The morality play was an enactment of a comic strip idea that Martin, Sykes, and Coble created with table mates Ben Rogers, Kamilah Sanders, Yuliya Franklin, and Debs McCrary, as a lesson plan to teach creditworthiness.
Guess who won?
First, he laid out the environment for attendees:
• Younger people have lower scores
• It takes five to six years of debt repayment history to build an ‘A Paper’ resume
• Young people are more likely to earn low and sporadic wages, making them more likely to miss payments
• Credit report market could be worth $860 million by 2010 (USA Today)
Ben then detailed the credit union response – “There are three pieces to effective credit score programs for youth: education, marketing and financial products. Education is a good start, and it’s where most CUs do start, but it needs to be coupled with marketing and tangible products to be most effective.”
One of the most intriguing examples that Ben discussed was one from Beehive CU (
Another interesting example out of Filene’s I3 project is SmartScore. The project is pure marketing:
• Target a group of members, easier if you have recently pulled scores
• Mail them their score with information about how to improve it
• Follow up quarterly with updated score, further information
• Offset costs by cross-selling
Click the link above for a detailed business plan and summary.
Before he spoke, I asked Ben why serving 18-to-30s is so important for credit unions. He responded:
There are two ways to look at the youth issue among credit unions: 1) We need to move the average age of members down, ’nuff said; and 2) We have a chance to reinvigorate credit unions as the first choice for their financial institution, not just another among equals for young people.
Social networks provide a tremendous opportunity to meet small loan demand through person-to-person direct lending, according to John Donovan, COO of Lending Club. That’s because networks like MySpace and Facebook build connections between people, links that can be used to motivate people to invest in each other.
Lending Club is a peer-to-peer lending application available through Facebook, which has more than 50 million current users, with 250,000 new users joining every day. Each user can establish a “friend” relationship with anyone else on the network, and most do based on common interests.
Lending Club uses these links to bring people in need of money together with those who have it and are looking for better-than-market return. Potential lenders choose a risk level, which determines their “loan asking price.” Currently “low risk” translates to an interest rate of about 8%, while “high risk” sets a rate of about 14% (17.5% is Lending Club’s maximum).
Lending Club vets loan applicants, using conventional credit reports. It requires a minimum FICO score of 640. It is licensed in individual states to lend and resell loans.
Lending Club matches borrowers with lenders that fit the criteria. For example, Donovan displayed a borrower’s record showing need for $10,000 and a two-week deadline. To date, 15 people had offered 90% of the requested funds. Each lender was able to view the borrower’s qualifications, including credit rating, employment history, and intended use of the money. In the future, lenders will also be able to ask questions of prospective borrowers.
Prosper, the largest peer-to-peer lending service, has funded abuot $100 million in loans.
Zopa, the peer-to-peer lender based in the U.K., recently announced partnerships with several U.S. credit unions. The potential benefits to these credit unions include new loans and experience with new markets.
This new community—called the YES CU Community— serves two purposes:
The YES CU Community has all the basic social networking tools:
70% of young adults are on these sites – but many credit unions are not because they don’t know where to start and can’t get over the mystique. This ‘social networking sandbox’ will allow attendees to play around and get comfortable with the technology – all with the support of each other. I was actually impressed by how many attendees said that they have a personal MySpace or Facebook account. Only 2 or 3 said that their credit union has a presence. Many attendees said they don’t blog regularly, so I hope they leverage the blogging functionality in the new site for practice.
At the end of the session, I gave out my “homework” to do different activities in the network, such as setting up their profile, joining a group, adding a friend, and so on. I also pointed out that everyone who registers by 8 AM Wednesday morning is entered to win a brand-new 8GB Ipod Touch. That got everyone very excited.
The Yes CU Community is open to anyone associated with the credit union movement that is looking to network with others on better serving young adults. Simply request access by visiting the site and follow the prompts to sign up. You can click one of the badges on the right of the blog or visit:
For those of you who missed my presentation, here it is in all its ten-slide glory:
The assignment for attendees at each table—design a debt management program for Gen Y. One table created the “Yes, You Can Debt Reduction Program.”
Table mates Paul Snyder, David Kexel, Noel Hilden, Paul Gaumier, Danielle Thron, and Kenja Purkey hammered out the following basics for an educational program that helps overendebted members get back on the road to creditworthiness:
• Eligible members will have the opportunity to “earn down” the interest rate on a credit card from 16% to 10% by completing a course of instruction.
• Six courses will be available online, via podcast, or during face-to-face seminars offered monthly. Completing one course each quarter will qualify the member for a one-percentage point reduction in the credit card’s interest rate.
