Credit unions across the country are looking to boost lacklustre membership growth rates and are specifically targeting younger Canadians, new immigrants and those communities underserved by the banks.

“We need to make sure people understand that we are a viable alternative to banks,” says Howard Bogach, president and CEO of Credit Union Central of Ontario. “The challenge for credit unions is to be banklike and unbanklike at the exact same time.”

To do this, credit unions are developing and launching new products, revamping their marketing strategies and looking at ways to set themselves apart from the traditional financial institutions.

While the credit union system outside Quebec has seen assets under administration grow by a healthy 8%-10% annually over the past several years, membership growth is stuck at a steady but unspectacular 2%-3% a year. From December 2002 to March 2007, credit union AUA surged by 45.6% to $96.7 billion, while membership grew by a modest 8.7% over the same period, to slightly less than 5 million members.

“I think our strategies, in terms of attracting youth and immigrant populations, need to be much stronger,” Bogach says.

There are many reasons for the credit union industry’s modest membership growth rate, including an aging population base, a lack of awareness among many Canadians about credit unions and plenty of competition from the country’s big banks. While no one in the industry is saying that membership growth rate constitutes a crisis, there is recognition that credit unions need to find a new generation of members if they want to continue to thrive.

“The big financial institutions are going after younger members. We’re going to shrink if we don’t try to attract them, too,” says Tom Atkins, manager of program development and youth services specialist at Nelson and District Credit Union in Nelson, B.C.

Atkins, who received a 2006 scholarship as part of a youth leadership program run by the U.S.-based World Council of Credit Unions, says an integral part of appealing to younger members involves customizing products so that they are relevant to the lives of members of that group.

He cites as an example the Mixer Mortgage product launched last year by Vancouver City Savings Credit Union. The product, designed to appeal to first-time homebuyers struggling with high housing prices, allows multiple partners, family member or friends to share the cost of buying a home. Vancity offers life insurance to cover the partners and guides them through the steps, such as drawing up a co-ownership agreement.

“You need to offer products that are relevant to young people’s lifestyle,” Atkins says. “You can’t just offer the standard bank product.”

Credit unions also need to engage younger members by being accessible and offering them plain-language communication, using both new and traditional media and focusing on how credit union values match those of its customers, according to Atkins.

One credit union that has been successful in pursuing a branding and marketing strategy designed to attract new members is Vancouver-based Coast Capital Credit Union. Since January 2005, when it launched its no-service-fee “free chequing, free debit and more” account, the credit union’s membership has increased by 25% to 360,000 members.

Since then, Coast Capital has developed and launched a number of products based on a “no hassles” approach intended to appeal to all consumers, especially younger ones.

Coast Capital spent a lot of time in the research stage before launching its new product suite, says Mike Bushore, Coast Capital’s senior vice president of strategic planning. The credit union consulted staff, looked for efficiencies by questioning preconceived ideas and made sure to focus all its products, services and presentation around its “How can I help you?” slogan.

“When consumers see you make a valuable offering, they reward you,” says Bushore, who adds that the credit union has also improved its retention rate by 7%.

Some credit unions are looking for ways to bring in new immigrant groups, letting them know about the credit union option. “It really requires a very dedicated reach out [to attract new communities],” says Bogach.

Three years ago, the commercial lending arm of Credit Union Central of Ontario worked with Toronto-based UM Financial Inc. to begin offering shariah-compliant mortgages to Muslim clients. Today, McMaster Savings & Credit Union, based in Hamilton, Ont., also offers the product.

Credit unions across the country are also looking for ways to reach customers who might be underserved by the banks. Toronto-based Alterna Savings, for example, operates a community micro-loan program that provides business loans to low-income, self-employed members who might not otherwise get access to credit. Alterna has also been investigating ways to offer small consumer loans, looking at ways to reach customers who currently bank at payday loan shops.

@page_break@Reaching the underserved community in a way that makes economic sense requires creativity and persistence, Bogach says: “It’s a tough market.”

Another strategic tool for growing membership is lifting the levels of credit union awareness among Canadians, some of whom still believe credit union membership is limited to those who belong to a certain profession, union or immigrant community.

“We’re inclusive organizations, not exclusive,” Bogach says. The key is marketing and communication, especially to those who might be open to the credit union message and set of values and principles, he adds.

“Credit unions are attractive to people who aren’t pure conventional thinkers,” he says. “Pure conventional thinkers will say: ‘I bank at a bank.’ Credit unions appeal to those who are willing to look at alternatives, and are open to the consumer-friendly approach at credit unions.”

Bogach believes that the merger and consolidation trend among Canadian credit unions, which is still going strong, could result in some short-term membership losses as long-time clients, unhappy with the new entity, leave. But, he says, this trend usually starts to turn around after six to nine months.

“There’s no doubt in my mind that when credit unions merge, the value proposition generally gets much stronger,” Bogach says. “And that’s really shown in the asset growth.”

Financial services industry analysts acknowledge that credit unions need to be careful not to alienate established members as they try to woo new and younger customers. It’s a fine line to walk, and not all observers believe that credit unions are best served by becoming obsessed with growth.

“It’s not at all clear to me that getting bigger makes you better,” says John Chamard, director of the master of management program for co-operatives and credit unions at the Sobey School of Business at St. Mary’s University in Halifax.

Chamard believes that credit unions might be best served by looking at ways to offer tailored services to the membership they already have rather than chasing after cost-conscious and difficult-to-reach younger consumers.

“What the credit unions have to do, and they have been doing it over time, is put in place mechanisms that allow them to be very efficient without losing touch with their public,” Chamard says.

All industry people agree that in the quest for growth, it’s important not to lose sight of basic credit union principles, including staying local and putting members first. Whereas banks are at the mercy of the shareholders, insiders say, credit unions can put their emphasis on their value offering.

“Members aren’t looking for a big dividend,” says Pete Crear, president and CEO of the World Council of Credit Unions. “They need products and services.”

To Bogach, this focus on basic credit union principles should really be regarded as the main engine of growth and the credit union industry’s best strategy to achieve growth.

“If you look at the banks, tell me how you can differentiate one from another. You can get five different flavours of vanilla,” Bogach says. “When you think about the differentiation factor, that’s our opportunity.” IE