By NYU Staff

Young and Free Snapshot

Before Bank of America had its student loans, there were credit unions. In the past years, their members have dwindled from their prime time when they used to dominate student loan business with preferable interest rates.

Now one of them is trying to refurbish its lackluster loan business with social media. Its success might lend an invaluable perspective for businesses of other industries.

Servus Credit Union, who began its business in 1938, started a social network in 2007.  In the following 19 months, Young and Free pulled in over 2,600 new checking accounts who made $3.4 million new deposits, that was nearly five new members a day, a revival for a financial institution whose business has been coming to a near halt.

The financial services reaped some sweet returns from this group of new members, according to Currency Marketing, the firm that created the site. First part of the revenue came from the interest payments. As the new members took on $17 million worth of loans, a year later, they collectively paid 4.15%, or $705,500, of interest payments to Servus. Meanwhile, Servus invested $1.4 million in a mutual fund that gave 15% annual returns. Subtracting the cost of the Web site that is totaled at $630,000 for the same period of time of 19 months, Servus has realized a handsome 45% profit on this investment.

“We’ve been analyzing data for Web sites for a while,” said CEO of Currency Marketing, