Credit unions are losing the battle for younger customers to big banks, which have the technology to cater to every consumer’s advancing needs.
In response, credit unions big and small are revving up their youth banking programs, hoping to attract a new generation of members and keep their parents.
“We were losing accounts to places like [JPMorgan]Chase, who offered youth banking,” said Tyler Woodward, chief strategy officer at Desert Financial Credit Union in Phoenix. “Parents told us that they had gone and opened accounts up at Chase. [They] loved us, loved their primary membership here, but they were looking for this solution for their kids.”
Attracting and retaining youth members, which requires more advanced technological solutions, has become a growing challenge for credit unions, which is why many are turning to fintechs.
“I don’t look at my competitors as the credit union down the street. I look at my competitors as Chase, Wells [Fargo] and Bank of America,” Woodward told American Banker. “They have technology resources at the scale that, quite frankly, we just don’t have. They spend more on operations in a day than we spend in a year.”
Desert Financial, which has 480,000 members and roughly $9 billion of assets, started working last year with Nuuvia, a fintech formally known as Incent, to deliver youth banking services to its members.
Nuuvia breaks down financial literacy into digestible programs and games for kids. Its cash-for-chores and cash-for-grades features allow parents to set custom rewards for completed tasks and academic success. Kids can also earn digital trophies and climb their family’s leaderboard.
Since the partnership launched in November, Desert Financial has opened 5,000 youth banking accounts. Prior to the partnership’s launch, Desert Financial was opening about 300 youth accounts per month, and that pace has now more than doubled, Woodward said.
In a case study conducted with Desert Financial, Nuuvia found a 22% increase in youth account deposits and a 30% adoption rate among existing accounts since the partnership launched, according to Nuuvia President and Chief Operating Officer Marcell King.
Massachusetts-based Metro Credit Union took a similar approach to youth banking after seeing what JPMorgan had to offer. The $3.4 billion-asset credit union partnered with Greenlight, the maker of one of the most popular youth banking apps, and has registered 137 families since April.
One difference between Greenlight and Nuuvia involves where the money deposited on their platforms goes. Unlike Greenlight, Nuuvia keeps all deposits and accounts at the users’ financial institution, instead of at a sponsor bank, which serves as another source of revenue for partner institutions.
“One of the things that attracted us to [Nuuvia] is that we got to keep the relationships,” Woodward said. “We, as a credit union, got to continue to have the relationship that we hope can continue to grow into a long-term relationship over time.”
Elevations Credit Union, stationed in Boulder, Colorado, has partnered with a third youth banking app, called Zogo, which it chose because of the app’s pace and gamification of learning. Users earn points, which then turn into gift cards, for completing modules — a unique feature that attracted the $3.4 billion-asset institution to the app, said Elevations Director of Member Expansion Aimee Sundstorm.
After launching their fintech partnerships, Metro and Elevations have continued their traditional approach to youth banking, still connecting with the community face-to-face.
Elevations Credit Union
“We [want] to get to the kids as early as possible,” Sundstorm said.
Both credit unions work closely with school districts, in hopes of building lifelong relationships and changing the way kids think and feel about money. Metro is also the financial institution partner of Boston’s summer youth employment program.
Elevations brings its mascot, Freddy the Yeti, to schools and parades and hands out prizes for deposits of $5 or more to connect with younger kids.
Elevations Credit Union
“We kind of want them to be emotionally triggered not by spending, but by saving and making deposits,” Sundstorm said.
Moving forward, Metro and Elevations want to expand their outreach to more schools.
“I see us engaging a lot more with the schools within our footprint and more broadly in order to get in front of kids and start to build those relationships and help them along,” said Traci Michel, Metro’s chief operating officer and chief strategy officer. “But now we have product and experience that we can serve up.”