10 Young Adult Innovations: From The 30 Under 30 Group

ISBN 978-1-932795-56-1

10 Young Adult Innovations: From the 30 Under 30 Group

ideas grow here PO Box 2998 Madison, WI 53701-2998 Phone (608) 231-8550

www.filene.org

PUBLICATION #177 (2/09) ISBN 978-1-932795-56-1

CU Tomorrow Business Brief

10 Young Adult Innovations: From the 30 Under 30 Group Ben Rogers Driver, CU Tomorrow Filene Research Institute

10 Young Adult Innovations: From the 30 Under 30 Group Ben Rogers Driver, CU Tomorrow Filene Research Institute

Copyright © 2009 by Filene Research Institute. All rights reserved. ISBN 978-1-932795-56-1 Printed in U.S.A.

About Us

Deeply embedded in the credit union tradition is an ongoing search for better ways to understand and serve credit union members. Open inquiry, the free flow of ideas, and debate are essential parts of the true democratic process. The Filene Research Institute is a 501(c)(3) not-for-profit research organization dedicated to scientific and thoughtful analysis about issues affecting the future of consumer finance. Through independent research and innovation programs, the Institute examines issues vital to the future of credit unions. Ideas grow through thoughtful and scientific analysis of top-priority consumer, public policy, and credit union competitive issues. Researchers are given considerable latitude in their exploration and studies of these high-priority issues.

CU Tomorrow is a Filene Research Institute clearinghouse for credit union young adult strategies. The project publishes research and open-source business plans to help credit unions attract younger members, promising young professionals, and younger volunteers. Initiatives include: • Business briefs—open-source, young adult business plans for credit unions. • 30 Under 30—entrepreneurial SWAT team of young credit union professionals. • Community—CU Tomorrow and Filene Web sites for publication and idea sharing. • Leagues—statewide collaboration to implement CU Tomorrow programs. • Recruiting—talented interns and new hires from high-profile universities. • Research—academic research, focus groups, online surveys, and interviews. Visit www.cutomorrow.org for more details.

Acknowledgments

The Filene Research Institute would like to thank PSCU Financial Services, the nation’s largest credit union service organization, for its generous financial support of past, present, and future studies of the under-30 population and for recognizing the potential that young adults represent for the continued success of the credit union system. We also gratefully acknowledge the Credit Union Executive Society, Fiserv, and the Corporate Credit Union Network for their financial and intellectual support of research and projects focused on credit union growth. We also thank the California Credit Union League, which hosted the final 30 Under 30 presentations at its annual convention in November 2008. The assistance of Mark Klinkert, Diane Spiegel, and Patrick Solares was invaluable. We would like to thank the “curious observers” who spent time with us in San Francisco: • Jessica Hrubes, Credit Union Executive Society • Josh Jones, Credit Union National Association • Barry Lingelbach, CUNA Mutual Group • Jessica Vogel, National Credit Union Administration • Jeff Jordan, Omniture, Inc. Finally, even the best ideas cannot go far without a long-term commitment. We are grateful that the Credit Union National Association sees value in the 30 Under 30 model and has committed to continuing the project in pursuit of its member growth and professional development goals.

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Table of Contents



Executive Summary and Commentary

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About the Author

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Chapter 1

Younger Members

1

Chapter 2

Younger Employees

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Chapter 3

Younger Volunteers

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Chapter 4

Conclusion

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Appendix 1 Change Your Savings Additional Information

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Appendix 2 Win–Win Savings Additional Information

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Appendix 3 iAdvanceCU.com Additional Information

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Executive Summary and Commentary

By Ben Rogers, Driver, CU Tomorrow

Credit unions need to attract younger members, talented young professionals, and a new generation of volunteers. Since its inception in 2007, the Filene Research Institute’s 30 Under 30 group has worked toward these goals. In 2007 Filene invited talented young credit union professionals from around the country to apply for a spot to innovate alongside their peers. The final 30 Under 30 group emerged from 167 applicants. For several months, the group focused on research and information gathering regarding millennials’ financial habits and needs. Later, members broke into smaller groups to develop business innovation plans to help credit unions better serve this emerging young group. This report highlights those 10 business plans, each of which aligns a facet of young adult life with credit unions’ needs. From recruiting programs to innovative savings products, and from volunteer panels to employee consulting, this national group of rising credit union talent shows what kind of innovation is needed to keep credit unions relevant and essential for a new generation of members and leaders. Ideas were generated for younger members, for talented young professionals, and for younger volunteers. Plans for Younger Members • Change Your Savings: Harnesses the power of debit to fund worthy goals. • CUre Card: Members improve their communities with a credit union card—“a dime every time.” • GrassHopper: Life planning meets credit union products. • Mortgage Down Payment Accelerator: Rewards those who are saving for a home. • Win–Win Savings: Prize-based savings for young adults. • What’s Next?: A responsible way to build credit and save. Plans for Talented Young Professionals • Shared Staffing: Short-term sabbaticals for professional development and credit union cooperation. • Gen Y Fast Track: Mentorships and job rotation for superior retention. • iAdvanceCU.com: Credit union career paths and improved recruiting.

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A Plan for Younger Volunteers • Member Advisory Panel (MAP): Connecting young adult volunteers with credit union leaders. The 30 Under 30 group is both from and for the entire credit union system. Each business plan details the product’s overall aim, outlines its benefits for the member and the credit union, explains how to put it into practice at your own credit union, and shows what further considerations, like marketing, human resources, or finance, apply to each. This is brainstorming you don’t have to do yourself, and in most cases the groups have already beta tested their ideas in their markets and share their real-world insights. All ideas from the 30 Under 30 group are open-source. We encourage you to use, tweak, or rewrite them for your credit union’s benefit. Each group has volunteered to share its expertise and the research that wouldn’t fit in this final report. The aging of credit unions’ membership is only the iceberg’s tip of the challenge the industry faces. Marketplace and regulatory realities will continue to change at a breakneck pace, and financial institutions of all stripes risk obsolescence if they can’t stay ahead of that change. Engaging ambitious young professionals and giving them enough room to suggest, to improve, and to innovate will be essential for credit unions over the next 10 years. As pointed out in this group’s interim report, Mapping the River: A Report from 30 Under 30, insights without effort disappear quickly; they don’t become innovation. Filene’s 30 Under 30 group sees innovation as more than just flashes of insight. Innovation is like a river. It starts small, but it starts somewhere. It begins when ideas and effort align. Like a river, it grows as other ideas feed into it. It takes time to get to its end. Sometimes it barely moves, and sometimes it roars. In this final 30 Under 30 report, full efforts follow on initial insights. The results are the seeds for 10 open-source opportunities for credit unions.

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About the Author

Ben Rogers The author, Ben Rogers, is driver of the Filene Research Institute’s CU Tomorrow project and director of the Institute’s 30 Under 30 group. Ben is a former editor of The CEO Report and chairman of the National Directors’ Convention. Ben holds a master’s degree in journalism from Northwestern University and graduated cum laude from Brigham Young University with degrees in English and philosophy.

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Chapter 1 Younger Members

Young adults’ habits, along with their slang, may change from year to year, but their financial needs do not. Credit unions succeed by making it easier for young adults to save and borrow on their own terms, even if that means tweaking existing products or preconceptions.

Change Your Savings Opportunity

The United States maintains a poor personal savings rate. In a recent focus group, consumers described savings as important, but described the actual process as painful or difficult. The pain of saving can be reduced by having the option to save a small amount each time a purchase is made. Consumers have defined Bank of America’s Keep the Change program as a painless way to save and an easy way to balance their checkbooks with round numbers. But they have also said that it’s very easy to transfer their savings right back into their checking account. The Keep the The pain of saving can be reduced by having the option to save Change program and Wachoa small amount each time a purchase is made. via’s Way2Save program have not addressed the fact that consumers have different goals when attempting to save. These institutions attempted to launch their products as “one size fits all.” Solution

Change Your Savings will operate in a similar fashion to Bank of America’s Keep the Change program by rounding up point-of-sale (POS) transactions to the nearest dollar and transferring the funds to a savings account. Change Your Savings is different from other programs in that it attempts to meet the individual savings goals of specific Gen Y markets. Several savings options are offered. Tuition Savings Option The tuition savings option will receive a deposit to a Coverdell Educational Savings Account (CESA) at the end of the business day for all purchases made during that day. This account can receive a deposit maximum of $2,000 annually. Members will achieve tax benefits from participating in this type of account, but if they withdraw funds prior to the beneficiary’s 18th birthday or use the funds 2

for purposes other than education, they will be penalized. More than one checking account may make deposits to the CESA (e.g., parents and grandparents may link their checking accounts to the savings account). Auto Savings Option The auto savings option will receive a deposit to a non-interestbearing club account at the end of the business day for all purchases made that day. When the club account reaches maturity, the member will receive a savings match option of 10%, up to $250, if the account is redeemed in conjunction with an auto loan at the credit union. The member can also opt to remove the funds without any incentives at time of maturity. Finally, the club account can be broken, but penalties will apply. House Savings Option The house savings option will receive a deposit to a non-interestbearing club account at the end of each business day for all purchases made that day. When the club account reaches maturity, the member will receive a savings match option of 10%, up to $2,000, if the account is redeemed in conjunction with a mortgage at the credit union. The member can also opt to remove the funds without any incentives at time of maturity. Finally, the club account can be broken, but penalties will apply. Debt Reduction Option The debt reduction option will receive a deposit to a savings account at the end of each business day for all purchases made that day. On a monthly basis, an ACH transaction will be made to the member’s loan or will be transferred internally to their loan. Other Savings Option The other savings option will receive a deposit to an interest-bearing club account at the end of each business day for all purchases made that day. When the club account reaches maturity, the funds will be automatically transferred into the member’s checking account. The club account can be broken, but with penalties and loss of interest. Member Benefits

Consumers who participate in programs like Keep the Change and Way2Save fully benefit from having an easy way to save, but they do not benefit from saving for a specific goal. Consumers have specifically noted that they transfer the money from these accounts back to their checking account without the benefit of savings and

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eliminating future debt. In addition to easier saving, members can expect the following benefits: • Easy and painless way to save with tax relief, to eliminate debt, to save for a down payment, or just to meet a short-term savings goal. • Eliminate future college debt. • Ability to receive contributions from multiple debit cards. • Ability to save with premium incentives to help reach goal. • Eliminate probability of negative equity on an auto loan. Credit Union Benefits

The Change Your Savings program encourages saving for different goals, and it packages incentives on the basis of whether a loan is obtained by the credit union. While programs like Keep the Change and Way2Save only increase low-cost deposits, non-interest income, and checking account penetration, Change Your Savings also benefits the credit union with loan penetration. The benefits to credit unions can be described as follows: • Increased checking account penetration. • Increased low-cost deposits and overall net interest margin. • Increased interchange income. • Increased loan penetration through auto and home savings options. • Increased core deposits. • Improved loyalty of Gen Y by engaging them at an early age. Target Market

Tuition Savings Option Primary Target Market • Current member. • Have a checking account at credit union or live within one-mile radius of a branch location. • Have children under the age of 18. • Household income of $50,000 or greater. Secondary Market • Non-member. • Have children under the age of 18. • Household income of $50,000 or greater. • Live within one-mile radius of a branch location.

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Auto Savings Option Primary Target Market • Current member. • Have an auto loan at credit union. • Between the ages of 18 and 34. • Live within one-mile radius of a branch location. Secondary Market • Non-member. • Between the ages of 18 and 34. • Live within one-mile radius of a branch location. Home Savings Option Primary Target Market • Current member. • No mortgage loan at any financial institution. • Have a checking account at credit union or no checking account within one-mile radius. • Between the ages of 22 and 34. Secondary Market • Non-member. • No mortgage loan at any financial institution. • Between the ages of 22 and 34. • Live within one-mile radius of a branch location. Debt Savings Option Primary Target Market • Current member. • Current unsecured debt of $5,000 or greater. • Have a checking account at credit union or no checking account within one-mile radius of branch. • Between the ages of 18 and 34. Secondary Market • Non-member. • Between the ages of 18 and 34. • Live within one-mile radius of a branch location.

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Other Savings Option Primary Target Market • Current member. • Have a checking account at credit union or no checking within one-mile radius of branch. • Between the ages of 18 and 24. Secondary Market • Non-member. • Between the ages of 18 and 24. • Live within one-mile radius of a branch location. Operational and Other Considerations

There are many ways the Change Your Savings program can be packaged depending on the credit union’s needs and capabilities. Credit unions should consider the following questions when packaging this product: • Can our processing system accommodate rounding POS transactions to the nearest dollar, or should $1 be transferred for each POS transaction? The rounding option is recommended; however, some systems may not support this. • Should a new suite of checking accounts be rolled out to accommodate this service, or can it be implemented as an add-on service to existing checking accounts? Change Your Savings should be introduced as an add-on service to existing checking accounts to increase both value to members and non-interest income. • Does our credit union need all savings options? Depending on your credit union’s strategy, it may not be necessary to implement all options at once or even at all. • Can this process be automated with our core system, or do we have a budget to look into customization? Automation is key. If this process cannot be automated, the credit union may want to consider what type of budget fits its goals for this program. From the beta tests for this service, it was estimated that research and implementation will require 64 IT hours. • Do we have a marketing budget to introduce this program, or should we consider grassroots efforts? Proactive and consistent marketing will enhance the results of this program.

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• Do we have the staff to implement the program and train employees in the program? Training is essential for employees. From beta tests, the following training time is recommended: ■■

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24 hours for training program development, inclusive of procedural plans. Approximately 2 hours for training class (employees and trainer).

• What are the legal implications? Legal considerations should also be made in the case of the Change Your Savings program. Recent lawsuits between Bank of America and Every Penny Counts regarding the technology behind the program mean credit unions should be careful with this product. Consulting with legal counsel during the early phases of product implementation is recommended. Proof of Concept

Change Your Savings Team, From Left to Right: Robin Hickey, First Financial Federal Credit Union; Dustin Allen, Weber State Credit Union; and Matthew Prosneski, Travis Credit Union

Consumers who participated in focus groups have indicated that programs like Keep the Change make saving painless. First Financial Federal Credit Union, Travis Credit Union, and Weber State Credit Union are currently preparing to implement beta testing of the Change Your Savings program. First Financial Federal Credit Union is seeking to test the auto loan savings option. Travis Credit Union is seeking to test all of the Change Your Savings options. Weber State Credit Union is seeking to test the CESA option. Results are yet to be determined.1

For more information about this project, please e-mail Josey Siegen­ thaler at [email protected].

