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September 29, 2016

FICO Survey: US Credit Unions Lose “Primary” Status with Half of Millennials as They Age

Risk & Compliance September 29, 2016

SAN JOSE, Calif.  — 29 September, 2016

HIGHLIGHTS:                                                                                                                                     

  • 20 percent of 18-24 year-old Millennials say they use a credit union as their primary financial institution, compared to only 10 percent of Millennials aged 25-34
  • Data shows 18-24 year olds are attracted to low and transparent fee structures and better interest rates
  • Millennial respondents aged 25-34 say they are two-to-three times more likely to close all accounts with their primary financial institution than other age groups, creating an opportunity for credit unions to win their business
  • Survey shows only 42 percent of credit union members are using their institution’s mobile app, compared to 64 percent of customers at large national banks.

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FICO’s latest consumer finance trend survey has revealed that 20 percent of U.S. Millennials aged 18-24 say they use credit unions as their primary financial institution. This drops to only 10 percent for ages 25-34.

According to the 2016 US Credit Union Profile report by the Credit Union National Association (CUNA), there are over 6,000 credit unions in the US. These credit unions, which hold over $1.3 trillion in assets, earned high marks in the survey on overall trustworthiness among consumers, especially around the perception of providing greater transparency on fees.

“Although credit union and regional bank members are generally older, 18-to-24-year-olds are noticing the value that credit unions provide as an alternative to large banks,” said Joshua Schnoll senior director at FICO. “In particular, this age group is attracted to low and transparent fee structures and better interest rates.”

For the second year in a row, the FICO survey showed the number one reason that consumers leave their primary financial institution is the perception of high fees. Of those consumers who have switched institutions, 49 percent listed high fees as the top reason. For Millennials, fees are still the number one reason for switching, followed by poor customer service or ATM/branch convenience issues.

“Credit unions should market attractive rates and low fees to existing and potential members, given how highly it rates in their consideration process,” said Schnoll. “In addition, credit unions can more intelligently manage debit and credit accounts by leveraging transactional data and behavioral patterns to help prevent attrition. This will enable them to make the best pricing cross-sell offers or fee waivers for each customer.”

FICO’s survey revealed that there might be an opportunity for credit unions to win over 25-34 year olds, as the survey reveals these Millennials are two to three times more likely to close all their accounts with their primary financial institution in the next 12 months.

Looking at consumers of all ages, the survey reveal that 14 percent of respondents with accounts at major banks said they are likely to close all their accounts in the next 12 months, compared to just 4 percent with credit unions. Capturing some of these customers when they are looking to switch presents a chance for credit unions to increase their share and keep it.

Credit unions should also consider the importance of consumer convenience when courting the business of Millennials. The survey showed that Millennials want to be able to manage their accounts from their smartphones and receive messages via app, SMS and phone. There is currently a significant gap between this preference and the service level delivered. For example, only 42 percent of credit union members responding to the survey said that they are using their credit union’s mobile app, compared to 64 percent of customers at large national banks.

Schnoll concluded, “While credit unions may not have the vast networks of ATMs and branches, these new smartphone-driven technologies allow them to level the field. Integrating the ability to transact online can help address the attrition they are seeing in the 25-34 year-old age group.”

FICO conducted an online survey of about 1,000 US consumers over the age of 17, in October and November 2015. Data was weighted by age and region to reflect U.S. Census data.

About FICO
FICO (NYSE: FICO) powers decisions that help people and businesses around the world prosper. Founded in 1956 and based in Silicon Valley, the company is a pioneer in the use of predictive analytics and data science to improve operational decisions. FICO holds more than 165 US and foreign patents on technologies that increase profitability, customer satisfaction and growth for businesses in financial services, telecommunications, health care, retail and many other industries. Using FICO solutions, businesses in more than 100 countries do everything from protecting 2.6 billion payment cards from fraud, to helping people get credit, to ensuring that millions of airplanes and rental cars are in the right place at the right time.

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Media Contact:
Greg Jawski
Porter Novelli for FICO
+1 212-601-8248
greg.jawski@porternovelli.com

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