• Savings as a result of the lowered interest rate will be held in a CD and presented to members who complete the 18-month program.
• Further incentives will be available from a menu designed to appeal to 18-to-30s at different live stages. Examples, include a match of some portion of the savings the member has earned through the program or a waiver of some portion of closing costs on a future mortgage.
The debt reduction program offers members a chance and a reward for learning to take responsibility for debt and turn its burden into a better life. As Snyder, VP of marketing for Canton Schools ECU, explained the program title, `“You can get a handle on your debt. Yes, you can save money.” And, yes, you can become creditworthy again.
Blogging is Web 2.0.
Web 1.0 was characterized by the attitude: “Let’s put our brochures online.” But viewers could do nothing but look at copy. Many credit union web sites are still at this level, still static.
Web 1.0 links documents. Web 2.0 links people. The benefits:
• It’s great for putting a human face on your credit union. For example, Verity CU (Seattle, see link to the right), for example, allows any employee to post to its blog. (16 now do; some require editing.) Makes the credit union feel more like a group of people.
• A blog can help you positioning your brand with idealistic values. For example, Commonwealth CU (Alberta, Canada, see link) looking for an under-25 employee to serve as spokesperson and help design products. Video and blog application.
• Blogging can help with product development. “A blog is a ramped up suggestion box.” Bank of America invites online reviews of all products. This can be scary. You won’t get that kind of feedback from calling people or putting them in a focus group.
• Your blog can be a vital channel for crisis management by reassuring members. Verity used its blog to keep members informed about a problem that forced it to take down its web site.
Be open, be real, be transparent. But also beware: Because a blog is an open community it can be “hijacked.” Be sure to moderate comments. Don’t allow a free-for-all. The dangers of not moderating are not only off-color but also identity theft.
By creating an interactive blog, you’re opening yourself up, and are vulnerable. Wal-Mart—travelers cross U.S. and stay in Wal-Mart parking lots. Turned out to be PR firm employees, and once exposed, they hurt the company’s image.
Concentrate of on a specific topic of interest to your target audience. Most successful blogs are niche-focused. For example, Fiskars’ (best known, perhaps for its scissors and scrapbooking lines) addresses it blog to crafts people. Wells Fargo has a student resource site, which covers topics of interest to college students, including “Ask the Expert” Q&A feature.
Is blogging a cultural fit for your credit union? You have to be OK with responding to negative feedback.
Will blogging add value to members? 1% of Verity’s new members cite the blog as a reason for joining—this group has an average of $11,500 in loans outstanding, excluding mortgages.
On the morning’s subject of Debt Management, staff of First Miami Student & Alumni Credit Union in
The credit union was started in 1988 and consists of 50 volunteer interns. It is $1.1 million in assets with about1, 700 members (mostly students, but includes an increasing number of alumni).
Their challenges include:
One of their most popular activities including presenting on financial education to students – focusing mostly on credit and money management. They tailor their examples from student suggestions and by group using real-world examples.
They are launching a new website (their current one is here), which will include financial education information and is designed to be the standard for credit unions expanding financial education sections.
They recently received a grant from the Ohio Credit Union Foundation to fund their efforts in expansion.
The staff of the credit union recommended to attendees:
Continuing financial education is a key priority.
Gen Y is the most influential spending generation yet to hit the world. We have grown up with access to relatively large amounts of money from both our parents and jobs we have held. Because of this access to capital we rarely consider the long term affects of our purchases thus escalating the problem with outstanding debt. Not only that, but according to CUNA President / CEO Dan Mica “Most people choose their primary financial institution by age 25 and stay with it, on average, 15 years.”
According to the YES
site, the average age of credit union members is 47. That is a rather disturbing statistic if credit unions are looking to survive well into the future and compete with the larger banks. The earlier credit unions can gain exposure to students, the better the chance of providing these people with their financial needs, and one of the easiest ways to gain exposure is through financial educations programs and materials. Education sessions or materials gain credit unions access to young people while also educating them on the importance of financial literacy, thus creating more profitable measures. Summit
“I want to know how a credit union can save me the most money in the long run and make my monthly payments affordable. The number one problem I have is ATM accessibility, when I find an ATM to get cash, I get charged. If credit unions had more ATMs, I’d probably switch to one of them completely.”
“I need information about how to get out of credit card debt. I have about $10,000 on a credit union credit card at 9.5% and the rest on a bank card at 12.9%. I’m looking into a signature or other fixed-payment loan to pay it all off. I’d come to a group educational session, a lunch seminar during the workday when I’m already away from my child.”