1 See Appendix 1 for a guide to implementation and examples of market-consumer research. 7

CUre Card

Figure 1: CUre Card

Opportunity

CUre Card is a debit card for ages 15–25 that donates a dime to a worthy cause every time the card is swiped. The donations fund grants aimed at social problems in a local community or at the national level. The card offers a unique opportunity to reach millennials with ideas that attract them: social responsibility and collaboration. Gen Y makes up about one-quarter of the U.S. population,2 but credit unions derive only about 12.5% of their membership from this demographic.3 Clearly, there is a vast opportunity for credit unions to increase membership by attracting young adults. CUre Card is an effective conduit for increasing credit unions’ relevance to Gen Y and for entering this market. In addition to the sheer size of Gen Y, members of this generation also possess strong spending power. From “Tough Customers: How to Reach Generation Y,” author Joanna Krotz notes, “This generation already spends an average $100 a week, or a stunning $150 billion a year. And they influence another $50 billion in family purchases.”4 As this generation ages, both spending power and influence over the economy will continue to increase. The oldest of this generation have not yet reached age 30 and have not yet entered their peak borrowing years. Now is the time for credit unions to form solid, lasting relationships with them. Credit unions are especially well positioned to appeal to one particular characteristic of Gen Y: its focus on social responsibility. Studies show that members of this target market make many decisions on the basis of social responsibility and that 89% of this demographic would switch brands in favor of one associated with a good cause.5 Credit unions can gain members by offering socially responsible plastic cards, but they can lose them just as easily if they do not offer options like CUre Card, as the demand for such products is high.

2 Microsoft, www.microsoft.com/smallbusiness/resources/ArticleReader/website/default.aspx?Print=1&ArticleId=ToughcustomershowtoreachGenY. 3 2007–2008 Credit Union Environmental Scan Report (Washington, DC: Credit Union National Association, 2008), 4. 4 Microsoft, www.microsoft.com/smallbusiness/resources/marketing/market-research/tough-customers-how-to-reach-gen-y.aspx# ToughcustomershowtoreachGenY. 5 Ibid. 8

Solution

CUre Card presents an opportunity to younger members by providing a new way for them to increase their personal commitment to social responsibility. Generation Engage, a nonprofit group that aims to increase civic participation among young adults, conducted a survey of individuals under age 29 and found that nearly 70% of respondents had volunteered their time for community This generation already spends an average $100 a week, or a service. Of that same group, stunning $150 billion a year. And they influence another $50 nearly 60% had never donated billion in family purchases. money to a cause. John Burnett, professor of marketing at the University of Denver’s Daniels College of Business, says this about this demographic, “They are far more socially conscious than any generation since World War II. They believe in giving, participation in nonprofits, and in donations of time and resources.”6 While this demographic cares about making an impact in the community, its members might not currently be in the financial position to make monetary contributions. This is where CUre Card holds appeal: Members get the opportunity to make a difference in their communities, become more civically engaged, and provide financial support to worthwhile causes, but without the concern of compromising their own financial security to make it happen. There are competitive products on the market, mostly in the form of rewards cards, although American Express and Visa have also recently developed cards that focus on philanthropic efforts. CUre Card differentiates itself from other cards and also differentiates credit unions from other financial institutions by supporting the credit union philosophy of “not for profit, not for charity, but for service.” CUre Card is different because of its collaborative nature that draws together the efforts of all credit unions, a Web site that includes a tracking system that creates a sense of ownership for the individual and a community among card users and social entrepreneurs, and its universal use by all credit union members in this demographic. CUre Card stands out from the competition in the way it serves communities. Unlike credit cards that donate small amounts to the individual’s charity of choice every time the individual uses the card, CUre Card combines the efforts of all cardholders to make a significant contribution to a cause that will help build a future of social responsibility. CUre Card helps members better understand the bottom line to which they contribute, as well as how these contributions

6 Ibid. 9

add up with those from other card users throughout the entire credit union system. CUre Card plays a role in increasing public understanding of the credit union difference. The current market is primed for credit unions to draw attention to themselves, to their strong financial performances, and to their ability to serve members. CUre Card provides a new way to bring positive media attention to credit unions, provides a service to communities that are also feeling the weakened economy, and gives young consumers—a typically underserved demographic—a product that often begins a relationship with a primary financial institution. As margins continue to tighten, fee income is critical to credit unions—as is the importance of attracting new, young members on the verge of their prime borrowing years. CUre Card works to bring in additional income and attract new members in a way that feels good to them: through social responsibility. Member Benefits

Members will financially benefit from CUre Card through access to an exceptional plastic card program and exposure to additional benefits of credit union membership. Using CUre Card is just as convenient as using any debit card, but it offers something more. Appealing to this generation’s desire to be part of something greater, to fit into a community, and to make a difference, CUre Card will fully integrate members into the credit union philosophy by making them part of the effort. The complete program provides members: • Access to an interactive Web site that tracks charitable contributions and shows the significant impact members have made through collective philanthropy. • An opportunity to advocate for the social venture whose efforts they most support. • The possibility of creating their own programs to positively impact their communities. • A shared community with other CUre Card holders who are also part of the credit union system. Credit Union Benefits

Credit unions will tangibly benefit through increasing membership numbers from a demographic that many firms are struggling to reach. The primary focus of the program is not to generate revenue but to increase credit unions’ long-term relevance through building new relationships with potential members. This will, however, result in increased revenue and increased lifetime value of a member. CUre Card and the social entrepreneurship grants it funds will generate additional awareness of credit unions and their commitment 10

to communities, helping get the word out about the credit union difference. Rather than saying credit unions are member-owned financial cooperatives run by a volunteer board of directors, CUre Card will show how credit unions use a spirit of cooperation to make an impact and how membership can make a difference. Target Market

Gen Y in the United States comprises more than 76 million individuals.7 CUre Card targets those individuals born between 1983 and 1992, or approximately one-half of the members of this generation. The 15–25-year-old CUre Card holder will be reached by credit unions that participate in the program. When a credit union partners with CUre Card, it receives debit cards with the CUre Card graphic as well as its own logo, and marketing materials to distribute via direct mail, online, and in-branch. In addition to these materials, partner credit unions benefit from the appeal of a national image and earned media, which may raise awareness of the program. Interactive Web sites, blogs, and word of mouth will also be used to reach the demographic. Costs for marketing to members beyond the marketing toolkit will fall to individual credit unions and may include paid advertising in newspapers and on TV and radio. The CUre Card program can work for the 94.5% of credit unions that offer plastic card services.8 Strategic partnerships with established, reputable organizations and the media attention this will generate will help overcome the barrier of reaching all 8,200 credit unions. It is not expected that all credit unions will sign up, but through continued development and success, reaching out to all credit unions that offer debit cards is a reasonable goal. Operational and Other Considerations

CUre Card is a debit card with a custom design and an interactive Web site for all CUre Card holders to access. CUre Card provides turnkey marketing and promotional products with the same look that can be customized for each credit union, but the CUre Card brand will remain consistent. Consistency in branding is important, and credit unions win by sharing a similar look for this program in order to emphasize its cooperative nature. Credit unions will use the marketing tools in ways that are effective for their membership or potential membership and can either attach the CUre Card to a checking product they currently offer or introduce a new one that integrates with a current product line and member needs.

7 Penelope Trunk, “What Gen Y Really Wants,” Time, www.time.com/time/magazine/article/0,9171,1640395,00.html. 8 Credit Union National Association, “Second-Quarter Debit Transactions Are Up,” www.cuna.org/newsnow/08/system080808-7.html. 11

This debit card functions just like any other debit card with the exception that 10 cents of each transaction’s interchange income will be contributed to the same national charity (“a dime every time”). This national charity will administer a grant program, providing funds to social entrepreneurs with solutions for improving their communities. Each year, the number and amount of grants distributed will be based on CUre Card usage, showing members’ direct control over the program. Grant recipients will be selected through Web site voting, as well as potential impact on a community. A flat rate of 10 cents per transaction keeps CUre Card contributions simple. It’s easy for the CUre Card holder to understand his or her impact: When I swipe my CUre Card, I donate a dime every time. Proof of Concept

Interchange income became the focus of our research because research indicates it provides credit unions with an opportunity to make a real impact without incurring new costs and without increasing member fees. Further, it does not require additional efforts by members outside normal behavior. The credit union system generates a significant amount of interchange income each day—approximately $6.5 million (M). This number considers that the average debit card transaction is roughly $40 and the average percentage of interchange income generated for a credit union with each debit transaction is 1.39%, or $0.56 per transaction. While CUre Card would not contribute from all interchange income generated by credit unions, the realization of how quickly these funds could grow indicates credit unions can make a real difference for communities without significantly detracting from an individual credit union’s bottom line. This is further supported by credit union executive commentary that indicated CUre Card is unlikely to cannibalize current interchange income. With only a sliver of credit union membership represented by those ages 15–25, and only about 35% The credit union system generates a significant amount of debit card penetration among interchange income each day—approximately $6.5M. this demographic, it appears that 10 cents per transaction is a small price to pay for most credit unions looking to increase their debit card penetration among this age group. In fact, interchange income generated from CUre Card could increase revenue from this demographic by 80%. One hundred percent of credit unions responding to a survey about debit card interchange income indicated they are interested in learning more about increasing debit card penetration among young adults. In this survey of 24 Oregon and Montana credit unions, the 12

results indicated that if these credit unions offered CUre Card to their current 15–25-year-old membership, estimated revenue would be $23,000 per month in contributions. These 24 credit unions range in size from $810,000 to $866M in assets and have between 4 and 5,828 debit cardholders. With the addition of just one of the largest credit unions in the country—one that holds over $1 billion (B) in assets—one month’s contributions would quickly increase to $525,000. Another way to look at the potential is to consider the average debit card numbers for the average-size U.S. credit union (about $87M in assets). With 12% participation from all credit unions nationwide, average contributions generated would equal $325,000 per month. This survey did not account for the growth in membership anticipated with the rollout of this new product and the associated publicity. Calculations accounted for current numbers only, which indicates even greater potential for revenue. How to Get Started

Visit www.CUrecard.org and read a detailed explanation of the CUre Card concept. This Web site also has tools to measure interest from potential members, social entrepreneurs, and credit union personnel.

CUre Card Team, From Left to Right: Brandi Melo, Rocky Mountain Credit Union; Chad Warneke, Oregonians Credit Union; Jill Jarman Nowacki, Credit Union National Association; and Mike Escudero, MBA Candidate at the University of Southern California

CUre Card will be brought closer to rollout with advocacy from credit unions expressing their interest on www.CUrecard. org or by encouraging current card processors to make CUre Card one of their available debit cards for credit unions to select. For more information about this project, please e-mail Josey Siegenthaler at [email protected].

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GrassHopper: Jump with Confidence Opportunity

Many students experience financial hardship after college because their expectations of what opportunities their degree will bring are unrealistic. With 55% of students relying on Figure 2: Sample Logo student loan funding to complete their degree (65% for four-year college students), a limited deferment window for postgraduation repayment, and other financial pressures associated with debt acquired throughout college, many students do not realize how much higher education can cost after four or five years.9 Some believe that once graduation comes, they will walk into high-paying jobs and professional opportunities; however, these are commonly out of reach for most graduates. GrassHopper addresses this problem by providing a unique opportunity for young adults to develop and test their college and young-life plan against the realities of the marketplace. Through accurate and realistic data, and managed expectations, young adults can successfully embark on their college adventure without falling into some of the pitfalls associated with unrealistically matching postcollege costs with job opportunities within their field of study. Solution

Gen Y needs a service that resembles what Ameriprise Financial does for baby boomers. But instead of helping identify retirement goals and action plans, GrassHopper helps young adults identify their life goals and develop a realistic plan to accomplish them. Grass­Hopper provides the information needed to make these tough decisions through research on college majors, salary expectations, and national housing and job market environments and then matches credit union products and services to help young adults achieve their goals. While students are in high school, they are faced with tough decisions that can make or break their future, and sometimes the advice they receive from their parents is misguided or out of touch with today’s marketplace realities. GrassHopper focuses on serving students age 16 and older. The service entails a series of steps that involve high-touch, face-to-face communication with a credit union representative and the member, as well as low-touch communication, via an online channel.

9 FinAid, “Student Loans,” www.finaid.org/loans.

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The steps are as follows: 1. The member uses an online submission form to describe life goals and how he or she plans to accomplish these goals. 2. The member meets face-to-face with a credit union representative to review the information submitted online. 3. Field experts and online data resources help set the course for making the plan a reality and potentially provide guidance for areas of the plan that may need to be adjusted. 4.  Another face-to-face meeting is held with the member, the credit union representative, and a field expert, to discuss findings and make adjustments if needed. 5.  The last stage of this meeting involves the credit union matching products and services with the member to help achieve his or her goals and put him or her on track to financial independence and security. By matching credit union products and services with the goals of the member, GrassHopper not only helps fulfill the needs of the member but also creates a profitable member for the credit union over time. The Market

As an industry, credit unions have experienced a decline in the number of young adult members. These members are vital to credit union growth because they are in their prime borrowing years. According to a CUNA report, Credit Union Growth Task Force, “The number of members between the ages of 25 and 44 years old has declined 17 percentage points (from 55% of members to 38%) between 1985 and 2006.” The report also indicates that while overall membership will grow by 5 million by 2010, the number of young adults will decline by 2.5 million. Approximately 94% of young adults ages 19–24 don’t belong to a credit union.10 GrassHopper is a service that helps young adults validate their life plan to determine how realistic their ideas are for achieving their life goals. The opportunity lies in allowing credit unions to offer a service that is needed and that attracts young adults as members, thus increasing profitability per account. While young adults do need financial literacy, this service is much more than that. It offers young adults a chance to explore their plan for reaching life goals by validating through research and statistics how realistic their initial plans are to attain those goals. This service helps put young adults on track so that they don’t make huge financial mistakes that may affect their future. GrassHopper helps young adults make educated decisions 10 CUNA, Credit Union Growth Task Force, summary report, August 18, 2006, 6. 15

and recommends credit union products and services to help them accomplish their goals. There are 76 million young adults in America today.11 These individuals are making life decisions that will impact their financial future. They’re deciding on which schools to attend and how to pay for college. In addition, The number of members between the ages of 25 and 44 years they are faced with many other old has declined 17 percentage points (from 55% of members life events, such as buying their to 38%) between 1985 and 2006. first car, getting married, or purchasing a home. These decisions all benefit from guidance and create an opportunity for credit unions to be the resource in funding and helping young adults make informed life decisions. Target Market

The target market is segmented into two disFigure 3: Gen Y Population per Age Group tinct groups. The primary segment will be Age Population 17–18-year‑old high school students who plan to 12–15 years 17 million attend a postsecondary educational institution. 16–18 years 13 million The secondary segment is a little broader and 19–22 years 16 million includes any young adult under the age of 25. 23–30 years 33 million Having two distinct segments allows the credit Presentation by Susan Follick, PSCU Financial Services, at the 30 Under 30 meeting, Chicago, union to identify high school students who are Illinois, March 13, 2008. just about to make life-­changing decisions, such as whether to attend college. The service is more effective when started in the student’s senior year of high school, before any concrete decisions have been made. GrassHopper could be particularly effective for credit unions with in-school high school branches and those that offer student loans. The second segment of young adults under the age of 25 is also included because these individuals could be making the same decisions, albeit a bit later in life. Marketing

Marketing materials will focus on three groups: (1) high school students ages 17–18, (2) all young adults under the age of 25, and (3) parents of young adults, helping them understand the value of this service in planning and validating the goals of their children. Gaining the parents’ confidence is important for creating a level of interest with the students. It will be important for credit unions to find ways to create awareness of this service within high schools that are located in their field 11 Trunk, “What Gen Y Really Wants.” 16

of membership. Marketing materials will be developed to address this segment and create partnerships with the schools. Direct-to-Students Marketing The direct-to-students marketing will work well for credit unions that have developed relationships with schools in their area. Whether through in-class presentations, school branches, or participation in educational events, credit unions in partnership with local schools will have a great opportunity to directly reach their target audience for this product. Parental Marketing Marketing directly to parents is another effective way to find the appropriate users of this product. Students close to graduating from high school or just starting college are likely to still be dependent on their parents for guidance and financial support. While the best fit for this product will be naturally motivated students with a desire to succeed, parents can still play an important role in helping reach students who can benefit from this product. School-based Marketing Another great way to reach this audience is through local high schools and colleges. They can be a great resource for gathering statistical data about anticipated graduate salaries and job and housing markets. Many colleges and universities send out surveys to graduates to get information on what their after-school salaries are. With that specific information, the data may one day be able to get down to specific levels of insight based on schools and distinct areas. In addition to providing data, school partnerships can play an important role in providing potential students for the GrassHopper product. They can identify motivated students who are looking to make informed decisions about their education and the rest of their lives. GrassHopper can also serve as a good starting point to create a relationship between the credit union and the local schools and universities. With a product and service targeted to their students, they may be more likely to engage in a mutually beneficial relationship that can extend even beyond GrassHopper. Advertising can be broken into two categories: advertising to current members and advertising to prospective members. Advertising to Current Members Current members will be an important group to engage with GrassHopper. Many members in this age group will likely have just a savings account. By encouraging members to participate, it will help 17

deepen the relationship and encourage the use of additional credit union products and services. There can also be marketing to current members who are parents of this age group. Many credit unions purchase demographic information that shows the presence of children in the household. It’s also easy to obtain this information through interactive member conversations as well as by noticing who brings children into the branch. Advertising to Prospective Members GrassHopper is unique enough that it has the power to generate new members. Partners can help identify prospective students who would benefit from the GrassHopper tools, which include the following: • E-mail to current members. • Internet. • Blogs. • Social networks. • Direct mail to current members or members with children. • Internal sales force—cross selling and making observations will be important parts of the marketing efforts. • Press releases—another great way to get the word out about this product. • Branding, logo, Web design, and content (to be determined). The service is intended to be free to members. The credit union will absorb the cost of using the service with the thought that it will produce more active members. The last stage of this process is to identify credit union products and services the member will need to reach his or her goals. The money spent to participate in the service can be viewed as a replacement of traditional marketing dollars to naturally acquire these services. Member Benefits

The target audience was chosen Young adults have a strong preference for personal contact. on the basis of several factors, Many young people will avoid a financial purchase until they including the potential for meet with a professional. credit unions to (1) gain new young members in their prime borrowing years, (2) increase profits by matching products and services to this demographic, and (3) provide needed solutions to help young adults reach their life goals. Gen Y believes that planning for its future needs and purchases is important. GrassHopper meets this need and provides not only a 18

financial plan but a plan to help young adults achieve their life goals. This program can help young adults determine if their plan for growth is feasible and puts them on the right track to success. According to the Filene Research Institute Report by Mark Meyer, “Young adults have a strong preference for personal contact. Many young people will avoid a financial purchase until they meet with a professional.”12 Purchasing financial products via the Internet or telephone rates low with these consumers, but they use these media to research products and services that may be appropriate for them. GrassHopper takes this into account by providing young adults with high-touch interactions alongside online resources. Credit Union Benefits

The average credit union member is 47 years old. Credit unions need to attract young adults because these individuals will help generate interest income to help credit unions thrive. As members age, their borrowing needs begin to diminish and they begin to demand higher yields for savings products. The young adult segment may not create an immediate return on investment, but will yield profits the longer the relationship is maintained, which can be measured in terms of lifetime value. The goal for GrassHopper is to help credit unions offer a service that will appeal to a younger demographic to increase membership and lower the average member age. Challenges

More and more students are attending college every year. According to an NCES graduation rate survey in 2006, college graduation rates were at 56.4%, up from 54.3% in 2002. As the number of graduates increases, so does the opportunity for credit unions to attract these individuals for membership and provide options for student loans. Once the young adult becomes a member, the credit union can begin to offer products and services to help meet his or her needs while in college and beyond. GrassHopper is designed to attract these young adults even before they enter college, to help in the decision process of which school to attend and how they’re going to pay for their education. The average annual cost of a private four-year college continues to rise and is approximately $25,143, up 5.9% from last year.13 Students need help in determining whether they actually can afford tuition, housing, and books. Some students may make decisions about college without really examining the financial impact and the debt load they will incur after graduation. The average student

12 Mark Meyer, Cool Solutions: Say Hi to Y (Madison, WI: Filene Research Institute, 2005), 11. 13 College Board, “2008–09 College Prices,” www.collegeboard.com/student/pay/add-it-up/4494.html. 19

debt after graduation is approximately $20,000.14 This is without taking into consideration the amount of other accumulated debt, for example, credit card debt. According to Nellie Mae, college-age credit card holders are accumulating more debt, with high balances ranging between $3,000 and $7,000—up 61% since 2000.15 This is a financial burden that requires planning. Students The average student debt after graduation is approximately need to weigh the probability of $20,000. finding their desired occupation after graduation with their obligation to repay their student loan with their accompanying salary. GrassHopper presents research and ­statistics that can help students and their parents make more educated financial and life decisions. Credit unions that invest in GrassHopper will need to understand that an immediate return on investment may not be apparent. While this service is designed to attract younger members and deepen relationships, the profitability of these new accounts should be measured over a longer period of time. Credit unions need to understand that by attracting these individuals while still in high school, there is an opportunity to profit off these accounts through the many life events that young adults encounter. This could span from purchasing their first car to retirement products. A potential barrier to entry is the perception many young adults have of credit unions. Credit unions are not perceived as hip financial institutions, especially compared with many banks. Furthermore, many young adults aren’t even aware of what credit unions are or how they’re structured. Students can go to Salary.com to find out what they can expect to make in a certain job category, but the Web site doesn’t help them process that informa-

GrassHopper Team, From Left to Right: Melissa Troiano, Bridgeway Federal Credit Union; Christopher Danvers, Delta Community Credit Union; and Amy Stanton, Connex Credit Union

14 Robert R. Jennings, “Higher Education Must Fill the Void in Student Financial Management,” Diverse Issues in Higher Education, www. diverseeducation.com/artman/publish/article_9801.shtml. 15 Nellie Mae, “Undergraduate Students and Credit Cards: An Analysis of Usage Rates and Trends,” April 2002, www.nelliemae.com/library/ ccstudy_2001.pdf. 20

tion into something useful if the anticipated salary isn’t what they expected. The combination of face-to-face interaction and online tools will be an appropriate balance to take the service beyond what the competition currently offers. GrassHopper reaches out directly to students and also reaches out to the students through the parents. For more information about this project, please e-mail Josey Siegen­ thaler at [email protected].

21

Mortgage Down Payment Accelerator Opportunity

As the availability of 100% financed mortgage products quickly wanes, the need for consumers to save for a down payment increases. The Mortgage Down Payment Accelerator Program is an easy-toimplement savings and educational tool designed to bring the young borrowing demographic to the credit union through a three-step program. The program is specifically formulated to target first-time homebuyers who are struggling with accumulating an adequate down payment. This program comes at the perfect time, with firsttime homebuyers accounting for nearly half of all new and existing home sales in 2008. With the slump of the housing market and the subprime mortgage crisis well documented, the mortgage marketplace has already changed. Specifically, more lenders are shying away from 100% financing and requiring customers/members to have enough funds for a down payment when purchasing a home. The Mortgage Down Payment Accelerator Program helps alleviate this pain by giving young members the tools and incentives necessary to save money to purchase a home. Solution

The solution offered by this savings plan is twofold. First, credit unions will attract young members who need one of the credit union’s most profitable loan offerings. Credit union members who take advantage of this program will save the money necessary to make a down payment on a home. Research shows that Generations X and Y will spend more on their first home than previous generations, and monthly mortgage payments are on average about 25% of that household income.16 It is vital that credit unions acknowledge this research and provide members with an easy-to-use mortgage down payment savings plan. Second, financial literacy education is a key part of this program. In order to qualify for the initial accelerator component and the final reward incentive, the member must attend a minimum of two financial education sessions. Generations X and Y will likely look at this positively because both generations prefer to have more contact with their mortgage loan officers. Generation Y specifically would be more open to learning and research prior to purchasing a home, with about 77% more likely to conduct research online—a key reason to offer seminars on the Web.17

16 International Communications Research, “Century 21® Study Reveals Generational Attitudes toward Homebuying,” www.icrsurvey.com/ Study.aspx?f=CENTURY21_4_20_06.htm. 17 Ibid. 22

The Details

A major selling feature of this program is the ease of development and implementation within the credit union. The Mortgage Down Payment Accelerator Program may be customized by each credit union so that it meets specific marketplace needs. The components of the three-step program are discussed next. Savings Accelerator The savings accelerator component helps young members save for the down payment on their future mortgage. Why would a member come to you with his or her money as opposed to opening an ING Direct account paying 4.3%? This is where the accelerator comes in. Participating credit unions select a savings vehicle to help their members accelerate the savings process. This product could be an upsidedown CD, a high-yield savings account, or an add-on CD starter. The key is to create a savings plan that gives the member a head start toward saving for a down payment. Financial Literacy The financial literacy component is designed to bring mortgages to the credit union and to assist the member with financial education. The member will be responsible for attending two educational seminars throughout the course of this program. Credit unions may choose the format that works best for their members and the marketplace. This could include online seminars, member seminars offered at the credit union, or one-on-one financial coaching with a mortgage/ loan officer. Reward Payoff As an incentive for the member to complete the financial literacy component and close the mortgage through the credit union, a reward payoff has been designed. Reward options will be presented at the time the member creates his or her savings program and will be set by the credit union according to market need. Upon completion of the program and mortgage signing, the member will choose and receive a reward. An additional benefit for the credit union is the customization built into its program. Credit unions will determine, on the basis of market need, what rewards they will offer members. Rewards could include, but are not limited to, the following: • Discounted/no closing costs. • Cash. • Furniture discount. • Landscaping discount. • Energy-efficient products discount. • Home theater system discount. 23

Member Benefits

• The Mortgage Down Payment Accelerator Program helps members create a savings plan to purchase a home. • In addition to saving the down payment amount, members will receive a savings reward at the end of the program encouraging them to take out the mortgage with the participating credit union. • Financial literacy is one of the key take-aways from this program. All participating members will receive financial education on creating savings plans as well as purchasing a home. Credit Union Benefits

• The Mortgage Down Payment Accelerator Program will assist credit unions in attracting young members who want to utilize mortgage products. • By offering this program, credit unions provide financial literacy and position themselves as the financial experts in the eyes of the member, thus building a relationship for life. • Participating credit unions will be preparing their members to take out a mortgage with their credit union. • This program gives credit unions the opportunity to market services they already provide. Target Market

The Mortgage Down Payment Accelerator Program benefits a very specific membership base, due to the required time commitment. This group has been identified as those members who are just beginning to think about home ownership. The member will need to have a specific time frame available in which to save before he or she is ready to purchase a home. This program will not truly benefit members who are currently ready to purchase a home. Market Pricing The pricing model will need to be credit union specific due to lending practices. Credit unions that immediately sell their mortgages to the secondary market could risk giving away a large portion of their loan profits if their giveaway is overpriced. Each credit union will have to price the reward on the basis of its risk tolerance as well as market expectations.

24

The Ideal Consumer The average age for a first mortgage purchase for Generation Y is 26, while Generation X has an average purchase age of 29.18 Because this is a savings program, the timeline created to reach the goal will be set according to the amount of money the individual has available to save. A college graduate has a higher entry-level earning potential ($52,000) than a non– The average age for a first mortgage purchase for Generation Y college graduate ($30,000).19 is 26, while Generation X has an average purchase age of 29. The ideal consumer will be a young member/non-member experiencing a life-changing event such as getting engaged, graduating from college, starting a first job, or getting married. This program gives credit unions the opportunity to market services they already provide, while adding one-on-one financial coaching and savings programs for their members. The time put into the member financial literacy and coaching will not increase; only marketing efforts will increase. Due to the small size of the target market, marketing expense is estimated to be minimal. Proof of Concept: The University of Wisconsin Credit Union

3-Step Process Implementation Savings Accelerator The University of Wisconsin Credit Union (UWCU) chose to set up the savings accelerator portion as a 30-month add-on CD with a $250 gift deposit to get the member started. The $250 gift deposit will be locked, and the member will be unable to withdraw this amount. However, all interest earned on the $250 will belong to the member. If the member’s savings plan allows it, the CD term may be broken with no penalty at the time of mortgage loan closing. The gift deposit will be later withdrawn if the member does not attend a seminar, close on the first mortgage, or establish a checking package. Financial Literacy All participants in the UWCU Mortgage Down Payment Accelerator Program will have access to an online interactive budgeting tool that

18 Florida Home Loan, “Home Buyer Survey Reveals Different Motivations for Different Generations,” www.floridahomeloan.com/2006/04/ home-buyer-survey-reveals-different.html. 19 U.S. Census Bureau News, “Earnings Gap Highlighted by Census Bureau Data on Educational Attainment,” www.census.gov/Press-Release/ www/releases/archives/education/009749.html. 25

will show their savings goals and their progress toward those goals. This will be in the form of widgets on their home banking Web site. Members must attend a home buyer’s seminar at the credit union and meet with a mortgage loan officer for at least one coaching session. UWCU will also provide members an online home-buying educational library. Reward Payoff Once the member has completed the savings program and has taken out the mortgage, he or she will receive not only the initial $250 gift deposit but an additional $250 Visa gift card as a savings reward. The member will receive a grand total of $500 from the credit union by utilizing the Mortgage Down Payment Accelerator. Operations Process Members will meet with their mortgage loan officer and collectively determine their savings goal through an online, interactive budget tool. At the end of the budgeting process, the 30-month CD will be set up through an interface with UWCU’s operating system, including the initial $250 accelerator deposit. Any agreed upon automatic transfers will also be set up through this interface as well. Once the account has been established, the member will be able to track his or her progress online through a savings thermometer located within UWCU’s Web banking. UWCU has created an internal system where an annual letter will be mailed to the member while enrolled in the program. This letter, signed by the mortgage loan officer who helped open the account, will contain a $5 “keep up the good work” gift card as well as a summary of the member’s savings progress. The member may meet with his or her mortgage loan officer at any time to discuss/modify the program, to complete the financial education portion, or to receive one-on-one coaching (a flag will be created on UWCU’s operating system to track the financial literacy component). Another component of the program involves a preformatted invitation (called MoneyLink) that a member can send out to friends and family to deposit funds directly into the member’s Mortgage Savings Accelerator account. This will be great for birthday, holiday, and wedding gifts. Marketing Plan Branding UWCU chose to incorporate the Mortgage Savings Accelerator Program into its current marketing pieces (as opposed to creating an individual campaign). The program will be featured on electronic marketing venues as well as more traditional print vehicles: 26

• Electronic: This includes advertising the program on UWCU’s Web site, home banking, e-mail blasts, and e-statements. The program will be prominently featured on all mortgage-related pages. Additionally, the home banking site will feature a savings thermometer for members to track their progress. UWCU will also have special statement messages designed for members in the target demographic. • Print: UWCU will eventually feature this program in its current print documents, including brochures, posters, one-page handouts, and direct mail. MoneyLink Invitation UWCU has partnered with MoneyLink to create a preformatted invitation that members can send to their family and friends inviting them to make deposits directly into the member’s account. Internal Sales Force UWCU believes that its current financial specialists and mortgage loan officers will be the drivers behind this product’s success. With that in mind, both groups will attend a training session that will emphasize the following: • Describing the Mortgage Down Payment Accelerator. • How to determine which members are right for the program.

