disgruntled young professionals and, *gasp*, multiplying.
So now the question isn’t “how long can credit unions stay in business?” But “how long can they keep this momentum going?”
With more and more young consumers turning to these institutions for their financial needs, everyone wants to know if the nation’s 7,000-odd credit unions can capitalize on this once-in-a-lifetime opportunity and become serious contenders in the market. Well, at the moment, all signs point to yes.
Breaking Down the Numbers
If you were asked to explain the sudden popularity of credit unions, you’d have to point to a specific calendar date: Bank Transfer Day, 2011. Sponsored by the Occupy movement and the Guy Fawkes-loving hacker collective Anonymous, Bank Transfer Day encouraged every American – especially 18- to 25-year-olds – to pull their accounts from their Wall Street banks and transfer them to a credit union on Nov. 5, 2011. While the holiday resulted in just 210,000 new accounts for credit unions nationwide, you only need to look at the business that credit unions did during Bank Transfer Day’s entire campaign to see that it was much more successful than the numbers suggest.
Bank Transfer Day was first publicized Sept. 29, the day that Bank of America announced it wanted to tack a $5 monthly fee onto its debit cards. Within a week, more than $4.5 billion had been transferred from Wall Street Banks to the nation’s 7,000 credit unions. Furthermore, the latest Credit Unions Online report states that 1.3 million consumers opened accounts with a credit union last year, up from 600,000 in 2010. The report goes on to say that credit union membership is currently at an all-time high of 91.8 million, and that number is expected to grow in 2012. These hardly seem like the numbers of a struggling business, right? In fact, Bank Transfer Day was so wildly popular that one banking affiliate actually tried to imitate it.
Winning a Downhill Battle
It’s safe to say that if credit unions are to stay as successful as they’ve been, they’ll have to keep attracting young people. At the moment, 75% of credit union members are at least 50 years old. That’s not exactly a recipe for long-term sustainability. However, the union heads aren’t blind to this. They’re mounting campaigns to draw young adults away from the big banks and over to local credit unions. They’re starting Twitter accounts, hiring 20-something spokespersons and sponsoring edgy viral videos that attack unpopular banking practices.
Of course, the most effective argument for credit unions – at least in the eyes of young consumers – is being made by Wall Street itself. With the economy struggling to escape the worst recession since the Great Depression, major banks like Wells Fargo and JPMorgan Chase are unabashedly chasing the money. The headlines weren’t exactly flattering to Wall Street last year, what with all the new fees and foreclosures, and the fact that the country’s biggest banks are pursuing wealthy customers instead of struggling young professionals is only alienating the kids even further. According to a recent Harris Poll, only 24% of Bank of America’s customers feel like they’re valued, and only 50% of JPMorgan Chase and Wells Fargo customers say they’re likely to continue doing business with their bank in the future. Suffice it to say that credit unions don’t need to have the best marketing campaign when their target demographic is being driven right into their arms.
A Slow Change
It’s unrealistic to expect credit unions to throw the entire banking industry into upheaval overnight, but the evidence definitely suggests that they’re gaining traction. And why shouldn’t they? In an era defined by excessive fees and the illegal pursuit of credit card payments, credit unions are poised to succeed because they’re still doing exactly what they did when they got into the business a hundred years ago – offering community-minded loans and services, without the unrelenting drive for profit at any cost. They embody all the buzzwords marketers are so crazy about these days, like “locally owned,” “grassroots” and “organic.” So when you ask if credit unions have what it takes to win over America’s youth, the answer is that they always have. The only thing they have to do now is not screw it up.
Bill Hazelton is the founder and CEO of CreditCardAssist, a pro-consumer credit card resource. Since 2004, he’s been providing American consumers with all the tips, tricks and news they need to navigate the world of personal finance. His on-site reports have been cited by the San Francisco Chronicle, the New York Post, Yahoo! News and more.