image

MARKETING AND MESSAGING:

BREAKING OUT OF THE LOCAL MINDSET

While credit unions’ core value proposition has always revolved around being locally focused and community oriented, the lending environment has fundamentally changed. Canada is a country of immigrants and the financial services needs of young people have become increasingly mobile and global. If credit unions seek to gain market share from the banks, they will need to break the stigma of possessing domestic-only capabilities.

In our survey of Canadian millennials, more than 60 percent of respondents did not think a credit union could support their financial services needs if travelling abroad.

Younger demographics in Canada lack an awareness of credit unions and their value propositions. For example, most young Canadians are generally unaware there is a global network of 30,000 ATMs available to credit union members without fees in the U.S. and other countries such as Bahrain, Belgium, Germany, Greece, Italy, Japan, Netherlands, Spain, and the United Kingdom.(i) Most would also be unaware credit union centrals have the capability of facilitating global money transfers, foreign exchange and other global services for credit union members. Credit unions have an opportunity to highlight these services and also leverage their membership in the global cooperative movement in their marketing to young people.

MESSAGING: Environmental, Social, and Governance

Reaching young people extends beyond financial services capabilities. Every day, what a credit union does is being assessed for sustainability, social responsibility, and an ethical backbone that extends from the credit union’s board of directors to front line staff. While all businesses report on financial results, there is an array of financially material risks that are equally — if not more — critical to success or failure. These include climate change, business ethics, human rights abuses, operational impact on the environment, and cyber-security, to mention a few. These risks fall under the rubric of environmental, social and governance (ESG) management and reporting.

Credit unions are already ahead when it comes to the principles of ESG. The seven underlying principles of the international cooperative movement identifies credit unions to be committed to education and training, making decisions as a cooperative, and being socially responsible. However, it is no longer enough to trumpet the successes of charitable and community activities, or the extent of member rewards as giving back to the community. If the financial services industry was static, there would be time to catch-up to the full implementation and reporting required by ESG. But the one constant is change, and expectations of financial institutions are being driven by many factors, including;

  • Regulators requiring more attention be paid to ESG;
  • Community stakeholders speaking louder on ESG issues;
  • Changing financing adjudication requirements for banks;
  • Employees wanting more from their work and their employers;
  • Social influencers exacting more pressure on companies;
  • Boards paying more attention; and
  • Long-term, intergenerational benefits and risks are more pressing.

In 2019, the United Nations Environment Programme Finance Initiative established the Principles of Responsible Banking. There are currently over 190 signatory banks comprised of more than 1.6 billion customers worldwide representing around 40 percent of global banking assets. The essence of the principles are to drive change in the banking community through a positive contribution to people and the planet. The banking industry is further pushing change by embracing dramatic targets such as net-zero financed emissions to all investments and debt financing decisions. Why? There is an opportunity to do well by doing good. It is also a source of strategic differentiation to target new customers who align with the vision and purpose of banks that are making a difference, namely younger generations.

Reporting is the ultimate and transparent disclosure of financially material issues that are meaningful to internal and external stakeholders. It provides the information necessary for stakeholder decision-making to include issues that extend beyond the bottom line, and yet directly impact financial outcomes. Making use of a globally accepted ESG framework for reporting is a critical part of an increasingly values-based economy, and also a critical component in a strategy to attract and retain younger members. Reporting needs to include meaningful information, such as an overview of the credit union’s profile, strategy, ethics and governance. It also extends through to those policies, commitments, targets, responsibilities and other specific actions put in place by management and the board of directors. Sufficient detail is needed, both quantitatively and qualitatively, to compare annual results year-over-year as well as to benchmark with industry peers.

Young people are looking for this information, and existing reporting should send a message on credit unions’ respective positions related to ESG issues.

In addition to ESG, taking social purpose to another level is the B-Corporation certification, which demonstrates a company’s commitment to employees, the community and the broader environment. Founded in Pennsylvania, USA, by a nonprofit B-Lab in 2006, this certification allows organizations to analyze their company against a 200-point scale. If you achieve a minimum of 80 points on the scale you can receive the certification.

In Canada, about 269 certifications for B-Corporation status have been granted, with the top industries being food and beverage and IT services. This certification provides immediate recognition and allows consumers to see alignment with their own values. In a 2020 BDC survey it was noted that 75 percent of consumers would pay more for a product from a socially or environmentally conscious business, 50 percent consider environmental factors in their purchases and 33% indicated that they have researched a company’s environmental or social practices in the last 12 months. BDC is Canada’s first B-Corporation bank and indicates on their website that this certification allows them to attract millennial employees, amongst numerous other benefits.

While it is uncertain if the B-Corporation certification will become the standard, it is growing in recognition and is seen to align with the younger generation that credit unions are looking to attract and retain as members.

MESSAGING: Storytelling

In addition to stressing global narratives and a commitment to ESG policies, credit unions can use storytelling in their marketing efforts. The Canadian credit union story is a compelling one, being a disruptive industry that stood up to the banks and created a more even playing field for Canadians. There are numerous examples of instances when credit unions disrupted the status quo.