Mortgage Down Payment Accelerator Team, From Left to Right: Matthew Schewe, UW Credit Union, and Toni Montgomery, AmeriChoice Federal Credit Union

• How to use the online, interactive budgeting tool. • How to describe the program to a member.

For more information about this project, please e-mail Josey Siegen­ thaler at [email protected].

27

Win–Win Savings: Prize-Based Savings Accounts for Young Adults Opportunity

Current economic instability has encouraged all Americans to start saving today. Capturing those savings is a great opportunity for credit unions. The U.S. savings rate has hovered around 1% since 2005;20 however, in The U.S. savings rate has hovered around 1% since 2005; 2008, personal savings rates however, in 2008, personal savings rates rose significantly to rose significantly to just over just over 2.5%. 21 2.5%. Young adults in particular have been known to simply spend and borrow more than is feasible. For example, the number of 18–24-year-olds declaring bankruptcy has increased 96% in the last 10 years.22 University administrators state that they lose more students to credit card debt than to academic failure. Credit unions need to reach out to this market and help young adults prepare for their financial future—both short term and long term. According to one study, 61% of young adults cited “lifestyle purchases” as an impediment to saving.23 Those purchases include items such as iPods and big-screen TVs—things that aren’t required for day-to-day living but are influenced by advertising and peers. Yet millennials are “the most socially conscious consumers to date.”24 For example, 61% of 13–25-year-olds feel “personally responsible for making a difference in the world.” Additionally, 81% have volunteered in the past year, 69% consider a company’s social and environmental commitment when deciding where to shop, and 83% will trust a company more if it is socially or environmentally responsible.25

20 Comment on “Our Savings Rate Is (Still) Negative: Should We Worry?” My Money Blog, www.mymoneyblog.com/archives/2007/02/ our-savings-rate-is-negative-should-we-worry.html. 21 Bureau of Economic Analysis, www.bea.gov/briefrm/saving.htm. 22 “The State of Financial Literacy in America,” Young Americans Center for Financial Education, www.yacenter.org/index. cfm?fuseAction=financialLiteracyStatistics.financialLiteracyStatistics. 23 Sandra Block, “Few Young Workers Take Heed of Need to Start Saving Now,” USA Today, www.usatoday.com/money/perfi/columnist/ block/2006-03-06-young-savings_x.htm. 24 Sharon Jayson, “Generation Y Gets Involved,” USA Today, www.usatoday.com/news/nation/2006-10-23-gen-next-cover_x.htm. 25 Ibid. 28

Solution

A Savings Account for a New Generation How can credit unions appeal to young adults and encourage them to save in a way that is meaningful, fun, exciting, and rewarding? Enter Win–Win Savings, an account that awards cash and prizes as part of the saving product’s return, with prizes and messaging tailored to young adults. In this program, everybody wins! Unique to this product is According to one study, 61% of young adults cited “lifestyle that the monthly grand prizes purchases” as an impediment to saving. are twofold: The young adult receives a cash prize, and a similar dollar amount is given to a local charity chosen by the young adult when opening the account. A $25,000 annual grand prize is also suggested for all participating credit unions. Win–Win Savings26 will appeal to young adults’ own self-interest (prizes) as well as their altruistic side (charitable component). Prize Values (suggested starting point) • Monthly prizes:  Monthly cash prize: $2,000/member and $2,000/charity.

 

 

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 Monthly various prizes: $1,000 in prizes (no charitable component), to be split however the credit union decides—for example, a single prize valued at $1,000 or 10 prizes valued at $100. More opportunities to win each month will mean more winners and more excitement. This also allows each credit union to differentiate its Win– Win Savings account.

• Annual prize:  

Figure 4: Sample Logo

 

 Annual cash prize: $25,000/member and $25,000/charity (provided by a cooperative investment fund—see “Prize Funding” in the “Operational and Other Considerations” section for more information).

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Members automatically receive one entry for every $25 average daily balance in their Win– Win Savings account. This feature will encourage members to save, because as their savings increase, their chances to win will increase. This method discourages making last-minute deposit dumps without the intention of growing core deposits, only to increase one’s chance to win.

26 Based on an idea conceived by the Filene i3 group, Prize-based Savings. 29

Members can increase their chances of winning by earning bonus entries. The following are shown to be popular ways of increasing chances of winning: • Direct deposit. • Referring friends and family. • Adding other products and services. (Please see Appendix 2 for detailed information on bonus entries.) Member Benefits

With little to no regular income, young adults find it increasingly difficult to save money. However, they often find themselves wanting the latest technology, new clothes, and other merchandise. This product provides a solution because it encourages young adults to save while giving them the opportunity to obtain these items through the prize drawings. With the credit union’s monthly and annual prizes, young adults can win one of the latest gaming systems or even a large cash prize. With its simple design, this product surpasses the competition’s boring, low-rate savings account. Dividend rates do not usually attract young adults to credit unions—and savings in general. In fact, most young adults do not know the difference between a dividend rate and an interest rate—neither has much meaning to them. Most are also unfamiliar with what a credit union is. Win–Win Savings speaks their language—“Win $25,000!” “Win an iPhone or a gift card!” “Win and make a difference!” Marketing for this product will focus on the fact that saving can be fun, rewarding, and different. Unlike most raffles or lotteries, where the individual most likely will not see a return on the investment, this product is a way to save money and to possibly win something at the same time. There are no adverse entry requirements, no penalties for early withdrawal, and no hidden fees. In addition, the Win–Win Savings account is recommended as the default account for all members within the targeted age group. This will show new members that the credit union is committed to improving their financial well-being and dedicated to serving the community—a great first impression for all new members. Credit Union Benefits

Credit unions offering Win–Win Savings have the opportunity to: • Help young adults develop good savings habits. • Promote social responsibility. • Attract low-cost deposit dollars. 30

• Attract new members. • Increase product use among account holders. The charitable component of the product benefits not only the individual but also the credit union system, the surrounding community, and society as a whole, demonstrating the credit union philosophy of “people helping people.” Target Market

Win–Win Savings is specifically targeted to all young adults (ages 18–30) in a credit union’s field of membership. This product will target an untapped market for prize-based savings. Recent data show interest in prize-based savings is greatest among people who do not have regular saving habits, who have little actual savings, and who are optimistic about their future.27 Win–Win Savings is a new and exciting concept for young adults. It not only appeals to their desire to improve their personal financial condition with bonus cash and prizes, but also appeals to their philanthropic side. Marketing

Launching a full targeted marketing campaign with special emphasis on internal branch contests is essential. Marketing will be specifically targeted to young adults, promoting the credit union and Win–Win Savings in areas highly frequented by this group: schools, sporting events, etc. Please see Appendix 2 for extended details on developing the following: • Marketing campaign—Billboards, e-mail, direct mail, education seminars at schools. • Segmented marketing opportunities—Winning cash and prizes, charitable component, target parents/guardians of young adults. • Internal marketing—Internal branch staff contests to promote the product and keep the excitement alive. • Social media—Adding a blog component for young adults to talk about their savings goals and initiatives, as well as promote their charity of choice.

27 Nick Maynard, Jan-Emmanuel De Neve, and Peter Tufano, “Consumer Demand for Prize-Linked Savings: A Preliminary Analysis” (working paper 08-061, Harvard Business School, Finance, 2008), 2. 31

Operations

Win–Win Savings should have a product manager who will work closely internally with the marketing, operations, sales, and training departments and be the liaison between the credit union and the entity administering the cooperative investment fund (for the annual prize via the corporate credit union). The product manager will be the product “champion” and “owner” at the credit union, which means leading regular meetings with key staff and overall management of the product. The following is a brief description of each department that might be involved with this product and what its role might be (aside from the project manager above): • Operations—This department will administer the development of this product and determine any account codes or system regulations that need to be established. • Marketing—This department will be responsible for targeting the product to young adults. It will also fund and purchase the monthly prizes. Marketing will be responsible for public relations, and thus it will create and distribute all public information about this product’s charity component (see the “Marketing” section for more details). It will also create excitement and buzz around the grand prize among members and charities. Product brochures and take-away information should be created for staff to distribute to inquiring members. It is important to reach out to this market through schools, sporting events, and other areas where young adults gather. • Accounting—This department will be responsible for processing the 1099 tax reporting information for members. • Sales or training—The sales or training department will be responsible for informing staff about this new product and will conduct staff training and development on how to sell and open Win–Win Savings accounts for members. Sales managers will be in charge of the internal promotions and contests to encourage staff to continue to sell the product. • Branch managers and branch staff—Branch staff will assist in promoting and signing members up for the Win–Win Savings account. They will also have the opportunity to contact monthly prize winners. By having the branch manager personally contact the winners, this will help build relationships at the branch level. National Network

Why reinvent the wheel? A collaboration network for communication among credit union prize-based savings’ product owners has been formed to share best practices, to ask questions, and to find

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solutions. The platform has discussion functionality, write boards, the ability to share files, and more.28 Operational and Other Considerations

Legal Considerations Prize-based savings falls into the category of sweepstakes, as an entry is required to win. Considering this, each interested credit union will first need to check its local and state laws when tailoring its product. Credit unions must adhere to laws such as No Purchase Necessary and acts such as the federal Deceptive Mail Prevention and Enforcement Act. Prize Funding Prizes for Win–Win Savings will be funded by a combination of a few elements. Credit unions can offset the cost of the monthly prizes by offering a slightly lower rate of return. In addition, a portion of marketing’s promotional budget could be utilized to fund the prizes. CES Credit Union in Ohio launched a comparable version of this product in early 2008 with great success. In fact, CES Credit Union exceeded its break-even point by 70% in the first five months of opening the prize-based savings account. The break-even point projections for Win–Win Savings have been calculated based on results from CES Credit Union. (Please see Appendix 2 for a detailed breakdown of the monthly prize break-even point projections.) The annual grand prize is funded through a cooperative investment account through a corporate credit union. This account is designed to earn enough dividends to not only fund the annual prize but also provide an additional return on investment to cover administrative costs. Credit unions offering this product will have the opportunity to pool funds without giving up their hard-earned cash. More specifically, here is an example of how the investment fund would work, considering a desired return on investment of $100,000. Half of this return ($50,000) funds the annual grand prize for the cooperative, and the other half ($50,000) will be distributed to participating credit unions according to their level of investment. This return will assist credit unions in covering administrative costs and monthly prizes, and it will reward those credit unions that invest more monies into the fund (see Figure 5). Naturally, if the yield on investment is higher, credit unions could invest less money in the fund and benefit from the same return.

28 For more information on this collaboration network, contact Josey Siegenthaler at [email protected]. 33

Figure 5: Cooperative Investment Fund Projections Desired return on investment

$100,000

Example #1 (yield of 2%) Yield on investment Total investment amount Number of participating credit unions Average credit union investment

2% $5,000,000 10

25

50

75

100

$500,000

$200,000

$100,000

$67,000

$50,000

10

25

50

75

100

$333,333

$133,333

$66,667

$44,444

$33,333

Example #2 (yield of 3%) Yield on investment Total investment amount Number of participating credit unions Average credit union investment

3% $3,333,333

Similarly, if more credit unions participate, the average credit union investment decreases. Proof of Concept

After extensive work from an i3 innovation team, several credit unions have started prize-based savings accounts in the last few years with much success. Most are broad-based (i.e., they do not have a defined market for the product) and do not have a charitable component. Data from Centra Credit Union in Indiana show that interest in prize-based savings was highest among young adults.29 Anecdotal evidence from the other credit unions with similar accounts suggests the same. Additionally, almost all credit unions that offer a prize-based savings product have yet to launch a full-blown marketing campaign, because it hasn’t been necessary—interest (and deposits) continues to rise. For example, Neighborhood Credit Union (Texas) opened 946 new accounts in the first month of its program, with an average balance of $788. After 10 months, these accounts grew to over 4,500 accounts with over $4M in deposits and an average balance of $902. This exceptional growth did not come from a major marketing campaign—only simple monthly statement flyers and information on the credit union Web site. Neighborhood Credit Union’s prize-based savings account is positioned as a primary share account, which contributes to the account’s success. Comparable savings programs in countries such as South Africa, the United Kingdom, India, Mexico, and Japan have also experienced

29 Maynard, De Neve, and Tufano, “Consumer Demand for Prize-Linked Savings,” 20. 34

great success, establishing new customer relationships, deposits, and excitement about savings.30 A survey of young adults regarding the validity of Win–Win Savings was conducted and distributed through a variety of channels. Responses augmented the market/customer analysis and ultimately helped shape Win–Win Savings product development. Survey results also corroborated with findings from other sources. Key findings from this survey of young adults follow. Prize-Based Savings (Win–Win Savings) • Almost 80% are interested in prize-based savings, 6% are not interested, and 15% don’t know. • Prize options: The vast majority are very interested in cash, followed by 52% very interested in a plasma TV and 41% in a semester of college tuition. • Increase chances to win: Survey respondents chose options of increasing savings, direct deposit, and referring a friend. • Almost 60% would pay down debt if they won $20,000. Charitable Contributions • Sixty-one percent have a charity that matters deeply to them. • Almost 65% donate money to charitable organizations. • Eighty percent donate time to charitable organizations. Current Product Use and Financial Condition • Almost all have a checking and a regular savings account, and half have a retirement account. • Half have an auto loan, and half have a school loan. • Members are generally satisfied with their current financial condition.

Win–Win Savings Team, From Left to Right: Christopher Morris, Credit Union National Association; and Megan Armstrong, Sunmark Federal Credit Union

• The majority said the following statement most accurately reflects their attitude toward saving—“Saving is difficult; I feel saving money is a difficult task. Something always comes up that I have to spend my money on.” • Members are hopeful that their financial condition will improve in the next five years. For more information about this project, please e-mail Josey Siegenthaler at [email protected], and please visit the Filene i3 section of the Web site for more information about similar i3 projects: filene.org/home/innovation/i3ideas/buildwealth/15.

