“So what is your credit union to do with a recalcitrant generation that sees credit cards through the murky lens of the financial crisis as they drag a massive boat anchor of student debt along behind them?"
There is an old French saying that states, “Plus ça change, plus c'est la même chose.” Actually, Jon Bon Jovi sang about it, too. But it sounded like “The more things change, the more they stay the same.” And in regards to basic human nature, it is probably true.
However, in the case of credit cards, it may not be true anymore, and the potential impact on credit unions is huge.
Baby Boomers were raised on credit cards, as a necessity of daily life, and American Express had a catchy ad campaign in the 1980’s that coined the phrase “Don’t leave home without it.” Boomers took that advice seriously and used credit cards as their primary means of payment for travel, entertainment and large dollar purchases – and very often for everyday purchases, too. But the Millennial Generation has changed the way they use money – and specifically how they use credit cards. They are representative of the dawn of a new era in payments and that era is characterized by a pay now mentality.
However, an important finding regarding this generation is their likelihood to turn to a credit union versus a bank when they do want a credit card. Recent statistics from Filene Research show that members of the 18-28 year old segment are significantly more likely to get a new credit card from a trusted credit union because of their mistrust toward banks. One of my favorite recent findings, from Viacom’s Millennial Disruption Index published in 2014, says they would rather go to the dentist than to a bank. The underlying assumption here is they really don’t like the dentist. Wonder how that makes the dental industry feel? “Yay. At least we’re better than a bank!” they shout. But we digress. Back to the topic at hand, credit cards.
In that age-old formula of Acquisition, Activation and Usage (AAU), this data makes it look like your credit union has a leg up on the first “A”. But those of you who have embarked on a strategy to attract this generation may find that the difficulty is with the “U” – getting them to regularly use your credit card. The default payment method for them is either a debit card or often a mobile payment account, something like Venmo, that is withdrawn directly from their checking account. The credit card stays tucked safely at the bottom of their wallet – for use in emergency situations, like when they are actually successful in getting those concert tickets for the gang to go see The National. “$628.42?” they gulp. Yes, they will use the credit card sometimes.
But the Great Recession scarred these kids in ways we are only now coming to fully understand, because watching their parents or neighbors being foreclosed on had a mighty impact on them. Additionally, being saddled with more college debt than any previous generation is affecting their credit card usage, as well. The Class of 2015 graduated with an average of $35, 051 in student loans. It doesn’t exactly make you want to throw your cap in the air, now does it?
So what is your credit union to do with a recalcitrant generation that sees credit cards through the murky lens of the financial crisis as they drag a massive boat anchor of student debt along behind them?
Step One is education for this group. We already know that they trust the credit union more than the bank – so what better platform to show them how credit card usage can actually be a really smart decision for them? Even for their everyday purchases, not just for the concert tickets. Using the credit union’s money and paying it off every month is a great way to pay while they simultaneously build up a good credit file. And the best way to reach them with this message is through their social media network, most likely not Facebook though, because that is now the Baby Boomers’ neighborhood. Millennials moved away to Snapchat and Instagram.
Step Two is communicating the lower fees they receive from the credit union and here is where the message of the cooperative resonates most strongly. We said they didn’t like banks and part of the reason is because they feel ripped off. Credit unions gain trust when Millennials understand that member-owned and not–for-profit translates into money in their pocket. Cha Ching.
Step Three is all about rewards. One thing Millennials are very good at it making thrifty decisions. They are not ashamed to download coupons and they are very attuned to the benefit of a good rewards program. This is the generation that made GroupOn into a household name, remember? So if they see the benefit of your rewards program over others, to the top of the wallet she goes.
Therefore, your credit union, as a trusted financial institution, has all of the tools necessary to attract and retain this new generation of consumers to your credit card program: Education, Lower Fees and Rewards. With one final caveat that is the most important factor of all. Remember the AMEX ad? They will leave home without a credit card, but the thing they will not leave at home is their mobile device. Research reveals that this generation is never more than three feet away from it at any time, even in bed.
So set the alarm. A strategy to win this generation has to be mobile enabled. Or your poor lonely credit card will be at the bottom of the wallet, the back of the sock drawer or worse yet – will be used to scrape the ice off their windshield after The National concert.
Get a credit card product on a mobile device right and you’ve got ‘em.
Fredda McDonald, Managing Partner of Lydian Management Consulting, is a payments expert with a career history of energizing teams to find better ways. Her latest book on Amazon, BoxBreakers, highlights some recent industry disrupters and the lessons to be learned to fuel meaningful innovation. She can be reached at fredda@lydianmgt.com.