The financial services industry is continuously evolving, and it is essential to optimize collections strategies to maintain liquidity and minimize risk. One of the most critical choices for credit un...
In the past decade, the digital transformation has reshaped how credit unions are expected to interact and communicate with their borrowers. This is due in large part to advances in Fintech and evolving consumer expectations. As your member base shifts to a larger number of millennials and their younger Gen Z counterparts, traditional forms of communication will likely fall on deaf ears. According to Pew Research, 93% of Millennials in the U.S. own a smartphone, so one can conclude that the best way to reach and market to this demographic is digitally and electronically.;
This is not just a trend among younger Americans. The fact is, members of all age groups are busier than ever with demanding work, personal, and social schedules. For better or for worse, busier schedules and advanced technology has shifted the way that Americans communicate and interact with their lenders.
Meet Shifting Consumer Expectations
Back in the day, if a member needed to apply for a loan, make a payment, or resolve account issues, visiting or calling their credit union was the standard way of getting these tasks accomplished.
These days, members can simply visit an ATM or log in to their home banking portal to pay their loans and conduct other transactions. Most modern banking can all be done online—in some cases, from a smartphone. The reason why it's so critical for lenders to know, understand, and accept this shift in consumer behavior is because it affects the way that you successfully gain new account holders and communicate with existing members.
Related Reading: 4 Things Consumers Expect from a Payments System
Embrace Electronic Communication
If your credit union is only using traditional forms of communication—i.e. sending letters—to contact borrowers that have lapsed or have inadequate auto insurance coverage, this communication strategy could be hindering your response rates and placing a greater administrative burden on your staff.
While letters are required by law for tracking and compliance purposes, they generally do not translate into action on the part of the consumer. Voice messages, such as automated messaging, actually result in a higher likelihood of response. In fact, our own internal research shows that automated messaging reduces the average number of first letters to a borrower by 10-15%. Consumers simply prefer and respond more consistently to electronic communication methods.
Adopt Omnichannel Communication
Different demographics have different preferences when it comes to communicating and interacting with their lenders. Millennials in particular hold a high level of comfort when it comes to using mobile devices as part of a multichannel experience and are using mobile tools to make payments and conduct other transactions.
Although the emerging omni-channel consumer is typically younger, there is a growing amount of overlap for digital communication, even among baby boomers and members of Gen X. There are pockets of older consumers—primarily technology-savvy segments—that share the enthusiasm for mobile payments but also have strong cross-channel behaviors.
As technology creates more contact options between you and your members, it’s important to keep pace with your borrowers’ preferences. Phone calls, emails, and text messages are all expected options for communication. Consistency and redundancy across multiple channels is an important part of a broad communication strategy, as some members will prefer one method while others may require multiple contact methods to gain top-of-mind awareness. Having regular communication touch points using multiple channels can help borrowers make a substantial difference in their members’ experience.
Step Up Your Social Media Presence
According to Pew Research, the vast majority of millennials (almost 90%) say they use social media. While this number hasn’t changed much for this demographic since 2012, the shares of Gen Xers and baby boomers who use social media all have increased by at least 10 percentage points during this period.
Social media is one of the most effective strategies for establishing a friendly, personable, and on-brand presence in your borrowers’ lives. By creating original content and sharing content created by borrowers and other members of your community, your credit union can position itself as a valued part of your members’ networks.
Social media can also be leveraged as a communication platform that members can use to engage with service-related questions. While social media may not be a stated contact method for traditional communication, many borrowers are most comfortable contacting institutions through the more informal, familiar channels offered by Facebook and Twitter.
Having an innovative borrower communication strategy is a critical aspect of staying relevant, engaging, and valuable to your borrowers across all demographics. To gain insight into payments preferences among different age groups, download our ebook, Equal and Opposite Reactions: Payment Preferences Across the Generational Divide.
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