Ask a young person when the last time he or she actually went to his bank and credit union and chances are the answer is they’ve never been to it and really don’t care about where it is – at least according to research by Rob Rubin.
Who is Rob Rubin, you ask? He’s the founder and chief executive of Facilitas, a company that provides community banks and credit unions with web-based tools, analytics and research to win more Internet-savvy consumers.
“Credit unions and community banks that fail to win over young consumers are doomed,” he said. “The times are changing.”
Filene Research Institute recently published a report by Rubin based upon a survey of 1,400 people and several credit union executives seeking to understand how consumers’ banking attitudes and behaviors have changed.
The survey found 22 percent of Gen Y use an online bank as their primary banking institution, 40 percent of those participating in the survey pointed to recommendations from friends and family playing a role in opening their account and that this generation places a premium on account features and interest rates in the immediate term.
Convenience is an extremely important driver of retention, according to Rubin. Paired with the difficulty of switching over existing accounts, it keeps a majority of consumers in place.
Still, Rubin said that most credit unions or community banks need to step up their online presence if they want to scoop up the younger generation.
“The things that attract Gen Y are often the things that need the most work,” Rubin said. “For example, some credit union and community bank websites are more like ‘sales prevention tools’ and it won’t make sense to invest heavily in social media or tout your online offerings until your online storefront is attractive and effective.”
• Scrap plans for the new branch and build a virtual branch for Gen Y. All of the capital and human resource costs of a new $1 million or more branch would be better spent improving the website, investing in remote deposit capture (because 90 percent of teller transactions involve check deposits) and rebating foreign ATM fees.
• Develop products internally. Even credit unions and small banks can develop consumer-facing applications their customers will love. Relying exclusively on third parties makes it impossible to differentiate yourself from competitors. Consider services like budgeting tools and personalized text alerts.
• Expand product portfolios to include more credit cards and reward programs, two areas the younger generation are interested in today. For example, credit union or bank – specific rewards that build on both use and responsible behavior will keep members around until they’re ready for bigger loans and more deposits.
“It’s time to really get with it,” Rubin said. “Take honest stock of the competition from online banks and big banks alike. Only then can you double down on the services that will make your financial institutions the one of choice among Gen Y.