30 Denise Gabel, Key Findings 3.0—Innovation through Cooperation (Madison, WI: Filene Research Institute, 2007), 7. 35

What’s Next?: A Responsible Way for Young Adults to Build Credit Opportunity

Young adults struggle with both saving money and building credit. When making a large purchase, they often rely on support from their parents or high-interest credit cards. The problem with relying on their parents is that young adults don’t learn the value of saving and the importance of budgeting for a large purchase. When it comes to credit cards, they run the risk of getting into debt; if they miss a payment or default on the credit card, this can seriously hurt their credit. Furthermore, most young adults and credit union members of all ages are uninformed when it comes to credit scores and building credit. According to the Callahan Internet Strategies Consortium, 25% of credit union members surveyed did not know what a FICO score was.31 Most young adults don’t have a credit file, and some build credit through highinterest auto loans or highTwenty-five percent of credit union members surveyed did not interest credit cards, according know what a FICO score was. to Maxine Sweet, vice president of public education at Experian. The demand for credit-building products is growing as more adults are getting into debt. The Callahan Internet Strategies Consortium found that although parents are looking for ways to educate their children on savings, 60% of them do not have savings accounts for their kids.32 The What’s Next? product provides parents with a way to educate their children about savings and also help them build credit. At this stage of life, young adults will choose the financial institution they will remain loyal to throughout their life. The Callahan Internet Strategies Consortium recently performed a case study on Point Plus Credit Union in Wisconsin. This credit union has had young adult programs in schools for many years. The study found that members who joined the credit union when they were under the age of 18 had higher product usage and higher account balances by the time they were in the 30–39 age group than members who joined later in life. Solution

The goal of What’s Next? is to help younger members (18–25) establish and meet short-term goals in a way that allows them to connect

31 Callahan & Associates, Online Member Attitudes towards Debt and Savings, January 2008, 45. 32 Ibid., 17. 36

with other members and develop a stronger trust in credit unions. Through this program, the young members will be able to achieve their savings goal while building their credit and loyalty with their credit union. Members who joined the credit union when they were under the age of 18 had higher product usage and higher account balances by the time they were in the 30–39 age group than members who joined later in life. What’s Next? features the following: • Goal setting. • Credit building. • Social media and support. • Online integration of services. • Monthly drawing for one goal to be fulfilled (up to $500). The process starts with a young adult choosing a specific product that he or she would like to save for, such as an iPod. Credit union personnel help the member develop a savings plan and open a nofee What’s Next? account to take deposits toward the goal. A social media site will supplement the product as a place where these young adults can share the myriad emotions involved in the savings process with their family, friends, and other credit union members. On this blog, they can also track how close they are to achieving their goal. What’s Next? also mirrors a new collaboration between a Filene i3 team and StickK.com. There, members can set financial goals and formally invite friends to monitor the commitment and hold the goal-setter accountable. To motivate themselves further, goal-setters can commit to “stakes,” money that they forfeit if they don’t achieve their goals in time. They can also invite a referee to verify their progress.

Figure 6: Sample Web Site

The What’s Next? share account features a generous dividend rate, no fees, a low minimum balance requirement, and limited withdrawal capabilities. The cost of the higher dividend rate will be partially offset by the requirement that new accounts elect electronic statement delivery. Direct deposit for this account is both available 37

and encouraged, as systematic savings is the easiest way to build positive savings habits. Upon reaching the savings goal, the member is automatically approved for either a loan in the amount of what was saved or a credit card with a spending limit in the amount of what was saved. Unlike a traditional share-secured loan or credit card for young adults, which uses a parent’s savings account as collateral, this product requires young adults to save this money themselves, thus teaching them how to save. As an added bonus, they can withdraw this money once they’ve saved enough to purchase the product they want. Another unique feature of this product is that each month one member will be selected to have the remaining balance of what he or she is saving for paid off. This prize-based approach has proved successful in the past and should motivate young adults to take part in this initiative. Unlike a traditional share-secured loan or credit card for young adults, which uses a parent’s savings account as collateral, this product requires young adults to save this money themselves, thus teaching them how to save. Although there will be no charge for this product, the credit union can expect to see an inflow in share deposits and increased loyalty among younger members. This loyalty should result in greater credit union usage as younger members progress through life. Member Benefits

Through What’s Next?, members have the opportunity to: • Achieve their savings goals through a no-fee savings account. • Earn dividends on their savings account. • Build their credit through a preapproved loan or a low-interestrate credit card. • Enter a monthly drawing to win money to reach their savings goal. • Connect with other members through an online social networking site. • Develop a blog that tracks savings progress and that others can view and comment on.

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Figure 7: Sample Logo

Credit Union Benefits

Credit unions also benefit through What’s Next? by: • Attracting younger members. • Developing loyal and responsible members who will use the credit union for future long-term borrowing needs. • Generating new deposits. • Having more people visit their Web site through the online component of the program. • Providing financial education resources to the children of current members. Target Market

The target market for this product is credit union members between the ages of 15 and 25. According to CUNA’s 2006–2007 National Member Survey, credit union members between the ages of 18 and 24 represent 6% of all members, so the potential market is at least 5 million credit union members.33 This age group represents 17% of the entire U.S. population, which means the market could increase up to 51 million people. Teens between the ages of 13 and 19 spend $94.7B annually, or $3,309 per capita, while young adults between the ages of 20 and 21 spend $61.3B annually, or $7,389 per capita.34 Operational and Other Considerations

For credit unions to launch the social media aspect, a blog template with full instructions has been created. Credit unions can incorporate this template with their Web site. Maintaining the blog will require 10–15 hours per week. The manager of the blog will need to be an excellent copywriter along with being proficient (not expert) in HTML and photo editing. Journalism experience would be a very nice plus. Typically, credit unions have a person in their marketing department who fits this description. In order to show growth of What’s Next?, the host credit union may implement its marketing strategy in well-planned phases. Starting with direct communication to existing young adult members may give a better glimpse of how the program will be perceived by larger audiences. An example of phased implementation may look something like this:

33 2006–2007 National Member Survey (Washington, DC: CUNA, 2006), 3. 34 Harris Interactive YouthPulse Study, 2003, www.harrisinteractive.com/NEWS/allnewsbydate.asp?NewsID=66.

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• Phase I—Direct mail/e-mail to 18–25-year-old members inviting participation in What’s Next? • Phase II—Credit union Web site, newsletter article/ad, in-branch advertising used to increase awareness and participation. • Phase III—Statement inserts, SEG marketing, educational seminars distributed within the community. • Phase IV—Earned media (traditional and new), public relations, press releases are used. • Phase V—Mass media advertising is implemented. Throughout all phases, credit unions should communicate regularly with What’s Next? users and update blog content as recommended above. Projections

While projections and keys to success for What’s Next? will vary by host credit union, here are a few potential indicators: • Ten percent increase in young adult (18–25) membership within six months, increasing by an additional 2% monthly for the first year. • Seventy percent of savings goals met by established deadline. • Positive word of mouth on Web site. • User-initiated blog posts. • Twenty-five percent of users creating second goal within six months of achieving first goal. Proof of Concept

For beta testing of What’s Next?, several members between the ages of 19 and 30 were asked to access the Web site whatsnextaffinityplus. com. Here, they were asked to do three things: 1. Post one goal that they would like to achieve. 2. Post at least one comment to another member’s goal. 3. Navigate the Web site and provide feedback, input, and thoughts to help make it more effective. Through the members’ use of the Web site and followup discussions, several things were learned that have aided in understanding the future use of this product for credit unions:

Members enjoyed connecting with other members and learning that other members had similar goals.

• Members were excited about the chance of “winning” the monthly drawing of having their goal achieved, which all 40

members noted as a motivator to continue participation in the program.

What’s Next? Team, From Left to Right: Julie Cosgrove, Affinity Plus Federal Credit Union; Matt Davis, Members Credit Union; Rachel Parrent, Vantage Credit Union; and Joe James, CU Direct Corporation

• Members who had not yet taken out their first loan were most intrigued by the thought of demonstrating their “worthiness” to the credit union in order to get approved for the loan by their actions, as some did not have any past credit and had been previously denied for not having any credit.

• Members enjoyed connecting with other members and learning that other members had similar goals. They enjoyed sharing recommendations or referrals to other like-aged members surrounding things that they have learned about achieving a goal (e.g., a member wanted to purchase a treadmill, and several members responded with additional recommendations, from Web sites to help track outside walking distances to a nicely priced treadmill found at Sears).

• Almost all noted that they do find savings to be difficult, so having a tool such as this member forum was one way to inspire them that little things can result in positive outcomes. For more information about this project, please e-mail Josey Siegen­ thaler at [email protected], and please visit the Filene i3 section of the Web site for more information about similar i3 projects: filene.org/ home/innovation/i3ideas/buildwealth/50.

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Chapter 2 Younger Employees

Credit unions can expect short-term membership growth and market buzz when they introduce innovative products. But recruiting talented young professionals as employees is even more important for the long-term health of the credit union system. Nearly three-quarters of executives state that finding successors for top leaders is the chief challenge facing companies, according to a recent survey by the Society for Human Resource Management.

Shared Staffing Opportunity

As the American workforce continues to grow older and approach retirement, it is imperative for credit unions to develop strategies and services to retain and train younger professionals. Generation Y has been characterized as a generation that challenges the status quo and resists traditional management styles. Gen Y “seeks out creative challenges and views colleagues as vast resources for whom to gain knowledge,” according to an article in USA Today.35 Gen Yers are also willing to have multiple jobs during their working careers and to seek out jobs that tolerate a work-life balance. All of these priorities exacerbate the need to create an environment that engages, challenges, and meets the needs of Gen Y. The credit union system, for the most part, falls short. The desires and opinions of younger employees must be captured to ensure they stay engaged, thus minimizing job fatigue and promoting entrepreneurial spirit. A service must be created to: • Develop future leaders—It is estimated that 60% of baby boomers will retire in the next 5–10 years, creating a void in the higher echelons of senior management.36 Human resources departments will be looking to Gen Y to fill management vacancies. Instead of waiting with nervously crossed fingers, credit unions should be working to retain and prepare employees within as well as recruit new young talent. • Promote innovation—Credit unions cannot stay competitive if they do not continue to develop new products and services to meet the needs of the future workforce and future consumers. Solution

Shared Staffing, like its cousin Shared Branching, is the next wave of the “people helping people” philosophy. 35 USA Today, “Generation Y: They’ve Arrived at Work with a New Attitude,” www.usatoday.com/money/workplace/2005-11-06-gen-y_x.htm. 36 CU Times, “Building Succession Plans Critical with Baby Boomers Beginning to Retire,” www.cutimes.com/Issues/2007/April%2025,%20 2007/Pages/Building-Succession-Plans-Critical-with-Baby-Boomers-Beginning-to-Retire.aspx. 44

Shared Staffing is a short-term sabbatical where young credit union leaders utilize their skills and experience to assist other credit unions in their quest to develop innovative products and services. It is important to note that Shared Staffing is not a temp agency, nor is it designed for the temporary exchange of entry-level employees. The receiving credit union, the institution in need of developing an innovative project or product, will utilize these employees for a variety of reasons: beginning a new branding campaign, introducing an innovative operating system, Shared Staffing is a short-term sabbatical where young credit implementing different human union leaders utilize their skills and experience to assist other resources tools, or executing credit unions in their quest to develop innovative products and a new lending program, to services. name a few. The lending credit union, the institution that will loan an employee, will recognize the need to engage and develop its employees. Develop Future Leaders Shared Staffing provides an affordable, practical, and attractive solution for developing future credit union leaders. At its core, it encourages entrepreneurial thinking. It also offers younger employees the benefits of nationwide travel, recognition from industry peers, and a variety of industry networking opportunities. It enables credit unions of all sizes to attract and retain top young talent. It will also assist human resources departments by: • Decreasing job fatigue. • Relieving stress and workload of current staff. • Retaining quality employees. • Providing networking within the credit union system. Promote Innovation Shared Staffing will promote innovation through the development of ideas gained from employees’ exposure to other credit unions. Both the receiving and lending credit unions will benefit through the shared ideas of the temporary staffing exchange. It is when an employee goes to another credit union and experiences its methods and ideology that new ideas and innovation are shaped. Shared Staffing will also help credit unions: • Increase new product/service development. • Develop and implement products and services faster. • Develop and implement products and services smarter. • Receive relevant and highly qualified individuals. 45

• Cultivate employee experts who are current in the industry. • Offer the objective viewpoint of an outsider. • Offer current regulatory expertise. • Make an experienced workforce available almost immediately. • Provide coverage for staff who are absent or on leave. Shared Staffing Survey

According to results from the Shared Staffing survey, 50% of credit unions with assets greater than $1B believe they are very likely to be more innovative with the Shared Staffing service, 33% more than any other asset group. That said, 75% of credit unions with less than $100M in assets believe they are somewhat likely to be more innovative. As the assets increased, so did the credit unions’ desire to utilize a consultant within the Shared Staffing service. Credit unions see Shared Staffing as a solution to provide better quality work (11%), implement products/services more efficiently (13%), and provide relevant experience to the project (13%). They also see Shared Staffing as a solution to lower costs compared to outsourcing talent (16%), and to relieve stress and the workload from current staff (22%). According to results from the Shared Staffing survey, 50% of credit unions with assets greater than $1B believe they are very likely to be more innovative with the Shared Staffing service, 33% more than any other asset group. In response to the Shared Staffing survey, Catherine Tieney, president/ CEO of Community First Credit Union, in Appleton, Wisconsin ($695M, 72,000 members), says consulting is an “efficient, effective way of accomplishing projects, injecting new ideas and expertise.” Community First offers IT, compliance, accounting, marketing, and support services to several smaller credit unions. “It’s a BIG win for everyone,” Tieney says. Feedback on the Shared Staffing service came from professionals across 27 states—10% from CEOs, 42% from other senior managers, and 48% from other credit union employees. The survey focused on how these professionals thought the Shared Staffing service would help in the areas of retaining and recruiting talent and innovation in the credit union. Shared Staffing enables credit unions large and small to play on their largest strength: the philosophy of “people helping people.” While banks wouldn’t dream of sharing their latest online bill pay or text banking innovation, credit unions don’t hesitate to share their ideas through various listservs or other networking channels.

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Figure 8: Interest of Credit Union Employees to Participate in Shared Staffing 50

46.8

Percentage

40

35.8

30 20

17.4

10 0 Not at all interested

Somewhat interested

In conclusion, the survey indicates that credit unions at either end of the asset spectrum (<$100M and >$1B) are most likely to utilize the Shared Staffing service for the benefit of the employee and the employer. The reason for these vastly different credit unions to find value in such a service could be the entrepreneurial spirit of the service. While the smaller credit union is trying to think of big ideas with small resources, the larger credit union is trying to find the next big idea in a smaller pool of new ideas. Credit unions of all sizes realize that in order to stay competitive, the cooperative spirit must continually progress.

