In the next four decades, the U.S. will have more than 350 million people younger than age 65. And this population will be more racially diverse as well: Hispanics will make up 23% of the total population by 2030, and 30% by 2050.
Younger generations in general already are increasingly diverse. As of 2008, 42% of millennials identified themselves as in a group other than white or Caucasian. And socially, the number of single heads of households is growing.
The significance of these demographic and social changes is profound for your credit union and the members you serve. Technology will affect how you interact with members, the products you offer, the way money moves, and the regulatory framework in which you operate.
CUNA’s 2015-2016 Environmental Scan examines this landscape for boards and management teams so they can meet growth opportunities and challenges head-on.
Considering these industry trends is one way to stay ahead of the curve. And that goes hand-in-hand with talking to your members about what they want and how you can stay a relevant part of their financial lives.
A MOBILE ECOSYSTEM
Serving younger and more racially diverse member populations will require different business models.
Young members grew up digital and expect to use this technology in the future—for nearly everything. That’s why your credit union’s ability to create a mobile ecosystem will be key, notes Mark Sievewright, president of Fiserv’s credit union division.
This will enable members to move their money via their devices in a variety of ways, such as online bill pay, person-to-person payments, and mobile deposits. Growth of these payments streams isn’t slowing down. E-commerce payments in general will grow 15% year-over-year, and person-to-person payments will increase nearly 50%. Last year alone mobile payments grew nearly 70%.
You’ll find higher adoption rates based on the services you offer and the effectiveness of your promotions. If done well, you’ll not only increase transactions and revenue, but create more loyal members, too.
Apple’s digital wallet solution, announced in September 2014, will be seen as a watershed moment in the payments world. It could signal widespread adoption of mobile point-of-sale payments, expected to increase exponentially in the next five years.
Many credit unions jumped immediately on the Apple Pay bandwagon. Those that wait too long should realize their hesitation could come at a high cost.
That’s because as you battle for your cards to be “top of device” and “top of wallet,” consumers and merchants will decide the payment methods they prefer and which technologies win out. Consumers focus on what’s in their cart and how fast they can receive service. Merchants want more sales and lower expenses. Knowing that, heed this advice in developing payments strategies:
Competitors have taken notice of Apple Pay’s arrival. Within months, Google revamped its wallet and also released Android Pay.
THE IMPROVING ECONOMY
Expect the momentum from 2014’s rosy economic results—positive job growth, low inflation, an improved housing market—to continue through 2016. Members’ balance sheets are improving as well.
Look for the Federal Reserve Board to finally move to increase the federal-funds rate, perhaps later this year, says CUNA economist Mike Schenk.
Credit unions should prepare for even stronger loan growth, which should offset the impact of these rising rates.
And, he says, look to what’s on the risk horizon:
MILLENNIALS AND THE CU BRAND
Credit unions continue to have a “millennial” problem. They’re your future savers and borrowers—but 71% have little or no knowledge of credit unions, PSCU research shows. The good news is that millennials also distrust banks.
How do you increase your relevance among young adults? For more than a century, credit unions have fought hard for the underserved by putting people first. So take the same approach with this group. Identify their needs, and work on building trusting relationships with them.
“Credit unions’ [millennial growth prospects] have never been greater,” says Myles Bristowe, chief credit union marketer for PSCU. But many credit unions aren’t prepared to attract, engage, retain, or provide services to these members. Considering these trends can guide your membership growth initiatives.
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