Credit Unions And Their Average Age Of Member Obsession

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For a few years now, credit unions have been obsessed (not too strong a word) with lowering the average age of their member base.

The rationale goes something like this:

Younger consumers represent the future of credit unions, therefore we have to attract more Gen Yers and reduce the average age of our members.

My take: OK, I can see some logic in this. But it doesn’t make mathematical sense.

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Allow me to explain this with some examples. Imagine, for simplicity sake, that your credit union has 100 members, all of whom turn 47 sometime during 2013, and that each member produces a strong $10 in profit.

2013 Average age of members: 47. Total profits: $1000. Average profits per member: $10.

Now consider the following scenarios:

Scenario A. In this scenario, the credit union enjoys 100% member retention going into 2014, with no change in member profitability. But no new member growth.

2014 average age of members: 48. Total profits: $1000. Avg profit/member: $10.

Oh no! The average age of member went up! This is terrible!

Well, not really. The lack of new member growth isn’t good, but maintaining good profits and profitability levels is nothing to sneeze at. And, after all, many marketing gurus think you should be focused on marketing to existing members since somehow they think that’s less expensive.

Scenario B. In this scenario, your CU brings in 10 new members, each of whom is 25 years old, and who each produce $5 of profits. But your CU loses 6 existing members.

On the face of it, this doesn’t sound too bad. 5% new member growth is pretty good in the scheme of things, as is 94% retention.

2014 average age of members: 46. Total profits: $990. Avg profit/member: $9.52.

You succeeded in lowering the average age of your members from 47 to 46. Hooray for you!

You also reduced the overall profits by 1%, however, and average profitability per member by nearly 5%. Not so good.

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I don’t think there’s a credit union in this country that doesn’t boast about how it’s member-owned, and how everything it does is for the benefit of the members.

If that’s so, can you explain to me how intentionally reducing the overall profitability of the organization — and hence, member dividends — is beneficial to existing members?

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A speaker at a conference I recently attended threw out this statistic:

The average age of credit union members grows by 2 years, every 5 years.

I don’t know the source of that statistic, but I did find this, written by Paul Gentile of CUNA in October 2012:

The average age of a credit union member is 47 years old. That average has been going up not down over the years. Back in 1989 it was 42.8 and in 2000 it was 44.7.

Let’s do a little math here, shall we?

What Paul is basically saying is that the average age of credit union members grows by 2 years roughly every TEN, not 5 years. Between 1989 and 2012 — a 23 year time period — the average age of credit union members only grew by four years.

In other words, over a 23 year time period, while your members themselves aged by 23 years (this is a law of nature, unless you belong the Dorian Gray Credit Union), the average age of CU members only grew by 4 years.

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What’s wrong with you CU people? Did you not pass third-grade arithmetic class?   

Bottom line: With a high member retention rate, the vast majority of your members stay with you year to year. Their age increases by one every year. The fact that the average age of the CU member base increases by 2 every 10 years is a sign of amazing success in acquiring younger members. 

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