While interest in the employee is strong, the employer’s opinion plays a key role in the buy-in of the Shared Staffing service. An amazing 66% of current credit union employers are somewhat likely to allow staff to particiVery pate as consultants in Shared Staffing, and another 24% interested are very likely. Credit unions smaller than $100M and larger than $1B are the most willing to allow staff to consult with other credit unions. In assisting the human resources department, employers at all the credit union respondents believe they could use this service to retain younger employees (7%), reward employees (9%), attract higher-quality employees (11%), retain quality employees (15%), provide networking access with other credit unions (17%), and engage current employees more (26%). Credit Union Benefits

Develop Future Leaders For the lending credit union, Shared Staffing provides young credit union employees the opportunity to: • Stay engaged by challenging their skills. • Encourage entrepreneurial spirit through the education that comes with networking with other credit unions. • Be considered an expert/consultant in their respective areas. • Travel nationally and internationally. • Minimize job fatigue. • Have their value as employees acknowledged. Promote Innovation For the receiving credit union, Shared Staffing provides: • Income potential from product offerings. • Increased member satisfaction through new and enhanced product offerings. • Increased competitive edge. 47

• Cost savings (versus an outside consultant). • Enhanced networking. Operational and Other Considerations

Figure 9: Do you believe your credit union would be more likely to be more innovative in its market if you utilized a Shared Staffing service? Very likely

Somewhat likely

Not at all likely

Less than $100M

Answer

18.3%

73.4%

  8.1%

$100M–$499M

  6.9%

69.7%

23.2%

56.2%

18.7%

27.7%

55.5%

The Shared Staffing service $500M–$1B 25.0% operates efficiently through Greater than $1B 16.6% use of a craigslist-type Web site where resources and needs are joined through a “community” interface. This approach allows the service to gain traction without the need for expensive operating budgets or Web sites. Details of the Shared Staffing transaction are discussed and settled by the individual credit unions. The Shared Staffing service does not provide guidance on fee structure or individual compensation. Proof of Concept: The California Credit Union League

Partnership talks are ongoing between the California Credit Union League (CCUL) and Shared Staffing. CCUL developed an innovative platform that utilizes some of the concepts of the Shared Staffing service. The following are opportunities for implementation: • Listing a credit union’s need versus a credit union’s staff availability. • Full geographic implementation versus local or regional. • Promotion of the service to human resources to retain and recruit young credit union leaders. Utilizing CCUL’s existing platform, Shared Staffing would offer suggestions and brainstorming to enhance the viability of CCUL’s service.

Shared Staffing Team, From Left to Right: Carma Parrish, Perfect Circle Credit Union; Brandon Michaels, San Francisco Fire Credit Union; and Avery Cashman, Formerly of Service 1st Federal Credit Union

For more information about this project, please e-mail Josey Siegen­thaler at [email protected].

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Gen Y Fast Track Opportunity

More than 78 million U.S. baby boomers are poised for retirement, and 54% of workers ages 45 and older will leave the workforce in the next 10 years. In addition, the annual growth rate of the U.S. workforce is expected to slow to .06% over the next few decades. Industries that require workers with specific skill sets—including finance, accounting, health care, science and technology, and engineering— will feel the pinch most acutely. Generation Y—those born in 1978 or later—is a critical demographic for employers, one that already comprises 22% of the workforce. In fact, more than half of the employers surveyed in MonsterTRAK’s 2006 GraduMore than half of the employers surveyed in MonsterTRAK’s ation Survey expect to replace 2006 Graduation Survey expect to replace a baby boomer with a baby boomer with a Gen Y a Gen Y employee sometime in the near future. employee sometime in the near future.37 Savvy hiring managers recognize that the future success of their organizations will depend on proactive, long-term recruitment strategies that will attract tomorrow’s brightest talent. This requires thinking more like a marketer: tailoring your messages and outreach efforts in such a way that is meaningful to the target audience, much in the same way a company looks to influence consumer behavior. The Gen Y Fast Track (GYFT) plan aims to do just that—help credit unions find a way to attract, retain, and help Gen Y grow. Solution

GYFT is a highly scalable internship, rotation, and mentorship program tailored directly to the needs and desires of Generation Y employees. Gen Y is a different type of worker; these employees look at your company as a “hub of resources.” They expect the following to be provided for them:38 •  Money. •  More control of their schedule. •  Relationships at work. •  Task choice. •  Learning opportunities. 37 Diana Nicholson, “Tomorrow’s Talent: Luring and Retaining Generation Y,” Boston Business Journal, www.bizjournals.com/boston/ stories/2007/01/22/focus2.html. 38 Bruce Turgan, “Managing the Generational Differences” (speech, Navy Federal Credit Union, Vienna, VA, July 2008). 49

What they don’t want:

Figure 10: Sample Logo

• To be pigeon-holed in one position or one task. • To be left alone. This is the great “oversupervised” generation—they love peers, they want attention from peers, and they want someone to have a plan for them. The GYFT program addresses these unique Gen Y characteristics and is composed of three parts: internship, rotation, and mentorship. Internship Partner with local universities and/or high schools depending on the type of internship position available at your credit union and the skill level required. Have recruiters establish and maintain relationships with high school counselors and college career services departments. Encourage credit union executives to offer their time to speak with students and establish relationships with local professors. Sponsor “innovation challenges” and university/graduate program projects. Finally, make sure that each internship position has the following components: • Immediate responsibility: Credit unions are uniquely positioned to offer each intern significant responsibility because many lack financial resources to add staff just for busywork. • Regular feedback sessions. • Visibility: If possible, give interns the opportunity to make presentations to their supervisors or peers and interact in meetings with executives. Rotation Recruit Gen Y employees for a full-time rotation program at the same high schools or colleges where you recruit for your internships. Develop an annual or biannual “class” of incoming recruits. Ideally, the rotational employees would get to work with the interns, so the rotation could be aspirational for current interns. The necessary rotation components include the following: • Three- to six-month positions chosen for recruits based on their background and the availability of positions. • Elective rotations that allow the recruit to finish in a chosen department.

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• Variety, which could include: ■■

At least two weeks in a branch role.

■■

At least one week on the phone in the call center.

■■

■■

Participating in volunteer outings as a group to develop camaraderie (Habitat for Humanity, fiscal education at a local school, supporting a USO event, etc.). Meeting with the CEO of the credit union to discuss progress and gain insight into the CEO’s “vision.”

• At the end of two years, the employee, his or her mentor, and supervisors of available positions will complete a ranking and pairing process to place the rotational employees in available positions. Mentorship Credit union executives who have the power to shape a rotational employee’s future should be chosen as mentors. The mentorship program should be structured as follows: • Through personality matching (Myers-Briggs, etc.), the mentor would be paired with one member of the incoming rotation “class.” • Mentors will be engaged within the employee’s first month of hire. • Mentors are responsible for working with their mentees to set up a “growth plan” that includes continuing education goals and identifying appropriate positions within the company for subsequent rotations. • The mentor’s responsibility is to monitor as a trusted advisor and head off any issues with the mentee before they arise. The mentor should have the power to get this done quickly and effectively. • The mentor will be responsible for mentoring the rotational employee throughout the two-year rotation and will write the mentee’s annual review after collecting feedback from the employee’s rotational managers. Gen Y Benefits

This program meets Gen Y’s needs by providing for their professional growth and development, and answering their desires for: • Relationships. • Task choice. • Learning opportunities. • Responsibility. • Variety. • Feedback. 51

This program increases the employee’s eagerness to meet with different people, to remain interested, and to learn from different areas. It aids in building contacts and networks and in getting a mentor. It makes individuals more self-motivated, flexible, adaptable, innovative, eager to learn, and able to communicate effectively. Finally, it increases career satisfaction, involvement, and motivation. Through all this, the rotational employee is not only likely to be happier but more knowledgeable and better able to understand how he or she fits into the credit union’s big picture.39 Credit Union Benefits

Other than the obvious benefit of filling a credit union position with an in-demand and motivated Gen Y employee, the credit union will gain from this program by: • Breaking down departmental barriers through cross-trained employees who have credit union–wide networks and friends. • Enhancing communication between departments through these networks and the improved understanding of different departmental processes and procedures.40

The key component in reaching this market is strong campus communication through the development of significant campus relationships.

• Training employees with a “soup to nuts” knowledge base about the credit union so that they are better able to enact changes with more intelligent understandings of repercussions. • Increasing the speed at which workers develop. • Improving retention.41 • Raising its recruiting profile because the unique program will attract higher-quality applicants.42 Marketing Plan

Since the program is a full-scale approach to attracting and retaining young professionals, credit unions must, in turn, implement a fullscale communication strategy to reach their desired audience. The full program model outlined below is designed for credit unions of $500M and larger that have the resources to hire multiple full-time employees in one “class” for professional-level work. Small credit 39 Ibid. 40 John Sullivan, “Develop World Class Job Rotation Programs to Improve Retention” (working paper, College of Business, San Francisco State University, 1998). 41 Ibid. 42 Ibid. 52

unions could customize elements of the plan on the basis of their target market and organizational constraints. Most larger credit unions generally prefer to use their own branding for recruitment marketing. Therefore, this plan does not provide creative components for recruiting, but suggested marketing strategies needed to reach the target market. Marketing Strategies

Credit unions should use a multiplatform strategy to reach their target market and communicate the internship/job rotation programs. The key component in reaching this market is strong campus communication through the development of significant campus relationships. These relationships must consist of more than simply purchasing space at career fairs and hoping that students will rush to the booth. In order to be effective, strategic partnerships must be cultivated with targeted high schools or colleges. GYFT recommends the following recruiting strategies. Recruiting Teams In order to develop a personal selling strategy toward the high school or college community, credit unions should create recruiting teams. These teams should consist of employees who can engage students and sell the value and level of prestige achieved through a project-based internship and job rotation participation. They must also sell the credit union philosophy and personality to the campus community—including both students and faculty. These recruiting teams solicit targeted campus faculty and staff for help in identifying talented students while also seeking face time with students outside a traditional career fair setting. The teams should be a mix of credit union staff from various departments (not only human resources). Career Services Career development or counseling departments at high schools or universities have a major influence on student career choices and companies. Credit unions should develop a strong relationship with Career Services though corporate sponsorship programs, career fairs, recruiting mixers, and mock interview seminars. Business School/High School/College Departments Developing relationships with academic departments is important for reaching students. Building these relationships with professors and staff creates in-house advocates for credit unions. For the internship program in particular, a professor can promote the value of the experience and identify students with a high likelihood for success. Since most school districts and universities have credit unions, many 53

faculty members may already be members and thus they understand the value of a credit union and can promote the internships more vigorously. Classroom Speeches Credit unions should utilize an excellent and free recruitment marketing/personal selling opportunity by conducting classroom speeches. It is important that recruiting teams develop relationships with faculty and offer to give business talks and personal testimonials regarding careers in the credit union system. These speeches should also endorse the internship and job rotation programs. Student Organizations Student organizations are another excellent avenue to reach students. Generally, highly successful students are involved in student organizations. Student organizations also offer a great opportunity to identify high-achieving prospects and speak directly to them in a captive audience format. Sponsorship of School Programming Sponsoring campus activities and programs is quickly becoming a highly effective recruiting tool for corporations. Such sponsorship allows direct access to students in a nontraditional format and provides strong community goodwill. Branch Advertising Recruiting teams should make sure to distribute collateral materials throughout the local branches as well. Parents are often very active in helping their Gen Y children find jobs and are an excellent source of word-of-mouth advertising for the programs. The Competition

The GYFT model addresses the need for developing unique programs to attract and retain highly talented, upper-tier young professionals to the credit union system. Financial institutions, particularly large national banks, spend heavily for their recruitment process and formal new employee development programs. Gaining a good understanding of how other financial institutions organize their recruitment and development process is paramount to developing strategies to compete. Direct Competitors The market for college interns and college graduate jobseekers is large. In general, credit unions compete against the entire financial industry for the finite pool of young professionals. Direct 54

competitors include other credit unions, national banks, regional banks, and community banks. Indirect competitors include investment firms, financial services agencies, and mortgage lenders. Additionally, consulting firms and various large corporations actively recruit young professionals. The Targets Competitors are seeking young professionals who generally have a business-related educational background. The most sought-after individuals are typically highly involved in extracurricular activities and have stellar academic achievement. According to Chris Resto, author of Recruit or Die, employers are also looking for students who possess professional qualities including communication skills, leadership, teamwork, energy, entrepreneurial spirit, creativity, critical thinking, analytical skills, self-motivation, technical savvy, resourcefulness, and integrity.43 Best Practices The leaders in recruiting in the financial industry have developed a strategic approach to recruiting and integrating new hires into the firm. The key to their success is their focus on developing highly desirable new employee development programs and marketing them through strategic personal selling and word of mouth. In order to achieve this, they understand the importance of a strong campus presence. These industry leaders make a concerted effort to garner significant face time on college campuses and make it widely known that they are looking for the best and brightest talent. Bank of America is a classic example of a financial institution that makes a significant effort to reach the college market. The bank has a sponsored relationship with more than 300 major university career services offices in the United States. It backs its sponsorship dollars with recruiting teams that conduct classroom and student organization speeches highlighting the bank’s internships and specialized development programs (including job rotation programs) for new employees. How GYFT Helps Credit Unions Beat the Competition

The credit union difference—the ability of credit unions to provide a balanced lifestyle, a civic/social purpose, and lots of responsibility to early-career employees—makes credit unions ideal for recruiting and retaining Gen Y. The GYFT model adapts some of the elements of what other financial institutions are doing but takes a holistic

43 Chris Resto, Ian Ybarra, and Ramit Sethi, Recruit or Die: How Any Business Can Beat the Big Guys in the War for Young Talent (New York: Portfolio, 2007). 55

approach to attracting young professionals by developing a string of employment programs—internship, job rotation, and mentorship— that drives positive word of mouth, provides a multifaceted view of credit unions, and gives career options to a generation that thrives on having options. Younger workers want more than just a good salary; they want to feel good about the company they work for. Gen Y wants a sense that their company is cool, committed to a charitable purpose, and focused on nurturing its employees.44 According to a 2006 Harris poll, American adults 65 and older have only lukewarm feelings toward nonprofits, but the feelings of those aged 18–39 are wildly positive.45 One large-asset credit union recently hired a Georgetown MBA and Gen Yer for an analyst position in the marketing department. The graduate had initially stated an expected salary $25,000 above what could be paid for American adults 65 and older have only lukewarm feelings the position (her expectations toward nonprofits, but the feelings of those aged 18–39 are were not out of line with what wildly positive. MBA graduates from Georgetown University were making upon graduation). But after hearing about the benefits and quality of life this credit union offered, she lowered her salary requirements and accepted the position. She later said that her primary motivator when looking for a place to work was the company’s “mission.” She had previously worked for Merck on a project relating to providing the HPV vaccine to indigent women, and with Nike on a project that gave sneakers to underprivileged children. Credit unions provide what Gen Yers crave, and GYFT facilitates this. The internship cultivates a pool of students who know what the credit union is like and have seen the rotation and a full-time position as something aspirational. Then the rotation itself (through providing constant job challenges) helps establish “affective organizational commitment”46 from the employees, combined with a mentor who has bought into their career. This program design takes an integrated approach to identifying, recruiting, fostering, and retaining young professionals in the credit union system. By fully implementing this program, large-asset credit unions can compete with multibillion dollar asset financial

44 “Tomorrow’s Talent: Luring and Retaining Generation Y,” www.bizjournals.com/boston/stories/2007/01/22/focus2.html. 45 Mark Penn, MicroTrends: The Small Forces behind Tomorrow’s Big Changes. With E. Kinney Zalesne (New York: Twelve, 2007), 231. 46 Marlene Dixon et al., “Challenge Is Key: An Investigation of Affective Organizational Commitment in Undergraduate Interns,” The Journal of Education for Business 80 (January–February 2005): 172–178. 56

institutions by highlighting credit union competitive advantages over other financial institutions and taking an aggressive stance on the development of young professionals. Portions of this model allow even small to midsize credit unions to engage young professionals directly. For more information about this project, please e-mail Josey Siegenthaler at [email protected].