After being rejected by all of the major Canadian banks, Bruce Linton, who was then Chief Executive Officer of cannabis company Tweed, received a loan from Alterna Savings Credit Union.(ii) After conducting careful due diligence, Alterna CEO Rob Paterson concluded that, because Tweed was a legal, legitimate business, there was no reason they should be denied banking services. Alterna granted Tweed funding, and the rest is history. Tweed evolved to become Canopy Growth Corporation, the largest publicly traded cannabis company in the world.

This story is just one of the many powerful stories that exist among Canadian credit unions members. Younger generations are both more tolerant of cannabis culture, and also to stories of the underdogs, their people and their brands. (iii) Credit unions have a unique opportunity to captivate younger audiences by sharing their stories in their marketing and messaging.

Social Media Strategy

Another way credit unions can communicate and spread awareness to younger generations is by developing actionable social media strategies. In Canada, there are approximately 20 million Facebook users, and more than 10 million Instagram users, yet Canadian financial institutions tend to have a weak presence on these platforms. For credit unions, the situation is suboptimal, with even some of the country’s top credit unions not even possessing active or current social media accounts (Figure 1).

The following graphs depict Canada’s top 15 credit unions based on their asset bases and their corresponding followers on Instagram and Facebook last year.

Top 15 Canadian Credit Unions - Social Media Penetration

Instagram Followers

Facebook Followers

Twitter Followers

LinkedIn Followers

Social media is a significant channel to distribute sharable content and is an important marketing tool. Credit unions have an opportunity to not simply go through the motions on their social media accounts, but to create incentives for members to follow or like their profiles. Influencer marketing can help, but credit unions should also incentivize follows on social media by engaging existing members to follow their social media accounts in their regular banking interactions.

Social media is both important for generating content related to a credit union, but also as a tool to process business transactions. For example, credit unions in Ireland have had measurable success using social media as a lending platform. They have utilized Facebook to streamline the loan application process, cutting down the application time to less than 30 seconds, followed by a rapid approval decision. The initiative has had significant success both generating awareness for credit unions as well as generating new business, with participating credit unions seeing a 10 percent increase in their total new-loan volume.(iv) This is a particularly salient example of how credit unions can modify their products and supplement their sales channels to meet the needs of younger generations on the social media platforms of their choice. It also demonstrates that credit unions can leverage their inherent flexibility and agility to craft meaningful experiences that generate measurable results.

MESSAGING: Social Media and Influencers

It is one thing for a credit union itself to trumpet its value proposition, but another thing entirely for this message to be communicated by those who have large followings and influence with certain segments. Research specific to the credit union industry suggests the best social media isn’t about pushing out content, rather it is about inspiring others, such as followers, to do it for you.(v) While not widely utilized in the financial services industry, there are openings in the market for credit unions to enlist influencers to spread awareness on the renowned credit union member experience and alignment to younger people’s values.

Social Media Recommendations

As with any systemwide initiative, Canadian credit unions could contribute collectively to an influencer marketing campaign. This would include researching influencers who are relevant to young people and deploying them strategically to communicate the credit union value proposition to their followers.

According to MNP Financial Services Leader Steven Luckie,

“It is likely that members with large Facebook or Instagram followings exist among Canada’s five million credit union members, and these individuals could potentially be leveraged to testify to the merits of banking with a credit union to their social media followers.”

With the major advantage of intimate customer relationships with members, credit unions can incentivize this type of behaviour by discovering members active on social media and deploying them at little to no relative cost. The right use of social media can allow credit unions to distribute content to a much wider audience base than it could by themselves and do so at minimal cost. Below are two examples of how influencer marketing has been utilized in financial services on Instagram.

American Express has used influencer marketing to its advantage and has more than 320,000 followers on Instagram. Image 1 depicts Finn Harries, a lifestyle influencer with over 1.5 million followers, commenting on the American Express value proposition of superior global customer service while travelling in Tokyo. The post has over 50,000 likes and links his 1.5 million followers directly to the American Express Instagram page.

Image 2 depicts Whitney Leigh Morris, an interior designer with more than 136,000 followers on Instagram. Whitney describes how Bank of America helps her with day-to-day financial planning. While a seemingly minor celebrity, Whitney has more Instagram followers than the entire Canadian credit union system combined. This type of influencer can post content to their followers at relatively low cost and link a credit unions social media to new groups of potential members.

INCENTIVES: How Credit Unions Can Get People to Make that Switch

A new trend is emerging among millennials suggesting a willingness to switch banks. According to a survey of more than 4,000 retail banking customers in the U.S. and Canada, millennials were the most likely to switch primary banking institutions, with nearly one in five switching banks in the last year — a rate greater than any other age-based cohort.(vi)

Canadians of all generations tend to put down roots when it comes to banking. Our survey indicated that most millennials have held the same bank account their entire life, and 82 percent of millennials use credit card services from their financial institution, indicating a desire to keep financial products consolidated in a one stop shop. If credit unions want to lure young people from their current financial institutions, they need to understand how they can facilitate the switching process as well as how a credit union can fit within the full millennial consumer ecosystem.

Miranda Goode, a professor of marketing and consumer insights at Ivey Business School, told MNP that the “last 100 yards” of switching financial institutions is a key factor in attracting young people to a credit union. Goode explained:

“Even if the values align, which is likely the case between credit unions and younger generations, there will always be the fundamental issue of entrenched banking behaviour, which makes switching financial institutions costly time-wise, convenience- wise, and psychologically.”(vii)

Professor Goode recommended credit unions take steps to enable a seamless switching process from the moment a young person has a touchpoint with a product, which is increasingly online or through mobile applications. She also encourages credit unions to understand the tools younger generations use to search for loans and mortgages and the sources from which they are getting their information.

Six Questions to Ask
Potential Members:

  1. How can we help make switching easy for you?
  2. What incentives would make switching attractive to you?
  3. What is your preference - us coming to your home or office? Or visiting our branch?
  4. Should we cover any fees you incur?
  5. How can we best fit within the suite of financial institutions in your life?
  6. How can we make it easier for you to manage your various accounts?

Rob Carrick reinforced these comments, noting that credit unions should have efficient online sign-up / account opening with e-signatures on digital platforms. “Millennials won’t download forms or sign it and mail it off. If they have any inclination to sign on for a credit union product, it has to be an absolutely seamless digital experience facilitating that switch.”(viii)

Be Visible Where Millennials are Online

Having a presence on emerging online platforms relevant to young people is important for credit unions to create both awareness for their products and to understand how consumers perceive these products. In their online communities, young people are willing to advocate for companies they believe have great products or services, and more importantly, companies with whom they have a genuine connection.

According to Rob Carrick, the biggest problem for credit unions is their lack of visibility on the relevant websites, blogs, and online social platforms younger generations use to make informed purchasing decisions. Millennials are more likely to go to social media to gather information about a specific financial product or service because they can instantly verify within these communities if a product lives up to its claims or not. While many young people may be relatively uneducated regarding personal finance, they are not afraid to conduct the necessary due diligence and research to inform important financial decisions, and tend to obtain multiple quotes when searching for a loan or new service using online communities like Ratehub.ca or Reddit.

The tendency for younger consumers to research products online suggests credit unions must embrace participating in online lending comparison sites. Online mortgage, credit card and savings account comparison sites such as Ratehub.ca provide consumers with information on comparable rates for mortgages, GICs, personal loans and credit cards between financial institutions in most Canadian cities. These platforms are useful channels for financial institutions as they help generate qualified leads and, consequently, only charge financial institutions for generated leads, not postings. These services can be a valuable tool for credit unions, because at no cost, their rates can be advertised comparatively with the banks, demonstrating their typical competitiveness on rates.

Ratehub.ca relies on the consent of financial institutions to use their information on its website, and a recent search revealed that, while the large banks were present, credit unions were largely absent. Jon Vassallo, Director of Sales at Ratehub.ca spoke with MNP about why credit unions are not prevalent on online comparison platforms, and how they can be more appealing with younger generations.

Vassallo explains:

“Many credit unions are unfamiliar with the option to post their rates online and often require face-to-face interaction and signed forms in order to execute completely on a product, which prohibits the convenience some young people are looking for.(ix)

For credit unions, an easy next step to boost millennial member acquisition would be to post rates on comparison websites and distribute content on other online forums where younger consumers research products.

INCENTIVES: Get Serious About Referral Programs

Nothing reinforces a credit union’s value proposition quite like having existing members communicate it for you, and referrals should be a desired outcome of any credit union’s marketing strategy. Most consumers choose their financial institution based on recommendations from family, yet a recent Nielsen study revealed that referrals from peers are the most trusted form of advertising.(x)

Credit unions have a built-in advantage for this method of marketing because their existing members are some of the most satisfied banking customers in Canada. However, while many credit unions promote referral programs, they do not significantly differentiate from what the banks offer. This presents an opportunity for credit unions to think beyond monetary rewards and compensate referrals to younger members with rewards that matter to them, such as charity, volunteerism, and access to exclusive tools that can help improve their lives.

Similar to influencer marketing, by encouraging younger members to make personal recommendations and referrals through digital channels and platforms, credit unions can reach potential customers in the 18-to-34 age group while not marketing at them but through them.

i https://co-opcreditunions.org/locator/search-results/?loctype=AS&country=BE&Submit=Search ii https://www.bnnbloomberg.ca/weed-banker-snags-600-million-in-business-as-rivals-just-say-no-1.1045190 iii https://socialmediaweek.org/blog/2016/02/tips-millennials-website-keep-them/ iv https://www.lscu.coop/2016/10/07/millennials-in-ireland-find-appeal-in-fast-track-cu-loans-via-facebook/ v https://blog.flexcutech.com/blog/credit-unions-effectively-marketing-to-millennials-0 vi https://newsroom.accenture.com/industries/banking/north-american-consumers-overwhelmingly-trust-banks-to-securely-manage-their-personal-data-according-to-accenture-report.htm vii Dr. Miranda Goode viii Rob Carrick ix Jon Vassallo x https://www.nielsen.com/us/en/press-releases/2015/recommendations-from-friends-remain-most-credible-form-of-advertising/