millennials, money & markets: credit union opportunities ......college tuition and loans top...

Millennials, Money & Markets: Credit Union Opportunities to Win This Segment

Hope Jensen SchauProfessor of Marketing

Filene Research Fellow, Consumer Decision-Making Center of ExcellenceAssociate Dean, UA Eller College MBA Programs

Pew Research

GenerationsGenerations are one way to group age cohorts. A generation typically refers to groups of people born over a 15-20 year span, such as the Millennial generation, currently the youngest adult generation.

Silent Generation (Now 71-88) World War II The Great Depression

Baby Boomers (Now 52-70) Vietnam War Civil rights movement Women's rights movement Assassinations of President JFK and MLK Jr. Advent of rock and roll

Generation X (Now 36-51) Dual earning parents High divorce rate of parents Parents' job loss from layoffs Grunge rock Poor economy of the 1980s

Millennials (19-35) Tumultuous economy Very involved parents September 11, 2001

Generations

CU Implications:Millennials will be the dominant consumer segment by 2020.Be their trusted partner.

Generations

CU Implications:Millennials will be the dominant consumer segment by 2020.Be their trusted partner.

Generations

AKA Gen YRacially Diverse

Boomers 70% White Xers 60% White Millennials 55% White

Digital NativesHeavily networkedEconomic OptimistsUnmoored from InstitutionsLower Levels of Social Trust

19% of Millennials say most people can be trusted, compared with 31% of Gen Xers, 37% of Silents and 40% of Boomers.

Millennials

Less Responsible Less Hard-Working Less Willing to Sacrifice Less Moral Less Self-Sufficient Less Compassionate Less Politically Active

CU Implications: Millennials are cautious borrowers, more reliant on parents and family, likely to seek advice and guidance prior to financial decisions. Be trusted partners.

Millennials Less Positive Self-Perceptions than Silents and Boomers

More Self-absorbedMore WastefulMore GreedyMore Cynical

CU Implications: Millennials are cautious borrowers, more reliant on parents and family, likely to seek advice and guidance prior to financial decisions. Be trusted partners.

Millennials Less Positive Self-Perceptions than Silents and Boomers

Millennial Education

CU Implications:Rising costs of education and increased educational attainment may suggest more and different student loan services.

CU Implications: Millennials will rely more on loans. Structure loans robust enough to tackle tuition and materials. Educate Millennials on loan options.

Millennials and Education

60% Millennials financial aid deciding factor in school choiceAmong those not attending first choice school, 62 percent

because they couldn’t afford itCollege tuition and loans top list of money matters worrying

Millennials, 21% it is their family’s main financial problem 1/3 students with loans are in repayment plans $300/month,

and 5% are actually paying more than $1,000/month.Millennials turning to payday loans and pawn shopsJunior Achievement and PricewaterhouseCoopers report by Ypulse; Doerer 01/29/2016 PBS

CU Implications: Structuring loans robust enough to tackle tuition and materials. Educate Millennials on loan options.

Millennials and Education

Millennial Debt

CU Implications:Millennial debt load is part urban myth. Sources of debt changed (education). Financial literacy educating Millennials on responsible debt could trigger increased financial services.

A recent survey by Junior Achievement and PricewaterhouseCoopers: 24%Millennials believe their student loan debt will ultimately be forgiven.Federal Reserve Bank of New York, outstanding student loan

debt jumped by $8 billion year-over-year to $1.13 trillion, still surpassing auto’s new high of $934 billion.

Outstanding auto and student loans combined still dwarf mortgage debt, which stood at $8.13 trillion as of Q3, according to the New York Fed’s latest analysis.

CU Implications: Educate students on loan terms. Educate Millennials on auto loan terms.

Millennials, Education and Debt

CU Implications:Millennials have an increase in income and disposable income. Employment indicates an ability to pay and a reduction in risk.

Millennial Employment

Millennial Employment

Seek education to achieve dream job.

Stay at jobs longer than Xers.Choose jobs with new criteria:

creativity, flexible schedules, sustainability, eco-footprint, local economy, corporate responsibility. Trade-off salary for criteria.

