the “why” behind gen y financial decisions daniel penrod ccul/ncul ari

The “Why” Behind Gen Y Financial Decisions

Daniel PenrodCCUL/NCUL ARI

Applied Research Institute (ARI)

Focus Groups:

Los Angeles and San Francisco

Attendees: 38

Ages: 16-25

Survey: Nationwide

Respondents: 1292

CA: 440

NV: 100

Other: 752

Characteristics of Generation Y

• Adaptable: Comfortable in various situations.

• Gadget savvy: Grew up with technology.

• Ability to grasp new concepts: Learning-

oriented generation.

• Efficient multi-taskers: Do it faster and better.

• Tolerant: Feel at home in diverse workforce.

Characteristics of Generation Y

• Impatient: Technology and instant gratification.

• Skeptical: Public scams, cheating, lying and exploitation.

• Blunt and expressive: Self expression is favored over self control.

• Image-driven: Personal statements with their image is very important.

• Strong sense of self: Overindulgent parents, strong sense of entitlement, the “Mr. Rogers” effect.

• They are still young: Lack life experience; ask questions rather than waste time trying to figure it out.

Some Numbers…

• Teens alone had an aggregate income of $80 billion in 2006.

• An additional $110 billion in parent-subsidized spending in 2006.

• Gen Y is expected to account for 39% of households with online bill payment by 2010.

Belonging or Individuality?

Do they want to be part of something

or to be seen as an individual?

BOTH!

• Belonging– Social networking– Volunteerism– Instant Messaging– Cell phone “faves”

• Individuality– Personal web pages– Personalized credit/debit cards– iPod songs– Cell phone skin or configuration

Gen Y: Financial Education

Where Respondents Learned the Most About Personal Finances

12%

4%1% 1%

3%6%

1% 1%3%

8% 9%

2% 2%3%1%

3%

53%

3%5%7%

12%

54%

14%

6%

2%1%

12%

8% 5%4%

52%

10%

0.1%

53%

5% 5%7%

11%13%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

From myparents

Fromschool/teacher

From Internet From f riends From otherfamily members

Personalexperience(s)

From books From church From magazinearticles

Other

Total CA NV Other States

Amount Parents Taught About Personal Finances

38%

16%

26%

17%19%

26% 23% 18%

34%41%

26%

17%

26%

16%17%

41%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

A lot, we talked aboutbudgeting, saving, etc.

A little, we talked about itand they helped me open

an account

Not a whole lot, theyhelped me open anaccount but that's it

Not at all

Total CA NV Other States

Interest in Personal Finance Education Classes

8%

25%

9%

17%12%

34%

22% 20%

7%

36%

13%19%

28% 32%

9%

17%

37%

13%

20%23%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Very interested Somewhatinterested

Neither interestednor uninterested

Somewhatuninterested

Not at all interested

Total CA NV Other States

Where Respondents Would Take a Personal Finance Education Class

38%

13%

2%

17% 18%18%14% 12%

3%

57%

13%

18%

26%28%

56%

28% 27%

14%

1%

41%41%

16%24%

59%

20%

58%

19%

10%

25%29%

37%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

At a localcollege

Onlinethrough mybank/credit

union

At mybank/credit

union

As part ofmy highschool

curriculum

As aninteractive

onlinediscussion

Via podcast At anybank/credit

union

Other

Total CA NV Other States

Likelihood to Consider Attending Class if Offered by Bank/Credit Union

3.43.3 3.3

3.2

3.0

2.8

3.4 3.43.3 3.3

3.1

2.9

3.43.3

3.2 3.2

2.9

2.7

3.43.3 3.3

3.2

3.0

2.8

1.0

2.0

3.0

4.0

5.0

Saving for thefuture

Making goodfinancial

investments

Saving to buy ahouse

Establishing andmaintaining credit

Paying off studentloans

Obtaining a carloan

Total CA NV Other States

Gen Y: Credit Union Awareness

Top 7 Descriptions of a Credit Union

9%

12%

13%

7%

10%

5%

8%

4%

11%

4%

15%

18%

8%

23%

7%

8%

12%

7%

7%

8%

25%

14%

6%

26%

25%

6%

10%

13%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Is owned/controlled/operatedby its members

Has better rates

Gives you/helps youbuild/establish credit

Has restricted membership

A bank

Offers loans/lends money

Don't know

Top 7 Descriptions of a Credit Union

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Is owned/controlled/operatedby its members