Gen Y Fast Track Team, From Left to Right: Katie Miller, Navy Federal Credit Union; Brandon Kelly, E Federal Credit Union; and Christina Gaglione, Affinity Federal Credit Union

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iAdvanceCU.com Opportunity

A mounting talent shortage that will affect all industries is projected to peak by 2010. Credit unions and all employers will have to deal with myriad generational challenges: • In 15 years, there will be 15% fewer Americans in the 35–45-year-old range. At the same time, the U.S. economy is likely to grow at a rate of 3%–4% per year.47 • Over that period, the demand for bright, talented 35–45-yearolds will increase by 25%, and the supply will be going down by 15%.48 These trends will lead to a war for talent that will make it even harder to retain top employees. Credit unions—large and small— will be hard-pressed to compete. Combine this shortage with the reality that Generation Y will not only change jobs but change careers numerous times, and it’s likely that this generation of employees will leave your credit union within 2–3 years. Credit unions that retain talented employees will thrive while competitors spend time and money in the recruiting cycle.

“I think credit unions do a great job of marketing their services, but I’m not so sure they do such a great job of career pathing,” says William Kennedy, CEO of Central Florida Postal Credit Union. The Solution

iAdvanceCU.com is a Web site that unites credit union opportunities, showcases expeditious career paths, and provides testimonials of relevant Gen Y employees. Credit unions that use it gain a ­nationwide presence and benefit from a larger pool of opportunity, which this generation demands. “I think credit unions do a great job of marketing their services, but I’m not so sure they do such a great job of career pathing,” says William Kennedy, CEO of Central Florida Postal Credit Union. At 47, he is many years away from retirement himself, but he has already started training candidates to fill his shoes and those of his much older industry peers.49

47 Charles Fishman, “The War for Talent,” Fast Company (July 1998), www.fastcompany.com/magazine/16/mckinsey.html. 48 Ibid. 49 Lauralee Ortiz, “Partnership with MBA Program Creates CU Career Path,” CU Journal (February 2004), www.cujournal.com/article.html?id=2 0060531AUS1TVB0&queryid=2144882834&hitnum=33. 58

Visiting any local credit union Web site or state network for career opportunities validates Kennedy’s comments. Out of 49 State Credit Union Network sites, only 1 had career path functionality, only 1 had testimonials, and all of them combined averaged only 14 job opportunities. Among the state credit union sites and hundreds of researched credit unions, only job postings from BECU in Washington and Teachers Credit Union in Indiana showcased career path options within their own organizations, but these still lacked any engagement of the target audience. iAdvanceCU.com fills that void and serves as a recruiting tool for credit union talent nationwide. It contains a host of additional resources and supplemental material: • Credit union jobs nationwide. • Showcase CU Career Path—All areas of expertise, including finance and marketing. • Mentor Connection—Contact info and live chats to connect with in each state.

Figure 11: Sample Logo

• Gen Y Success Stories—Testimonials and podcasts from the nation’s youngest CEOs and VPs, a day in the life. • Education on the credit union difference. From the perspective of Generation Y, this site globalizes all opportunities within the industry. Rather than perusing site after site, one visit to iAdvanceCU.com allows a search of all credit union job opportunities nationwide by department, desired state or region, or job title. Employee Benefits

Upward mobility is a hallmark desire among Gen Y. They want to understand not only what is expected in their present capacity but, even more important, what will be required to move into the next opportunity. iAdvanceCU.com not only will contain credit union opportunities nationwide but will fill this void for credit union employees by showcasing clearly defined career paths. This will provide individuals a better understanding of what it takes to advance within the industry—even if it means transferring to another credit union. By showcasing these opportunities within the industry, talented individuals who may not have upward mobility at a specific credit union may still remain within the industry. Although the organization may fail to retain the employee long term, the credit union system may retain him or her longer in order to hone the skills necessary for 59

advancement within the industry, making the individual that much more effective and efficient for your organization. Credit Union Benefits

Credit unions of any size stand to benefit from iAdvanceCU.com. Even the largest credit unions in the nation lack the ability to offer opportunities in every department and therefore do not stand a chance against the global giants and large banking institutions. For obvious reasons, smaller credit unions face the same issues, but many also lack the resources and funds to recruit at all. Centralizing recruitment efforts at iAdvanceCU.com will benefit the industry as a whole and provide each credit union the opportunity to retain the talent it currently has plus recruit more effectively. According to a survey conducted by Deloitte Consulting LLP and the International Society of Certified Employee Benefit Specialists (ISCEBS), three-quarters of the 413 U.S. human resources professionals surveyed cited talent as their top concern—more than the increasing costs of health care. As a result of the talent shortage, the survey also showed recruitment costs have increased, with almost one in two (45%) hiring managers experiencing cost increases up to 25%. Cost to replace talent is currently at 100 to 150% of salary, which is likely to increase during the talent shortage.50 As much as 70% of operating budgets is spent on human capital. If you have a more engaged employee, his or her productivity increases 20%.51 iAdvanceCU.com would allow credit unions to: • Work together to reduce costs by retaining talent within the industry while at the same time attracting talent that may not be familiar with what the industry offers.

As much as 70% of operating budgets is spent on human capital. If you have a more engaged employee, his or her productivity increases 20%.

• Highlight the progressive career path opportunities available. In many cases, credit unions offer a faster career path. When they exploit this advantage they have a better shot at retaining A-level talent among this group longer. Elements of ­iAdvanceCU.com career-pathing could be adopted and tailored at the individual credit union Web site and networking sites, and all can point

50 Management-Issues, www.management-issues.com/2008/3/27/research/talent-shortage-tops-hrs-list-of-worries.asp. 51 Mark Herbert from New Paradigms, “Little c to Big C,” webinar. 60

to this global Web site to keep credit unions as competitive recruiters. • Provide a nationwide presence for credit unions of all sizes that will ultimately provide the industry with the ability to compete for this young talent. Target Market

The primary audience for iAdvanceCU.com is the 70 million people who make up the “Me” generation—Generation Y. However, in order to attract this generation and provide a relevant site, an appeal must be made first and foremost to the secondary audience, which includes credit unions large and small, credit union leagues, colleges, and vendors. iAdvanceCU.com will employ a variety of marketing strategies to communicate its advantages in order to reach the primary and secondary target audiences. To start, iAdvanceCU.com will be built as an interactive site and a brand image developed to resonate to the Gen Y crowd. Ideally, the site will contain a large database of career opportunities, which will require numerous touch points with our secondary audience. To achieve this, exposure from the credit unions that are part of Filene’s 30 Under 30 program will be leveraged as well as partnerships formed with state leagues and other affiliates. This will require a public relations effort, face-to-face meetings, and eventually potential direct mail showcasing the finished Web site at iAdvanceCU.com. Once this substantial grassroots effort is accomplished, these partners will not only supply the site with all the opportunities available but will promote the site from their own career opportunity pages. Through exposure from the secondary audience Web sites, traffic will be generated to the site by individuals in the credit union’s primary market who may already be entrenched in the credit union system. However, in order to achieve exposure to untapped talent outside the industry, a variety of marketing strategies will be used that will utilize online channels to reduce marketing costs, such as exposure through blogs, microblogs, and social networks. This emphasis on online marketing will be essential to drive word of mouth and achieve ultimate visibility among the Gen Y demographic. Additional marketing materials—direct mail and fliers—plus other tools promoting iAdvanceCU.com will be developed for the primary audience to utilize, thus making it easier to promote the site at career fairs and college campuses.

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Operational Considerations

iAdvanceCU.com will initially be produced by the original partner credit unions—Novation Credit Union and Park Side Federal Credit Union. To keep costs minimal, the partner credit unions will utilize a highly skilled freelance designer as well as a Web developer for the creation of the Web site and branding elements. After the initial start-up, ongoing support will be provided by the original partner credit unions until the site is adopted by another entity, such as a state league or other credit union partners. An initial investment of $6,000, which has already been contributed by the two founding credit iAdvanceCU.com Team, From Left to Right: Arnold Ramirez, unions, makes this program very California Credit Union League; Kia Herd, Alliant Credit appealing. Additional funds will Union; Jeremy Presta, Park Side Federal Credit Union; and be raised through contributions Megan Primeau, Novation Credit Union from the participating credit unions, credit union leagues and associations, and CUSOs. Small nominal fees will be assessed depending on the types of services provided. Proof of Concept

Numerous credit unions and state networks have already volunteered to pilot iAdvanceCU.com. A plan is in place to gather at least 50 credit unions and 10 state networks to provide the following: • Job opportunities to the iAdvanceCU.com Team to upload to the site. • A link to iAdvanceCU.com from the individual credit union Web sites. • Testimonials of Gen Y talent within their credit union. Generation Y is indeed the future of the American workplace and undoubtedly comprises the next generation of nonprofit leaders. The credit union system must do its best to attract and retain those leaders, as the traditional practices from previous generations will no longer work. If the industry fails to understand this and does not embrace this charge, it will fail to grow and will suffer from it. For more information about this project, please e-mail Josey Siegen­ thaler at [email protected].

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Chapter 3 Younger Volunteers

Financial products and compelling professional opportunities for young adults are essential for the future of credit unions. But perhaps even more important is attracting younger volunteers who will inform, and eventually set, the strategic direction of the credit union. Only 6% of credit union directors are younger than 40, and only one in four is younger than 50, according to a 2005 Filene survey.

Member Advisory Panel Opportunity

The average age of a credit union CEO is just over 50. The board members, to whom the CEO answers, have an average age of 56.52 A young adult member advisory panel (MAP) provides a direct channel for credit union decision makers to communicate with young adults. This is an opportunity for credit unions to engage the community, to find out how to best serve its market, and to give young adults a voice in the development of credit union products. A young adult MAP should recognize and attract young members in the community to become advocates for the credit union. It also should recognize the talent young people have and address their thoughts on the way credit The average age of a credit union CEO is just over 50. The unions operate. It should be board members, to whom the CEO answers, have an average designed so that members may age of 56. directly communicate electronically with one another throughout the year on various issues relating to the client credit union. The opportunity for young people to participate in an advisory panel is attractive in several ways. They can: • Use their experience when making financial decisions in the future. • Gain professional experience for their résumés. • Make contacts within the community. • Learn firsthand the philosophies guiding the credit union system. Solution

MAP to Success is a package that enables direct access to younger members by credit union executives. Those making decisions for the

52 CUNA Research Services, quoted in Minnesota Credit Union Network, www.mncun.org/mycup.html. 64

client credit union will no longer rely only on industry numbers and intuition for new products. Instead, they will gain input from young members during the decision-making process. Having young members’ input during product development not only will help make for a better product but will get the young member engaged in the philosophy behind doing business with a credit union. The panel will be overseen by a member of the credit union’s senior management team, most likely a marketing executive, and an employee chosen by the credit union will be in charge of using material to facilitate online discussion in addition to conducting quarterly meetings. Member Selection

MAP to Success provides an opportunity to use your own credit union employees to recommend the most qualified candidates. The credit union selects 14 members to participate in the panel. The term for participants is 12–24 months. Seven new members join the panel every year so that the group remains fresh. Members of the panel will meet in person four times per year, and it is mandatory that each member attend at least three of the four meetings. Members will correspond continually throughout the year on a secure Web-based platform, and they will be asked to participate in short research/ brainstorming assignments at the request of the credit union’s main contact. Online Interface

MAP to Success will be your guide for creating an electronic workspace for panel members to communicate. Implementation is out of the box and straightforward. The program demonstrates the process of recruiting quality participants, developing an electronic meeting space, establishing a curriculum for meetings, and facilitating discussion between the panel and credit union decision makers. Direct Contact

In addition to participating in online discussions and regular meetings, members of the advisory panel have an opportunity to present annually to the credit union’s board of directors. This provides the board an opportunity to interact with members of the panel and hear a young person’s perspective on issues pertinent to his or her credit union. It may also introduce talented young volunteers as potential director candidates to the nominating committee.

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Member Benefits

MAP to Success gives a voice to a group of young consumers who spend approximately $200B annually.53 Giving young members input into the decisions of the credit union will benefit all members in the following ways: • Young members in the community will have advocates in the credit union. • All members will benefit because products will be reviewed by young adults, who will bring a new perspective that a different generation of credit union managers may lack. • Young members will learn about the values and philosophies that have shaped the credit union system. • Young members will be more inclined to at least consider using a credit union because a young adult advisory panel will create a direct relationship with the client credit union and the community. • A young adult advisory panel will create more new accounts, giving the client credit union greater market share.

Young members will be more inclined to at least consider using a credit union because a young adult advisory panel will create a direct relationship with the client credit union and the community. As an incentive to participants, it is recommended that panel members receive premier pricing at the credit union. This is at the credit union’s discretion, but premier pricing may include free checks, no foreign ATM fees, free online services, and any other benefits given to applicable members. The target market for the advisory panel is young adults ages 16–24 within the client credit union’s charter. The secondary audience is potential 16–24-year-old adults affected by the credit union’s marketing efforts. Credit Union Benefits

A number of credit union benefits come with simply engaging a young market of consumers. These consumers are technologically savvy, informed, and yearn for convenience when it comes to their finances. Along with the obvious benefits of direct communication, reduced age of membership, and greater market share, here are three additional benefits to consider:

53 Fast Company, “Leading Generation Y,” www.fastcompany.com/blog/bea-fields/leading-generation-y/marketing-generation-yexperience-culture. 66

• New technology will be engaged—In the past, credit unions have been slow to adapt to new technology. But with a group of young member-owner advisors and a credit union management team willing to listen, this dynamic can change. Panel members will also have the opportunity to create new electronic marketing campaigns for the client credit union. • Your credit union will become the brand in your community—The young adult advisory panel will comprise members that you have chosen in the community. These members will talk to their friends, classmates, and others in the community about their experience advising the credit union. This will undoubtedly have an effect on other young consumers who are looking to purchase their first car or first home or who are simply building credit for the future. • You’ll start your own credit union movement—By creating a young adult advisory panel, you are creating a new group of consumers who understand why credit union membership matters. Panel members and other young adults will then understand the principles behind being a member-owner as well as the credit union’s commitment to the community. Beta Testing

All expected results previously highlighted are based on beta testing using a MAP with participation from current members of the young adult panel. Implementation of a young adult member advisory panel at Wright-Patt Credit Union (WPCU), in Dayton, Ohio, as of Fall, 2008, is still ongoing. Young adults were recruited, interviewed, and are currently involved in various projects at WPCU. How to Get Started

Download the MAP to Success Implementation Guide at filene.org/home/research/ cutomorrow/30u30 for a stepby-step approach to starting your own young adult advisory panel. For more information about this project, please e-mail Josey Siegenthaler at [email protected].

Members Advisory Panel Team, From Left to Right: Dustin Limburg, Wright-Patt Credit Union, and Jansen Perdue, Hoosier Hills Credit Union 67

Chapter 4 Conclusion

The previous chapters suggested ways to attract younger members, young professionals, and new volunteers. All three segments are important, and all of these open-source ideas are yours to keep, modify, and use. May they be a starting point for credit unions to appeal to a new generation.

