Recently credit unions across the United States have enjoyed strong membership growth and increased popularity. The Credit Union National Association (CUNA) estimates that credit union membership has increased by 1 million during the fourth quarter last year. This is good news for the credit union industry and CUs of all sizes should try to keep the momentum going by targeting 3 growing markets that are currently underserved by financial institutions.
Unbanked and Underbanked
According to a national survey conducted by the FDIC in 2009 there are approximately 38 million unbanked or underbanked people in the United States. Unbanked individuals are defined as having no relationship with a financial institution. These people do not have checking accounts, savings accounts, credit cards or any financial products offered by financial institutions. The underbanked have limited relationships with financial institutions and often utilize financial services from money service businesses (MSBs) such as check cashing stores and pawnshops. The unbanked and underbanked population will continue to increase as more and more Americans grow distrustful of large banks. Credit unions can attract these people with a variety of prepaid debit products, mobile applications, and P2P platforms. CUs must also work diligently to distinguish themselves from big banks by promoting their “people over profits” mission statement in the communities they serve and invest in other grass roots marketing tactics.
Generation Y
Gen Y has been loosely defined as those between the ages of 10 and 35. According to a report from USA Today Gen Y is comprised of approximately 77 million people. This group is highly connected to each other and the companies, brands, and products they interact with. Credit unions should target this market segment because many Gen Y members have yet to develop strong relationships with financial institutions. Obtaining members of this young age could lead to strong and profitable long term relationships for CUs. Promoting simple share draft accounts to college-age young adults could lead to valuable cross selling opportunities in the future such as auto loans, mortgages and credit cards. The Gen Y population is extremely tech savvy and CUs must offer the online banking and mobile banking features that these consumers have come to expect. Not all self-service applications are created equal and it is important for credit unions to invest in robust software that offers a simple and efficient user experience. Mobile apps that operate solely on text message commands rather than a graphical user interface for example would not be attractive to Gen Y.
Small Businesses
In 2009 the Small Business Association (SBA) estimated that there were 27.5 million small businesses in the U.S. Small businesses have generated roughly 65% of net new jobs over the past 17 years and these firms are likely to have a significant impact on the country’s economic recovery. Credit unions should market themselves to small business owners as an alternative to community banks and national banks. In order to attract business members CUs must offer the products and services that businesses need such as online banking, remote deposit capture and ACH . While banks are slow to extend credit to small business, credit unions can leverage this fact to their advantage and attract healthy business loans from local companies.
2012 may shape up as another successful year for credit unions that are willing to pursue opportunities in neglected markets. If targeted successfully all of these population segments should drive membership rates, increase asset size and improve cross sales for credit unions well into the future.