3 Painful Trends, and 1 Antidote to Growing Core Deposits & Younger Relationships
The competitive battle to win low-cost core deposits, stem the outflow of deposits, and attract new members has never been higher for credit unions. But there is an antidote.
Three emerging trends have converged to create a significant credit union industry threat for sustaining the growth and retention of lower cost core deposits - and winning vital younger new member relationships:
A high-rate environment and the prolonged high cost of living drove a flight of core deposits out of credit unions, and led to a costly rate war for term CDs. It’s not over yet.
Rising momentum of digital-first neo-banks and fintechs - made switching deposit accounts for high rates and lean products easy, frictionless and fast.
The continued aging of CU members - and the battle to win more engaged younger millennial members.
The antidote will separate winners from losers in pinpointing and predicting where to focus core deposit and younger new member growth. It will require a focused strategy driven by smart consumer analytics and AI-driven insights that lead to relevant personalized journeys.
First, we must understand the major headwinds facing credit unions in growing core deposit and new member acquisition in 2025:
Financial wellbeing and consumer savings are at record lows
A tough post-Covid economy has created financial worries across generations for financial wellbeing. According to a 2024 Capital One study, 3/4 of Americans say personal finances is now the #1 stress in life. The impact has hit personal savings hard, as it dropped from a 20-year average of 9%, to 4% by early 2024.
“over 50% of all checking accounts in the first half of 2023 alone were opened by digital banks and fintechs”
Neo banks captured massive core deposit market share in 2023 and 2024
According to Cornerstone Advisors, over 50% of all checking accounts in the first half of 2023 alone were opened by digital banks and fintechs. Neobank Chime alone has captured over 25M younger customers, becoming the digital-first EZ button. 12.3% of Gen Zers and 9.5% of Millennials are now banking at Chime, with nine million using Chime as their primary checking account.
An incredible 7.2% of the entire US population moved housing in 2023 alone. That’s often when consumers switch banks. Strum Agency’s research nationwide with thousands of consumers has revealed a record-high consumer willingness to switch financial institutions, at rates up to 40% or higher. Digital first banking simplicity is winning the day among many younger audiences.
Less than 20% of Americans under 40 use a credit union today
The aging of credit union members has been growing for decades, but reality is not getting better – the average age of credit union members today is 53. Only 4.3% of Gen Z consumers (the oldest is 27 today) use a credit union.
If there is good news in this aging trend for deposits, it’s that consumers over 50 control over 80% of US personal wealth. That makes them key to your core deposit retention and growth strategies. The bad news: While Millennials only hold 9% of personal wealth today, according to Forbes, $90 trillion will pass on to them, making them the richest generation in history. Unless credit unions shift to win those relationships now, it will only grow harder to attract and retain them.
As interest rates continue to drop ahead and younger borrowers seek affordable loans, it will be a ripe opportunity to improve earnings for credit unions.
The antidote: a data-driven multi-generational Deposit & Growth Strategy and a CDP
Successful growth of core deposits and the right mix of new members in this hotly competitive arena requires a data-driven, multi-generational, regional segmentation growth strategy.
Building that data foundation starts with creating smart, multi-generational profiles of a credit union’s unique “ideal” engaged and profitable core deposit target members in each regional market. And that requires rich 3rd party data insights into people’s lifestyles, psychographics, pain points, net worth, etc. – combined with 1st party data on behaviors, transactional preferences, and family makeup.
“Know your members needs, lifestyles, behaviors and preferences better than everyone else”
Success also requires savvy analytical marketing tools, namely a financial industry marketing Customer Data Platform (CDP). Fueled by financial industry marketing expertise, AI-driven data insights, business intelligence, market geo-coding, and enhanced psychographic segmentation data, this tool allows you to “Know Your Members” (KYM) needs, lifestyles, behaviors and preferences better than everyone else. And it’s the key to unlocking behavioral triggers and predicting personalized solutions.
The Move to Intelligent Personalized marketing is no longer optional
The expectation for personalization as good as Chime and Amazon is no longer optional: 72% of consumers expect it, or are willing to switch to providers that can deliver it.
Yet most credit unions still struggle with a unified data platform to build smart audience targets, and deliver personalized and automated solutions across multi-channel communications. New member onboarding journeys are often slow, lack clear data insights, are untraceable, and are not fueled by intelligent next-best predictive triggers.
A state-of-the-art CDP that ensures highly targeted audiences driven by AI-insights, predictive triggers and marketing automation, all combined to deliver the right personalized solution, in the right channel, at exactly the right moment in time.
There’s no more time to waste upping your marketing technology game in 2025 to deliver relevant personalization and simpler member experiences that boost engagement, growth and performance.