2014 NACUSO Annual Conference

Will Digital Empower or Destroy CUs?

CUs must overcome generational disadvantages to succeed in the digital payments space.

April 20, 2014

Fredda McDonald

The conclusion of PSCU’s street interview video project during its MoPRO conference in Las Vegas produced a moment of particular clarity.

A poster boy of the millennials, stopped randomly by attendees to glean his perspective on financial services options, turned directly at the camera, shrugged, and asked rhetorically, “Who likes banks?”

Few do, at least from the 80 million strong 18- to 34-year-old age group, says Fredda McDonald (above), PSCU’s executive vice president/chief creative officer. 

In fact, survey respondents from that generation placed four of the nation’s biggest banks among their list of the 10 colossal businesses they most like to hate.

“We think that’s good news—except they don’t know the difference between us and banks,” McDonald said during a breakout session about digital payments.

In fact, one-third of millennials prefer to live bank-free, and nearly three-quarters believe banks will be displaced by Apple, Google, Square, or PayPal—even though only the latter two currently offer financial services.

Meanwhile, nearly three-quarters of millennials don’t know what a credit union is.

That identity crisis could prove credit unions’ undoing in the ongoing payments revolution, which revolves around the millennials and the rapid ascent of mobile technology, says McDonald.

She noted that Netflix’s digital strategy undercut both Blockbuster Video and the mom-and-pop video store in her favorite vacation spot.

“They were displaced by digital, and both entities lost,” McDonald said. “Credit unions have that same danger if they don’t adapt to the millennial shift. Millennials will have it no other way. Not that they’ll be isolated to the digital or mobile experience, but it’s going to be the dominant way they interact.”

The bad news: Credit unions must overcome some generational disadvantages among a leadership class that boasts an average age of 55 among CEOs and 67 among directors.

The good news: Credit unions project three qualities—legitimacy, trust, and a fundamental sense of fairness—that resonate among the generation that will catalyze the ongoing shift to mobile payments.

And while banks’ deep pockets give them an advantage in constructing a brick-and-mortar and mass-media presence, credit unions can go toe-to-toe in technology so long as they capitalize on the power of social media and analytics, McDonald says.

Why is the timing right for credit unions to pounce on digital?

Consider that TV, which dominated advertising dollars since its debut more than 60 years ago, has been supplanted by digital as the most impactful advertising medium, according to McDonald, citing a 2013 study indicating consumers are twice as likely to act on a digital ad.

“This is putting the marketing community on its ear,” McDonald said. “Those of us who were classically trained are like, ‘What do you do with that? How do you reach 313 million Americans through digital and social?’ You don’t—you reach them through analytics.”

PSCU recently demonstrated the power of a targeted digital message when its “Make Your Money Matter” pilot program, launched in eight markets, produced 31 million Facebook impressions in six weeks, tripling its “stretch” goal.

The platform, which creates awareness about credit union advantages and allows young consumers to own prepaid cards while migrating them to full membership, was named “best educational resources website” and a top-five finalist for the People’s Choice Award at the 2014 South by Southwest Festival in March in Austin, Texas.

Going beyond the aggregate numbers, the campaign produced analytical gems such as the fact 30-something yoga enthusiasts are eight times as likely as the average person to join a credit union.

This prompted McDonald to ask, “How could you ever figure that out from putting up a billboard?”

She addressed the National Association of Credit Union Service Organizations’ (NACUSO) 2014 annual conference in Lake Buena Vista, Fla.