Data and Better Loan Terms Help Credit Unions Win Millennial Business

As inflation remains stubbornly in place and credit gets ever more expensive, credit unions may have a secret weapon.

Scott Young, managing VP of Emerging Services at PSCU, told PYMNTS that credit unions (CUs) stand to benefit from their lending operations, appealing to critical demographics, at the right time, with the right offers.

As joint research between PYMNTS and PSCU has found, just about half of millennials and bridge millennials say they’d be willing to change banks for a financial institution (FI) that would be able to extend better loan terms to them.

Those stats are encouraging, said Young, who noted that credit unions have an inherent advantage when it comes to lending: “Credit unions have had much more competitive loan terms, given our not-for-profit structure.”

Getting It Right

For the credit unions that get it right, using data to fine-tune their offerings and their loan terms can pay dividends, in the form of long-standing member relationships that may last decades. After all, the millennial generation spans ages 27 to 42, which is lower than the 47 years of age marked by the average credit union’s customer base.

“Credit unions can, should and probably will utilize targeted marketing campaigns that highlight competitive loan terms, which include lower interest rates and payment options,” said Young. Ideally, CUs should show the cost savings tied to its loans versus competitors’ offerings.

“Don’t be afraid to go head-to-head,” he said, as CUs are likely to win out against their larger banking competitors, adding, “I can’t begin to tell you how many of my family and friends I’ve actually converted to credit union loan products because it’s better for them.”

As with so many things in finance and banking, data can lead to product and service differentiation. Young maintained that the savvy CU must fine-tune its lending products at an individual level, avoiding the old methods of flooding customers with numerous offers and hoping something will stick.

“It’s important to build out the personas and the cohorts of your members to understand what products are attractive — and what’s missing,” said Young. PSCU, for its part, is getting deeply entrenched in “enhanced” credit scoring, that can make its way across lending channels and give CUs additional insight into their member bases.

“We also have predictive models around growth, attrition and financial hardship,” he said, which can help CUs take a proactive approach to loan management once credit has been extended.

Eyeing Corporate Members, Too

The same approaches mentioned above can help CUs craft stronger relationships with their enterprise members, too, noted Young.

“There’s significant interest in business lending right now, from a CU perspective,” he said. Many firms are looking to enhance their cash flow, and having immediate access to funds is critical. Against that backdrop, he said, with capital requirements in place, larger banks are slowing down their small business lending. That leaves room for inroads to be made by CUs, which tend to have in-place relationships with those firms.

No matter the borrower — an individual or a firm — Young stressed the importance of having digital channels in place to get those loans and credit cards (and offers) to clients so that the process is easy and, of course, quick. PSCU has partnered with Amount, a FinTech, to help CUs extend credit card offers to their clients, with real-time decisioning and cash-back incentives on the cards in the mix.

“There’s value being placed on digital, on-demand and convenient lending,” he told PYMNTS.