Worthman NYTimes, 02/25/2016

CU Implications: Offer new structures for student loans, deferrals and flex mortgages.

Millennials and Employment

CU Implications: Millennials marrying later may postpone other milestones (home ownership). Encourage singlehood or double-ups home ownership.

Millennials and Marriage

CU Implications:Millennials obtain mortgages later and delay home improvement purchases. Encourage singlehood and double-ups home ownership.

Millennial Households

CU Implications:Millennials obtain mortgages later and delay home improvement purchases irrespective of educational attainment. Promote singlehood and double-ups home ownership.

Millennial Households

CU Implications:Millennials obtain mortgages later, delay home improvement purchases, and are creating framily rather than family. Millennials are more influenced by friends. Promote singlehood and double-ups home ownership.

Millennial Households

Millennial Employment &Households

CU Implications:Millennials obtain mortgages later and delay home improvement purchases despite higher employment rates. Promote singlehood and double-ups home ownership.

CU Implications: Smaller household composition and definition of family has changed. Loan offerings should reflect changing family and framily.

First Time Home Buyers

CU Implications: Millennials longer to take root may extend this trend. Education about real estate investments would be helpful.

First Time Home Buyers

CU Implications:Millennials omnipresent use of mobile devices indicates that financial service providers need to give Millennials accurate decision-making information and support mobile banking.

Millennial Technology

Millennial Technology

CU Implications: Use mobile-friendly apps for information, transaction processing and service applications. Utilize video.

CU Implications: Use mobile-friendly apps for information, transaction processing and service applications.

Millennials and Technology

CU Implications: As a result of the Affordable Care Act, Millennials are much more likely to have health insurance coverage during their young adult years and are less likely to have medical debt.

Millennials and Health Insurance

Millennials Perceptions

CU Implications: Create loans designed to fund experiences as opposed to durables. Include access loans.

CU Implications:Provide ample information in accessible online format. Offer access to experts. Stress predictability and reduction of risk.

Millennial Financial Perceptions

Millennial Financial Perceptions

CU Implications:Financial literacy is key and gamified budget apps help teach and reinforce good money decisions.

Millennials Financial Perceptions

CU Implications: Financial literacy is key and gamified budget apps help teach and reinforce good money behaviors.http://myfinancialanswers.com/why-millennials-are-missing-the-point-on-financial-planning/

Millennials and Financial Services

CU Implications:Focus on primary financial services. Mobile is critical.

Millennial Financial Services

CU Implications:More educated Millennials are less receptive to debt and less trusting of banks. CUs should continue to be trusted financial literacy partners.

Millennials and Financial Services

CU Implications:CUs should continue to be trusted financial literacy partners. Educate on the differences between CUs and banks.

Millennials Financial Needs

CU Implications:Let needs drive offerings.

Millennial Financial Services

Millennials delay major milestones : marriage, children, home purchase, wage growth slow

2013: 30% of Millennials did “not intend to buy a vehicle in the near future” and 25% were “indifferent” to a car purchase

Moving to a “sharing” economy, on demand services such as ZipCar, subscription options like Car2Go or other peer-to-peer car services.

2015: Millennials buy cars - over 28% of retail vehicle sales, largest segment of auto loan originations through CU Direct’s CUDL, averaging $664.1 million/ month: an increase of 5 % over last year.

2020: experts predicts that Millennials will account for more than 40% of new vehicle purchases, and when combined with Gen X, will buy 4 out of every 5 new vehicles.

43% of non-prime applicants are millennialsMarci Francisco VP CU Direct Jan 12 2016, Zulovich Aug. 03, 2015, http://www.autoremarketing.com/subprime/43-non-prime-applicants-are-millennials

Millennials Auto Loans

Emergent conditions are most predictive of willingness to borrow. Earnings power, economic conditions, life event, loan offerings, better credit score all about the same impact.

CU Implications: Educate members on new loan offerings. Target milestone events. Highlight economic knowledge and financial education.

