SAN JOSE, Calif.—A new study shows that credit unions lose their PFI status with half of Millennials as they age, but suggested there are ways CUs can win over this group as they get older.
According to FICO, 20% of U.S. Millennials aged 18-24 say they use credit unions as their primary financial institution. However, only 10% of Millennials ages 25-34 say the same thing.
"Although credit union and regional bank members are generally older, 18-to-24-year-olds are noticing the value that credit unions provide as an alternative to large banks," said Joshua Schnoll senior director at FICO. "In particular, this age group is attracted to low and transparent fee structures and better interest rates."
Perception Of High Fees
For the second year in a row, the FICO survey showed the number-one reason that consumers leave their primary financial institution is the perception of high fees. Of those consumers who have switched institutions, 49% listed high fees as the top reason. For Millennials, fees are still the number one reason for switching, followed by poor customer service or ATM/branch convenience issues.
"Credit unions should market attractive rates and low fees to existing and potential members, given how highly it rates in their consideration process," said Schnoll. "In addition, credit unions can more intelligently manage debit and credit accounts by leveraging transactional data and behavioral patterns to help prevent attrition. This will enable them to make the best pricing cross-sell offers or fee waivers for each customer."
FICO's survey revealed that there might be an opportunity for credit unions to win over 25-34 year-olds, as the survey reveals these Millennials are two to three times more likely to close all their accounts with their primary financial institution in the next 12 months.
Looking at consumers of all ages, the survey reveals that 14% of respondents with accounts at major banks said they are likely to close all their accounts in the next 12 months, compared to just 4% with credit unions. Capturing some of these customers when they are looking to switch presents a chance for credit unions to increase their share and keep it, FICO said.
Mobile Convenience
Credit unions should also consider the importance of consumer convenience when courting the business of Millennials, FICO advised. The survey showed that Millennials want to be able to manage their accounts from their smartphones and receive messages via app, SMS and phone. There is currently a significant gap between this preference and the service level delivered, explained FICO.
“For example, only 42% of credit union members responding to the survey said that they are using their credit union's mobile app, compared to 64% of customers at large national banks,” the company stated.
"While credit unions may not have the vast networks of ATMs and branches, these new smartphone-driven technologies allow them to level the field. Integrating the ability to transact online can help address the attrition they are seeing in the 25-34 year-old age group," said Schnoll.
FICO conducted the online survey among 1,000 U.S. consumers over the age of 17, in October and November 2015.