Has better rates

Gives you/helps youbuild/establish credit

Has restricted membership

A bank

Offers loans/lends money

Don't know

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Is owned/controlled/operatedby its members

Has better rates

Gives you/helps youbuild/establish credit

Has restricted membership

A bank

Offers loans/lends money

Don't know

Total CA NV Other States

42%

4%

1%

14%

37%

5%

19%

40%

5%

5%

18%

32%

5%

7%

17%

33%

44%

6%

39%

32%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Don't know

Other

Don't qualify to become amember

Not aware of any

Don't see the need

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Don't know

Other

Don't qualify to become amember

Not aware of any

Don't see the need

Total CA NV Other States

Why don't you belong to a credit union?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Don't know

Other

Don't qualify to become amember

Not aware of any

Don't see the need

Why Respondents Would Consider or Continue Banking with a Credit Union

6%

6%

12%

3%

2%

2%

4%

4%

5%

22%

11%

8%

7%

3%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

Other positive comments

Other negative comments

Recommendation/word of mouth

Convenience

Happy with current institution/will not change

Closer/more convenient locations/ATM's

Promotions/incentives/deals

Less/no fees/charges

Have the right service/product for me

Don't know enough about credit unions/ need more information

Better/good service

None/nothing

Best/good/great/competitive rates

Why Respondents Would Consider or Continue Banking with a Credit Union

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

Other positive comments

Other negative comments

Recommendation/word of mouth

Convenience

Happy with current institution/will not change

Closer/more convenient locations/ATM's

Promotions/incentives/deals

Less/no fees/charges

Have the right service/product for me

Don't know enough about credit unions/ need more information

Better/good service

None/nothing

Best/good/great/competitive rates

Why Respondents Would Consider or Continue Banking with a Credit Union

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Other

Other positive comments

Other negative comments

Recommendation/word of mouth

Convenience

Happy with current institution/will not change

Closer/more convenient locations/ATM's

Promotions/incentives/deals

Less/no fees/charges

Have the right service/product for me

Don't know enough about credit unions/ need more information

Better/good service

None/nothing

Best/good/great/competitive rates

Gen Y: Choosing a Financial Institution

Where Respondents Find Information about Banks & Credit Unions

17%

18%

31%

40%

4%

8%

50%

58%

4%

7%

24%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Radio

Other

Newspaper

Mailings

Television advertising

Co-workers

My financial institution

Other family members

Friends

Internet

Parents

Parents lead most financial decisionsWhere Respondents Find Information

about Banks & Credit Unions

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Radio

Other

Newspaper

Mailings

Television advertising

Co-workers

My financial institution

Other family members

Friends

Internet

Parents

Where Respondents Find Information about Banks & Credit Unions

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Radio

Other

Newspaper

Mailings

Television advertising

Co-workers

My financial institution

Other family members

Friends

Internet

Parents

Parents lead most financial decisions

• COO and co-founder of Brass Media? • Parents at job interviews?

How did you choose current financial institution?

14%

11%

11%

12%

25%

31%

40%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Don't know

Saw an ad in a newspaper

Products/services they had

Saw an ad on TV

Giveaway (promotional item given out)

Received information in the mail

It was recommended by a friend/co-worker

It was recommended by a family member (not parents)

Location is close to my work

They had the best rates

It was recommended by parents

Location is close to my home

It's the one my parents use

How did you choose current financial institution?

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Don't know

Saw an ad in a newspaper

Products/services they had

Saw an ad on TV

Giveaway (promotional item given out)

Received information in the mail

It was recommended by a friend/co-worker

It was recommended by a family member (not parents)

Location is close to my work

They had the best rates

It was recommended by parents

Location is close to my home

It's the one my parents use

38% 39%33%

44%

55%51%

17%22%

17%

31%

21% 22%23%

11%

23%

10% 10%10%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Open aninvestment

account

Take out a carloan

Open/obtain acredit card

Open/obtain acheck/debit card

Open a savingsaccount

Open acheckingaccount

Parents My Financial Institution Internet

Where did you Primarily go for Recommendations or Information on ...?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Open aninvestment

account

Take out a carloan

Open/obtain acredit card

Open/obtain acheck/debit card

Open a savingsaccount

Open acheckingaccount

N=168 (investment), 199 (Auto), 558 (Credit card), 733 (Debit card ), 833 (Savings), 848 (Checking)

How did you Decide Which Financial Institution to use to . . . ?

