In October 2011 a small but loud group of mostly young people stormed Wall Street and social media to declare that they were done with big banks. The campaign gathered steam, as many Millennial movements do, on Facebook, with the creation of a Bank Transfer Day group page that has since garnered more than 50,000 fans. The founder, Kristen Christian, supplied information to followers about the differences between banks and credit unions and urged them to join the latter on November 5, using the hashtag #makeyourmoneymatter.
“I started this because I felt like many of you do. I was tired — tired of the fee increases, tired of not being able to access my money when I need to, tired of [the banks] using what little money I have to oppress my fellow men,” Christian said in a post at the time. “Me closing my account all on my lonesome wouldn’t have made a difference, but each of YOU standing up with me ... they can’t drown out the noise we’ll make.”
The movement did make a lot of noise, buoyed by intense coverage of Occupy Wall Street. Madison, Wisconsin–based trade association Credit Union National Association (CUNA) reported that the average number of new customers more than doubled in the year after the day of action. More than four years later, things are a bit quieter, but the impact can still be felt. The Bank Transfer Day Facebook page regularly posts testimonials and articles about Millennials making the switch, citing a desire for more transparency and community involvement from their financial institutions.
“We absolutely think there is a threat to banks’ market share,” says Susan Sachatello, senior vice president of direct-to-consumer marketing at CUNA Mutual Group, a credit union insurance firm based in Madison. “The idea that credit unions have such a strong association with values that really matter to today’s Millennial population has got to be something that makes banks concerned.”
A generation or two ago, a sense of openness and community might have been the reasons customers loved their bank and, in particular, their favorite teller at that bank. But in the wake of the financial crisis, Occupy Wall Street and the digital revolution, and amid the largely anti–Wall Street rhetoric of the current presidential election, Millennials just aren’t feeling the love. In fact, Millennials are five times more likely than other demographic to close their accounts and leave a bank if their needs aren’t being met, according to credit risk software firm FICO. In its “2015-2016 National Member & Nonmember Survey,” CUNA found that 28 percent of consumers ages 18 to 24 now belong to a credit union, up from 22 percent in 2013.
The Millennial demographic, which includes people roughly between the ages of 18 through 34, is turning in ever larger numbers to financial alternatives. Credit unions are less focused on the commercial market than are banks, and experts say their advantage may be that they better understand the complex behaviors and needs of Millennials.
“The credit unions are certainly dangerous because they have proved in the past few years to be very effective at marketing,” says Christopher Marinac, director of research and senior managing principal of Atlanta-based broker-dealer FIG Partners. “Millennials tend to be incredibly well informed. They do their homework, and they form opinions long before you, as the financial institution, are pitching ideas to them. To really intersect, you have to kind of speak their language and be willing to help them answer the question ‘Why do I need you?’”
Answering that question may take more than a robust digital and mobile presence, which is where many financial institutions have focused their Millennial-luring resources. Credit unions have done this too, but some are going farther to connect with younger customers. Kansas City–based Mazuma Credit Union has a blog called Mazumafy that focuses on all things Kansas City, not just financial information or news. Mazuma and other credit unions like Oshkosh, Wisconsin–based Verve, a Credit Union also place a major emphasis on volunteering in, and with, their communities. And some are getting Millennials even more directly involved in the process: Elevations Credit Union, which serves Colorado’s Front Range region, appointed Chipotle Mexican Grill treasury manager Katie Larson, a Millennial, to its board in 2008, and in 2014 she became board chair.
Credit unions do pride themselves on being small, however, and the fact is that their current share of financial customers is a tiny fraction of that of banks; U.S. banks hold about 14 times more assets than credit unions, and as of the end of 2014, credit union market share was 6.7 percent, according to research conducted by CUNA.
But the small gains being made by credit unions with Millennials — and even the younger Generation Z — are registering with major institutions, particularly at the local level and among less wealthy young people.
“Lower-affluent Millennials are incredibly distrustful of financial institutions, so there’s a big opportunity for credit unions to play into that,” says Maureen Burns, a partner in Bain & Co.’s financial services practice in Boston. Those who do have some wealth, however, rely even more heavily on digital capabilities that, Burns says, can be hard for credit unions to provide at a level higher than that of major banks.
Multiple industry and independent surveys show that those who do bank with credit unions say they rarely enter a branch and prefer to conduct most business online. More than fragmentation, a bigger threat to the banking industry as a whole may be Millennials’ tendency to forgo the traditional banker-customer relationship altogether.
