Credit unions continue to feel the impact of the Dodd-Frank Wall Street Reform and Consumer Protection Act, enacted by Congress in July 2010.
The resulting regulatory and compliance burden is increasing administrative costs and has many credit unions exploring new ways to increase revenue. A new retail trend might provide just such an opportunity.
Savvy credit unions recognize that shopping local is not just a passing fad. According to the National Federation of Independent Businesses, last year’s Small Business Saturday generated $5.5 billion in sales for small businesses.
Consumer awareness of the event has grown to 67%, and 47% of those who were aware shopped at small businesses that day, the Saturday after Thanksgiving.
Studies indicate that of $100 spent with national retailers, $13 to $33 remains in the local community. When $100 is spent with local merchants, $50 to $60 stays in the local economy.
Furthermore, local businesses can provide more personal customer service. And a recent Gallup poll indicates that consumers have three times more confidence in small business than big business.
Social media sites such as Facebook, Twitter, and Yelp, when used in conjunction with mobile ecommerce apps, have opened a new world of opportunity for credit unions to compete with the mega banks.
Traditionally, big banks—with their large marketing budgets—have used rewards programs to encourage customers to open new accounts, use plastic cards more often, perform more signature debit transactions vs. personal identification number transactions, take out or refinance loans, and purchase additional bank products and services.
Credit unions, with staff experienced in social media, are now adopting public relations programs to compete with the big banks. They recognize that informed consumers today welcome push offers and notifications that are specifically targeted to their needs.
Programs can attract new members by offering bonus points for referring friends, paying reward points for becoming a new member, and offering reward points to members who opt-in to “share” information from their social networks.
The underlying theme for all of this activity is to encourage consumers to bank and shop locally and avoid big bank fees.
Demographics are at work here, too. There’s no question that Generation Xers and Millennials, now known as Generation C (for connected), are always on the lookout for ways to extend limited budgets, and they have no qualms about banking online. It’s doubtful these two age groups have bought a dozen stamps between them in the past year.
Credit unions with colleges and universities located within their fields of membership would be wise to target these students.
Yet at the same time, the fastest-growing demographic on Facebook is Baby Boomers. They love to share examples of money-saving coupons, rewards, points, and loyalty programs.
Fort Community Credit Union in Fort Atkinson, Wis., has already experienced success through a buy-local, social media-driven, rewards program. In October 2012, it partnered with fisoc's Buzz Points™ to increase member awareness of the power of buying local.
The program aligns closely with credit union’s people-helping-people philosophy, and Fort Community experienced a lift in signature transactions of 11% within the first month of starting the program.
This advent of online engagement, mobile banking, and e-commerce means credit unions must be proactive and take advantage of the combination of financial services, rewards programs and social media apps.
They should also team with local merchants to offer coordinated incentives to encourage spending in their local communities. One of the primary means to accomplish this goal is to reward consumers who bank and shop with local merchants in the cities where they live.
JAY VALANJU is CEO of fisoc Inc., a CUNA Strategic Services alliance provider. It provides Buzz Points, a merchant-funded loyalty program that enables credit unions to connect consumers and merchants through social media engagement and rewards.