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Are Today’s Borrowers Finding Your Credit Union?

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Today’s buyers shop differently than in the past. As the first generation of digital natives comes of age and begins to seek loans in earnest, research shows that they go about the buying process differently than previous generations, doing more research and getting more recommendations before interacting with sales people. The Zillow Group Report on Consumer Housing Trends (2016) provides the following insights into the home buying process specifically, but it seems likely that many of the conclusions from the home buying research could be applied to consumer borrowing, as well.

Half of home buyers in the US are under 36 years of age. Half. 42% are Millennials, age 18-34.

In many ways, younger people’s borrowing behaviors don’t vary much from previous generations. They still want to work with agents and value private home tours. But some of the areas where they differ can be useful when rethinking how to reach them. It’s interesting to compare the two biggest generational groups by population—Millennials and Baby Boomers—to highlight how things are changing. When it comes to finding a lender, it’s no surprise that Millennials use online resources more heavily than Baby Boomers, but some of the other areas of resource usage may be more unexpected:

The Zillow Group Report on Consumer Housing Trends

How visible is your credit union to Millennials when they are tapping into these resources?

Millennials use more resources to educate themselves and do more research on agents and lending professionals than any other generation. They make more use of interest rate and affordability tools and mortgage calculators. Are your tools easy to use? Are Millennials finding good content from your credit union as they do their research?

The sheer number of Millennials makes this group hard to ignore, but there are surprising statistics from the study that relate to loyalty—the thing that Millennials “just don’t have” according to some.

Important attributes when selecting a lender:

Important attributes when borrowers select a lender

Before you can build loyalty, you have to be seen. Remember that research is key for Millennials, so making sure that your credit union is visible, provides useful content, and offers easy-to-use tools is important. At the same time, they’ll be looking for positive online reviews as well as referrals from people they know—so fast, friendly, and effective processes are required. Doing an outstanding job for this group might not only help profitability today, but could serve to build member loyalty for years to come.

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Borrowing Trends are Changing…

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Would you be surprised by who is actually borrowing from your credit union, or applying for loans?  A recent article in the Wall Street Journal (WSJ) noted the growing trend of baby boomers moving into their retirement years completely unprepared from a financial perspective.

The article states that “people in the U.S. ages 65 to 74 hold more than five times the borrowing obligations Americans their age held two decades ago.”  In addition, median savings has decreased 32% in the last 10 years for those people nearest retirement age.  The result is that many Americans who should be enjoying retirement will work longer in life, and continue to borrow.

C. myers facilitates over 130 strategy sessions per year, and the data collected from those sessions lines up with the observations noted in the WSJ article. The image below is sample member demographic data for a credit union with more than $1 billion in assets as of June 2016.

If you focus on the two middle columns within each age bracket (loans and deposits) a couple of things stand out.  The data shows that while members over the age of 60 do hold about 67% of this credit union’s deposits, that same age demographic also holds about 40% of the credit union’s total loans.  This was a big surprise to this particular credit union.  They had not realized that their loan portfolio was that skewed toward these age segments.  This uncovered the possibilities of additional opportunities and considerations.

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If Americans who traditionally would have been in their retirement years continue to remain in the workforce and remain active borrowers, what can this mean for your credit union?  A few questions to consider include:

  • How well do you know your numbers?  For example, what percent of loan dollars are held by each relevant age segment?  How many new loans have been generated by these age groups in the last 1-3 years?
  • How do you determine if your credit union has a good handle on the needs and wants of the 60 and up age segment of your membership?
  • What unique credit risk characteristics, if any, need to be considered?
  • What does your credit union do to specifically market loans to this group?

Many credit unions are surprised to learn that this age group contributes so significantly to the credit union.  As a result, they have put less effort or resources into cultivating these opportunities.  For many, this discovery represents a chance to not only grow loans, but better serve this segment of the market.  Is your credit union ready to capitalize on the changing needs and wants of this generation?