30 Under 30 participants hail from all over the country and from every corner of credit unions’ employee base. Many are marketers, but others work in finance, IT, product development, branch operations, and human resources. With their work in 30 Under 30, this group of young professionals has shown that the credit union philosophy is not just alive but thriving. Participants constantly challenged one another and themselves to develop ideas that would be good for the credit union and good for the member. A heavy emphasis on saving among the group suggests that, at least among this segment of Gen Y, the ideals of thrift, personal responsibility, and prudent borrowing are enjoying a renaissance. The 30 Under 30 group’s business plans are also available at filene.org for free perusal and download. The downloads include additional information and materials not available in this report. Filene, along with each participant of the 30 Under 30 group, is committed to providing support, information, and encouragement for the success of these open-source ideas. The 30 Under 30 group was designed as an open-source experiment for the Filene Research Institute. After a year of trailblazing, the 30 Under 30 program will pass to the Credit Union National Association, which has agreed to use the program to promote professional development and product innovation for the credit union system. Additionally, the Filene Research Institute is heartened by the appearance of young adult networking opportunities popping up in places such as Indiana, Wisconsin, Oregon, and California. But credit unions don’t have to wait for a formal program to empower young employees. Who better, after all, to formulate responses to young adults’ financial needs than young adults themselves. Credit unions that constantly and conscientiously empower their younger professionals invite not just excellent ideas but enthusiasm and loyalty. These traits cannot be bought, but they can be grown.

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Regardless of where the formal credit union 30 Under 30 group resides, young professionals are brimming with ideas and fervor for a credit union system that can thrive among a new generation of consumers. Difficult economic times mean challenges, and sometimes even wrenching pain, for credit unions in the short term. But the long-term prospects for cooperative, socially responsible financial institutions have never been better.

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Appendix 1

Change Your Savings Additional Information Implementation Time For implementation of the Change Your Savings program, the following investments are assumed: • Program research: 16 employee-hours. • Core programming: 32 employee-hours. • Program testing: 16 employee-hours. • Total IT investment: 64 employee-hours.

Market-Consumer Research On average, credit union members make 150 debit card purchases per year, with an average purchase of $38 and annual purchases totaling $5,700 per debit card. Of these purchases, 63% are signature based and 37% are PIN based. Consumers typically don’t have a preference when choosing credit or debit when making purchases. Tuition Savings Option

With the overwhelming amount of debt that a college graduate has, about 30% of consumers have named saving for tuition as one of their primary concerns for their children or themselves. Some parents have stated that it is ideal to find or keep a position within a university or college for the simple fact that tuition for members of the employee’s family who are attending that university or college will be paid by the school. Local and state governments are also working on plans to curb college expenses. The Florida Prepaid College Plan allows parents to pay a monthly fee to cover a child’s tuition and fees to participating Florida colleges. The plan starts as early as when the child is a newborn. New Jersey STARS is a program that allows any student within the top 20% of his or her graduating high school class to attend a New Jersey two-year college for free. Although some states are addressing the issue of the high cost of tuition, they are not addressing the additional costs of books, transportation, supplies, and room and board. Even with assistance, parents and students still need to save for tuition. About 25% of college students said that they are solely responsible for their college tuition, according to a survey conducted for the Change Your Savings program. Fifty percent said that their parents

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are assisting them with tuition. The last 25% said that their parents had paid for 100% of their tuition. Auto Savings Option

Over 50% of consumers in a recent focus group named an auto as one of their primary reasons for saving. Home Savings Option

Over 50% of consumers in a recent focus group named a home as one of their primary reasons for saving. Debt Savings Option

Over 25% of consumers in a recent focus group stated they would participate in a program that helped pay down debt. Other Savings Option

All participants named different types of short-term savings as a primary concern, such as saving for a vacation.

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Appendix 2

Win–Win Savings Additional Information Charity Listings Each member will have the opportunity to select a charity at account opening. The credit union should prepare a short list of national and local charities available in case the member needs some guidance. Some resources for this could be your local United Way or another nonprofit agency. Here are listings of top national charities: • 50 largest charities: www.csmonitor.com/2006/1120/ csmimg/50_largest_charities.pdf. • 200 largest charities: www.forbes.com/2005/11/18/ largest-charities-ratings_05charities_land.html. • Charity research: www.give.org and www.charitynavigator.org.

Bonus Entries The following is a suggested guideline for awarding bonus entries: • Refer-a-Friend: Five bonus entries will be awarded to members who utilize the Refer-a-Friend program. Both the member making the referral and the friend opening the account will receive five bonus entries. A one-time bonus entry (not perpetual). • Direct deposit: Five bonus entries will be awarded for members who set up direct deposit to their savings account. The five entries are perpetual—five bonus entries for the life of the account with a minimum of $10 monthly direct deposit. Should the member cancel direct deposit or deposit less than $10 per month, the bonus entries will no longer be awarded. • Additional credit union products or services: Five bonus entries for each new product/service the member uses. For example, a member who establishes an auto loan through the credit union will receive 10 additional entries. This has much potential. FORUM Credit Union (Indiana) has a prize-based savings program called the Weekly Five Club, and the average number of services per Weekly Five Club player is 3.78. Also, 84% of Weekly Five Club players have a checking account with the credit union.54 The five entries are perpetual—five bonus entries for each

54 “Save and Win: Will Scaled Up Jackpots, Prize-Based Saving Bring New Members, Better Financial Habits to Michigan CUs?” CEO Report (Gaithersburg, MD: UCG, 2008), 6. 75

additional product/service currently open. Should the member close an account, the bonus entries will no longer be awarded. Members could also receive bonus entries for a blog post on the credit union’s Web site. This could be about savings goals, financial questions, or charitable events and causes. Also, additional entries could be given for community service for members who give back to the community.

Marketing Plan Marketing Campaign

In addition to using forms of social media (detailed below), Win–Win Savings should be advertised the same as any other youth product would be advertised. Use direct mail and electronic means to reach your existing youth membership. In addition to the normal advertising campaigns, leverage relationships with schools, sporting programs, and other youth-friendly organizations to help promote the product. Hosting financial education seminars and speaking at high schools and colleges in the area will help credit unions get face-to-face communication with students. Within the program the credit union can pitch the Win–Win Savings account and provide take-home materials. Representatives will also be prepared to take applications and open accounts at the event. Encouraging younger sales staff to attend these functions will help the audience relate with the speaker and will increase response. These young staff will act as brand ambassadors of the program. For credit unions with the ability to do so, accounts should be able to be opened through the company’s Web site as well as through ATM access. Any necessary paperwork to settle the account could be sent to the member via e-mail communication or mail. Another vital part of the marketing program will be the real-lifesuccess campaigns. These real-life winners will be key to keeping the excitement thriving. Providing information on both the individual winner and the benefiting charity can attract good press. This should be provided on the Web, through public relations releases, newsletters, and promotional campaigns. Most credit unions have found success with standard prize-based savings products with little or no marketing. Therefore, there is an even greater potential of increased account openings by rolling out this product in a big way. A full-blown marketing campaign could consist of the following: • Billboards strategically positioned near high schools and colleges that will help catch the eye of young adults traveling through the area. 76

• A small incentive offered by the credit union for opening an account, such as a $25 bonus or five extra entries in the annual prize drawing, to increase initial excitement about the product. • An e-mail campaign that will increase awareness of the product. E-mail lists from schools and colleges would be a great target market for this product. After the e-mail campaign has had time to hit, it should be followed with a direct mail campaign to further increase awareness. While the need and success of direct mail has decreased throughout the years with the increase in “junk” mail, young adults rarely receive mail, so the piece is likely to get attention. The branding of the mail campaign will match the billboard and e-mail campaigns, thus increasing its familiarity with the young adult. Young adults will be instructed to open their account online, and the credit union’s home page will be heavily marketed with this product to make sign-up especially easy during the initial launch of the product. • Automatic sign-up for eStatements for members to keep maintenance costs of the product down. • “Word of mouth” marketing potential—bonus entries can be given for referrals (see Appendix 2 for more information). • Segmented marketing opportunities, internal marketing, and social media. Segmented Marketing Opportunities

Another unique aspect of this product is the ability to create segmented marketing messages for different types of young adults (and their parents). Advertising can be segregated into the following categories: • General product marketing and information. • Marketing that appeals to young adults’ self-interest, focusing largely on the ability to win prizes and/or cash. • Marketing that appeals to more socially responsible young adults that focuses on the ability to win money for a charitable organization of their choice. • Marketing that appeals to young adults’ parents/guardians. Parents are usually the main trusted source of financial advice for young adults. Therefore, separate marketing that appeals to parents that shows that saving can be fun and exciting has great potential. Internal Marketing

Increasing internal staff excitement for the product is vital to the success of the program. The frontline sales staff controls the success and energy of this product. When sales staff is excited about the program,

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more accounts are opened and more members walk away excited about their new account and the credit union as a whole. Internal promotions and incentives will stoke excitement and keep the momentum for the product offering. While staff are not eligible to win through Win–Win Savings, an internal incentive campaign could be more effective. In fact, research shows credit unions currently offering prize-based savings accounts have found more success with incentives than with allowing staff to participate in winning the prizes. In particular, Centra Credit Union in Indiana found great success promoting its prize-based savings account internally through branch contests with no external marketing. However, when the internal promotion ended, staff excitement decreased and fewer accounts were opened; keeping a regular incentive would help keep the excitement going. Social Media

Social media is the norm for this target market. Among U.S. college students, approximately 28% author a blog and 44% read blogs.55 Providing a blog component gives young adults the opportunity to promote their charity of choice and talk about financial struggles and their savings goals (see Members Credit Union’s www.whatareyousavingfor.com as an example). The blog can also be a great way for the credit union to talk about upcoming prizes, the credit union difference, and savings tips. Past prize winners can post why they chose the charity they did, and local charities will also be able to leverage this avenue to promote and inform young adults of their mission and upcoming events. All aspects of the product can be communicated through this channel. Additionally, leveraging other forms of social media can enhance the blog and overall marketing efforts. For example, a Facebook page can be set up with RSS feeds from the blog and provide another avenue for members to interact on that platform if they prefer. Canada’s Servus Credit Union’s Young & Free campaign uses a variety of online media channels effectively in this way (see www.youngfreealberta. com—there you can find links to its YouTube videos, Flickr photos, Twitter feeds, etc.). Information about the program should be featured prominently on the credit union’s Web site and in e-mails. This can mean buttons, widgets, and relevant information that hyperlink back to the main product blog. Registering a unique URL for the product is recommended (e.g., www.yourproductname.com).

55 en.wikipedia.org/wiki/Generation_Y. 78

Break-Even Projections for Monthly Prizes Suggested monthly prize amounts were determined by calculating an obtainable break-even point. This was completed with the help of CES Credit Union in Ohio, which introduced a standard prizebased savings product as its primary share account in January 2008. President/CEO Kelly Schermerhorn says that CES exceeded its break-even point in less than five months. In fact, by May 31, 2008, the credit union had garnered almost $700,000 more than its breakeven point without taking into consideration any ancillary benefits of the promotion. With a cost of funds of 0.75% and an average yield on assets, CES Credit Union’s net yield was 5.45% on funds in its prize-based savings account. Using these assumptions, a net yield with a cost of funds of 1.00% was calculated, which is slightly higher than CES Credit Union’s cost of funds. A monthly award of $5,000 in prizes, totaling $60,000 annually, is recommended. In order to break even with this option, the credit union will need to bring in approximately $1.2M in deposits for the Win–Win Savings account.

Acknowledgments A special thanks goes out to Brie McCarthy at Coors Credit Union for her input and ideas in the development of this product. The Win–Win Savings group also wishes to thank the following individuals (in no particular order) for their input, advice, feedback, and time: the staff at Filene Research Institute, with special thanks to Ben Rogers, Mark Meyer, Denise Gabel, Josey Siegenthaler, and George Hofheimer. Also, we would like to thank Alex Alexander, Kent Sugg, Tinker Federal Credit Union; Doug True and Andy Mattingly, FORUM Credit Union; Nan Morrow, Centra Credit Union; Carolyn Jordan, Neighborhood Credit Union; William Azaroff, Vancity Credit Union (Canada); Kelly V. Schermerhorn, CES Credit Union; Josh Jones, CUNA; James E. Burns and Leigh Philibosian, Mid-Atlantic Corporate Federal Credit Union; Tim Eischen, Members United Federal Credit Union; Cindy Ships and Sheri Ledbetter, WesCorp; Rebecca Secor, Member Loyalty Group; Maxine Xodo and David Dunn, Co-operative Bank (UK); the i3 team on prize-based savings, and finally the entire 30 Under 30 group.

Figure 12: Win–Win Break-Even Projections CES credit union 1st year results Total cost of prize giveaways Breakeven point for shares invested

$2,000 monthly

$5,000 monthly

$6,000 monthly

$10,000 monthly

$55,000

$24,000

$60,000

$72,000

$120,000

$1,009,174

$461,538

$1,153,846

$1,384,615

$2,307,692 79

We also recognize and are grateful to the following individuals and organizations for their support throughout the development of this product: Bruce Beaudette, president/CEO, and Susan Siegel SVP, Marketing & Branch Operations, Sunmark Federal Credit Union; Dan Mica, president/CEO, CUNA; and David Rohn, vice president, CUNA Councils.

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Appendix 3

iAdvanceCU.com Additional Information Financial Analysis For individual credit unions or state network leagues, costs for ­iAdvanceCU.com will be minimal. The site is intended to be a cooperative, and therefore each credit union would be required to contribute a nominal yearly fee to the site for utilization, which will include the ability to post job descriptions. Given the savings in retention and recruiting costs, which will vary greatly by each credit union, the overall savings to each credit union could be significant. The operating costs associated with the continuation of the Web site will be limited to employee resources and marketing expenses. Marketing expenses may vary, depending on the number of credit unions and state leagues utilizing the site. These figures reflect a yearly expense, and may be increased depending on the response to the program campaign. Additional funds will be raised through contributions from the participating credit unions, credit union leagues and associations, and CUSOs. Small nominal fees will be assessed depending on the types of services provided. Going forward, assuming the minimum yearly contribution to join the site per credit union or network is $150, with some contributing more than that, only 17 participants in 2008 and 30 in 2009 will be needed to break even. Much like any cooperative, more participants means greater investments that can be put back into the site and higher potential for even lower contribution amounts.

Figure 13: Estimated Costs for Program Expenses Web development

2008 Anticipated

2009 Projected

$5,200

$0

$800

$500

$2,500

$2,500

Site maintenance

$0

$1,500

Cash investment

($6,000)

Total expenses

$2,500

Design/graphics Marketing

$4,500

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ISBN 978-1-932795-56-1

10 Young Adult Innovations: From the 30 Under 30 Group

ideas grow here PO Box 2998 Madison, WI 53701-2998 Phone (608) 231-8550

www.filene.org

PUBLICATION #177 (2/09) ISBN 978-1-932795-56-1

CU Tomorrow Business Brief

10 Young Adult Innovations: From the 30 Under 30 Group Ben Rogers Driver, CU Tomorrow Filene Research Institute