Filene Borrowing Report

Hope Schau and Ignacio Luri

Money Chatter = examination of Millennial online financial discourse across blogs and forums

MetaphorsEmotional TrendsLanguage Trends Thematic Analysis

Filene Research: Money Chatter

The structural de-skilling of a whole generation, who are bound to get less out of their qualifications than the previous generation would have obtained, engenders a sort of collective disillusionment: a whole generation, finding it has been taken for a ride, is inclined to extend to all institutions the mixture of revolt and resentment it feels towards the educational system.Bourdieu 1984

Filene Research: Money ChatterMetaphors

COLLEGE EDUCATION JOB

We are told to get a #College Degree. Majority of #students get a lifetime debt because of it. #OccupyStudentDebt

Filene Research: Money ChatterMetaphors

Diploma inflation

Pay off student debt

COLLEGE EDUCATION JOB

Filene Research: Money ChatterMetaphors

There are two ways to conquer and enslave a country. One is by the sword. The other is by debt. #OMG @JohnAdams

Filene Research: Money ChatterMetaphors

College education should create opportunities to succeed, but for many it is a #debtsentence.

What if the cure of cancer is stuck in a mind that can’t afford education? #debth

Filene Research: Money ChatterMetaphors

Filene Research: Money ChatterEmotional Trends

Self-consciousness Authority challenge Cautiousness

Hedonism Gregariousness

Filene Research: Money ChatterEmotional Trends

Filene Research: Money Chatter:Language Trends

Packing my bills 2 weeks in advance & paying 3 weeks worth of daycare makes me feel good #adulting

KIDULT

I’m a kidult for lack of a less obnoxious term. I'm a poor excuse for an adult.

My fault because my Fomo won’t let me move out of NYC and this city is costing me $$$$$

Filene Research: Money Chatter:Language Trends

You

Only

Live

OnceHe gave us a nice amount of judgment for playing pokemon go at 3AM . . . But yolo

Live the moment

Filene Research: Money Chatter:Thematic Trends

Filene Research: Money Chatter:Thematic Trends

and I’m like:YOLO

plan planning future

long-term goals

fiveyears from today

Banks are like:

Filene Research: Money Chatter:Thematic TrendsSeize the day. Put very little trust in tomorrow #YOLO @horace

Filene Research: Money Chatter:Thematic Trends

It is through mindfulness—focusing on the moment-by-moment experience— that financial challenges areovercome. Day by day and choice by choice.

Stop making impulse purchases andstart making mindful decisions. . . To achieve our financial goals, we simplyneed to make more mindful decisions.

Uncertainty about the future (job prospects? continuity of income?)Future can be overwhelming (retirement prospects?

Student debt?)

How Can Credit Unions Win Millennials? Collaborative by Nature: Communicate the differences between CUs and banks. Highlight the prosocial, non-exploitive, local attributes.

Non-exploitive (member-driven)Pro-Social (financial literacy)Trusted partners (funding milestones)

How Can Credit Unions Win Millennials?

InfrastructureConsumer KnowledgeB2B relationshipsFinancial Literacy Programs

How Can Credit Unions Win Millennials?

Mortgages (multi-family, multi-member, multi-generation)Renovation Loans (multi-family, multi-member, multi-generation)College Funds & Loans (multi-member, multi-generation, flexible

payment plans)New Savings Accounts (multi-user vacation/experience

accounts)Auto Loans (family or multi-user auto fleets) Service Bundling (not unlike Angie’s List)Asset Libraries (tools, cars, homes)Access Loans (multi-user access funding) P2P, M2M Financing (member input/crowd funding, micro-

financing, aggregate financing)

How Can Credit Unions Win Millennials?

Summary: Winning MillennialsHighlight the CU difference (member2member) Emphasize financial literacy (young adults)Go mobile (all access)Use gamified reification (continued education)Create new offerings (think outside the banks)Close the gap between user- and industry-money talk. “Speak their language” Negative feelings are better addressed

than ignored.Communicate financial products as present-bound. Financial “firsts” can be adulting milestones. Play up financial mindfulness, as opposed to

mindlessness and habit. Is your bank working for you?