Credit unions have existed for years. They’ve long been overshadowed by big banks. However, credit unions have returned to the spotlight. They’re becoming more popular due to Americans moving away from big banks, resulting in some credit unions seeing ten percent increases in lending. And according to a number of reports, credit unions have a strong future ahead of them.
The Data on Credit Union Growth
The assets of the average credit union have swelled from roughly 150 million dollars to 260 million dollars over the past six years. That’s an increase of nearly three fourths. Furthermore, only part of this growth is due to consolidation in the industry as around a thousand credit unions have closed since 2012. The number of customers at credit unions has increased nationwide by more than twenty percent since 2012. Let’s look at a few of the reasons why credit unions are experiencing such growth.
The Customer-Centered Organization
Credit unions are attracting people who want to work with financial institutions that care about their customers. This has led to many people joining credit unions in place of banks. Credit unions are not focused on profits like big banks, and this leads to more accommodations in the face of hardships, less hard selling and lower fees.
Yet credit unions are enjoying higher profits because they’re attracting new customers, more loans, and have a lower default rate for the loans they’ve issued. One theory is that they are less willing to make very risky loans, so they have fewer losses to write off. They also get loyal customers and positive PR when they make a concerted effort to invest in the community or set up a program to help people get out of predatory loans. They get points with consumers who get fees forgiven for mistakes and convenient services. This is why four-fifths of Millennials say their credit union provides outstanding customer service. Customer service is crucial for customer and brand loyalty.
The customer-centered organization is visible in lobbies that welcome people to have free coffee and staffers that have time and space in their office to meet with credit union members. It is also seen in the programs they offer from free classes on credit repair to money management to home buying. Credit unions sometimes offer other classes of interest to the community such as English as a second language to immigrant communities to computer literacy.
Generational Change
Credit unions and Millennials share many values. Millennials value community and supporting local businesses. Credit unions are a natural fit with this goal. Millennials hate being commodified, and credit unions value their members. Millennials are also the biggest haters of big banks. One survey of Millennials found that four of their top ten most hated brands were four of the largest banks in the United States. They also rated banks lower than any other financial institution, and it was the lowest by 11 percentage points. However, Millennials still need car loans, credit cards, and mortgages. The solution is to move to a credit union. Millennials were slow to do so due to the perception that credit unions couldn’t deliver the technology and mobility they valued, though credit unions are catching up in that regard.
One challenge for credit unions is knowing what this new customer demographic wants. Services like Avannis help credit unions get actionable feedback from customers to improve retention, evolve to meet customers’ demanding expectations, and learn what likely new customers would like. Credit unions must invest in understanding this large, young population because they’re the future of the financial industry and especially loyal to businesses that make them feel valued.
Conclusion
Credit unions are a perfect fit with the values and needs of Millennials, ensuring long-term stability and growth. This is on top of the strong growth they’ve seen as customers fled big banks for the local credit union.