38%

27%

10%16%

12%

19%

29%

42%36%

26% 27% 27%

15%

32%

13% 15%

23%21%17%

19%

16%23%

18%15%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Open aninvestment

account

Take out a carloan

Open/obtain acredit card

Open/obtain acheck/debit card

Open a savingsaccount

Open a checkingaccount

Best Rates Parents Use Recommended by Parents Bank/Credit Union offered

N=168 (investment), 199 (Auto), 558 (Credit card), 733 (Debit card ), 833 (Savings), 848 (Checking)

How did you Decide Which Financial Institution to use to . . . ?

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Open aninvestment

account

Take out a carloan

Open/obtain acredit card

Open/obtain acheck/debit card

Open a savingsaccount

Open a checkingaccount

• They are very sensitive to fees and fee structures.

• Help me get/build credit.

• They don’t know what they don’t know.

• Work Attire: They do not want you to be dressed like them.

Gen Y: Current Banking Experience

Type of Current Account

Bank account, 64%

Credit Union account, 9%

Both, 12%

Neither, 15%

Where is Their Money Now?

CUs are for savings – Banks are for transactional accounts & cards

76%

84%

64%

34%29%

7%12%

16%

2% 1% 0% 1%

93%

75%

58%

26%21%

8%13%

8%

1.0% 1.0%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Savings Checking Check/debit card

Credit Card Online billpay

Car loan Investmentaccount

School loan Other loan Other None ofthese

Bank Credit Union

Products at a Bank or Credit Union

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Savings Checking Check/debit card

Credit Card Online billpay

Car loan Investmentaccount

School loan Other loan Other None ofthese

Order in which products were obtained

67%

45%

5% 4% 3% 8%

18%

48%

33%

10%3%

15%

12%5%

55%

29%

14%

6%

7%

57%

80%71%

3% 2%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Savings Checking Check/Debit card Credit card Money market CD/sharecertificate

1st 2nd 3rd 4th or later

• Overdrafting is not their fault – You are the culprit for charging fees for NSFs and account abuse.

• Very cynical – They do not trust you! They trust themselves, their parents and their friends/family.

• Stop me from spending! – They understand that they have a problem with finances.

Gen Y: Communication Methods

To Text or Not to Text?That is the question…

Interest in Receiving Account Updates via Cell Phone

Neither interested nor uninterested

11%

Not at all interested

63%

Somew hat uninterested

11%

Very interested

5%

Somew hat interested

10%

Special Offers

Account Balances

Updates

Low Balance

NSF’s

Account Alerts

Interest in Low Balance Text Message Alerts

Very interested24%

Neither interested nor uninterested

10%

Somewhat uninterested

8%

Not at all interested

28%

Somewhat interested

30%

• Messages and solicitations through the online banking portal are preferred.

• Give straight forward rate comparisons and information so they can decide what they want.

• Gen Y wants one-on-one.

• Tellers are NOT seen as credible to cross-sell products or recommend services…They are “just tellers.”

Gen Y: Marketing

Does your marketing look like this?

Or, this?

Does your website look like this?

Or, this?

Are You Branded?

• Utilize current members or employees for focus groups– Free, internal sources of feedback

• Tell! Do not sell!– Sell to the parents…inform Gen Y– Is your interaction sales-focused or knowledge-focused?

• Commercials that “sell” are disingenuous – funny gets my attention, but I ultimately want to be informed.

• In-branch marketing is successful: signage and posters catch their attention.

What Does This Mean For You?

• ARE NOT– Short-term Return

• 1 – 3 years– Return on Assets (ROA)– Return on Investment (ROI)

• ARE– Long-term Investment

• 3, 5 or 8-10 year time horizon

Balance Sheet View of Gen Y

Take-Home Message

• You have what they want, they just don’t know it yet!

• Parents can be an effective way to bring younger Gen Y’ers into the fold.

• “Field of Dreams” philosophy does not work.– Create reasons for them to come into the branch.

Take-Home Message• You are already viewed as “different” – utilize

this. (e.g. WAMU)

• They want knowledge from you – educate them.– Shift: product/service first to education first.– Likely a requirement for Gen Next also!

• Target your marketing to their tastes, needs and desires.

Thank You!