A More Perfect Union

This project attempts to address the wicked problem created by the ever-growing power, wealth, and control of the top 100 U.S. banks, and the lack of financial services, products, protections, and education for Gen Y. By creating new services to attract a broader customer base to smaller institutions, deposits will be redistributed from the larger banks. The strategy that I developed involved two mediums, credit unions who need to attract their share of the 80 million plus Gen Y Echo-Boomers, born between 1982 and 2002, and the financially illiterate and exploited Gen Yers, who desperately need financial guidance and behavioral change.

Executive Summary

Union, is a non-for-profit consortium of America’s credit unions, formed to develop the technology and service offerings necessary to attract the next generation of borrowers to credit unions. These products and services will make credit unions both very attractive and highly competitive with large banks for consumer services. Developing and integrating these technology tools is a financial burden and hurdle for relatively small organizations. Currently, personal financial management tools are just that, personal, they do not allow for banks to support customers in their financial lives. The first service that Union is seeking to develop is an account called Perspective that combines a platform for financial advising with applied tools that simplify budgeting, saving, bill pay, and even collaborative bill pay.

GEN Y STRUGGLING WITH FINANCIAL LITERACY AND CRIPPLING DEBT

Currently, there are only three states that require financial education as a part of high school degree requirements. The vast majority of Gen Y has not had any financial education, has been encouraged to consume, and lack positive role models. At a historical high with no upper limit in sight, the costs of higher education leaves a student with an average loan debt of about $25,000, and credit card debt of about $5,000 spread over 3 cards. For someone aspiring to get into the creative class, debt load can be between $70,000 and $150,000. Gen Yers already have bad habits, money issues, and unsecured debt:
  • 58% do not pay bills on time
  • 75% do not use a budget
  • 76% of those in their 20s are in debt

Credit Unions Struggling for Relevancy with Gen Y

Credit Unions are organizations that by charter are non-profit. They serve a demographic population, whether geographic, religious, or enterprise. They have a responsibility to their charter to try to educate members. Members have a vote on all major issues. Credit unions have remained stable throughout the economic recession and represent approximately 6% of the 17 trillion dollar industry. Acquisitions have narrowed the banking market and now the top 100 banks own 72% of the market. While these acquisitions have affected small banks, credit union market share has been stable. Credit unions have not been particularly popular with Gen Y and Younger Gen Xers. This is problematic because this is the age demographic that is in the prime building stage of their lives, when the need is greatest to take on healthy debt to grow. Credit unions are currently flush with cash, and they lend responsibly. However, credit unions do not have enough qualified customers requiring loans; the majority of their members are older, and in the preservation phase of their lives. Gen Y will need to take on debt to grow, and credit unions can help them to do this responsibly.

Tech Spending and R&D

Tech spending in credit unions accounts for 10-15% of their budgets. Developing, selling, and integrating new services and technology is extremely costly for these organizations as there is no economy of scale. If credit unions banded together, their combined assets of more than a trillion dollars ranks them collectively within the top 100 banks. In fact, it would allow them to compete with the largest three institutions, which now control nearly a third of all U.S. assets. As a collective, they could pool their R&D spending to strategically develop new technologies to significantly improve their competitiveness relative to these dominant financial institutions.

Reframing Banking

Let's talk, let's problem solve

By providing simple banking services that allow customers to organize, budget, achieve goals, and develop healthy financial habits, service providers gain loyal and credit-worthy, lifetime customers. Financial advice services are moved beyond the traditional boutique offerings for the wealthy, to become a core service targeting those who need help developing and achieving their financial goals. These customers and empowered brand representatives will eventually purchase homes, cars, build businesses, finance their children's education and their retirement. Attracting young customers, by providing them with financial counseling, will ensure a mutually beneficial relationship. Through the development of a multi-sided banking platform that provides a means to connect the consumer and the financial adviser to common data, unique service delivery models emerge. Additional enhancing services that make bill pay easy and collaborative, will position credit unions as stand outs in the market place of mediocre to poor me too products.

RESEARCH & CO-DESIGN

Insights

Two rounds of co-design were performed. The first was utilizing a set of issue and touchpoint cards modeled to build an understanding of how people currently bank and how banking to better serve their needs. The second co-design activity utilized a game to discuss financial behavioral change. Some of the insights from this research included:
  • Discussing financial goals before concerns, successfully exposed problems and aspirations
  • Would really like advice and help, but not from "a pencil-pusher that doesn't get me"
  • They want to know what to bring to the conversation before hand
  • They want the ability to separate money for bills, spending, specific savings and goals
  • They want ATM/Debit cards declined when a purchase would draw on funds necessary for recurring expenses like rent
  • They would really like an easy way to collaboratively pay bills with roommates, others

The Perspective Account

Vision

Union's Perspective Account will combine the power of personal financial management with real advisers and powerful tools to ensure deeper, more satisfying, and productive relationships between customers, advisers, and the respective credit unions. These new tools allow customers to create folders separating spending money from designated folders holding monies to pay monthly and other recurring expenses, and savings by goal (e.g. education, a trip, car, new computer); they also include spending stops, bill pay, and collaborative bill pay (e.g. for roommates, parents assisting children), individualized to meet the customer's needs.

Competitive Analysis

Current services fall short

Current available personal financial management systems are digital only experiences that do not extend into the brand or core value proposition of retail banking. They are not collaborative or actionable. They are disconnected from the actions related to budgeting, spending control, timely bill pay, and where financial management occurs. They do not take advantage of and leverage the existing preferred methods of handling larger financial conversations that occur within branches.

REVENUE MODEL

Union will generate revenues based on a referral and user fee model, encouraging Union to develop new and innovative services to increase adoption. Credit unions integrating Union services into their existing infrastructure will pay integration and training fees. Credit unions will pay: A $60.00 referral fee per new account generated through union.com. A $40.00 per customer set up fee. A $12.00 annual per customer fee for hosting data and web services. All "profits" will be utilized for R&D. Once credit unions are integrated into the platform, all new services will be ready to roll out to customers.

Credit Union Benefits

Credit unions offering Perspective accounts can expect a 20% increase in Gen Y membership. Additionally, it will cut attrition of existing members by a minimum of 50%. Each Perspective customer will generate a profit of $6000, with growth potential, and have an average of 3 more relationships with his credit union. Savings and checking balances will double to triple in size relative to customers with traditional accounts.

Business & service model

Launch Strategy

ADVERTISEMENT & VIDEO PROTOTYPE

SERVICE EVIDENCE

Warm Up Kit

The warm up kit gives users a place to put all the things required to get on the path to financial freedom with the Perspective Account. This customer gathered information is utilized at the in-person or digital setup appointment.

Perspective Account Sales Site

iPhone App

Fin

Mix Your Own

  • Industrial Design
  • Interaction Design
  • Service Design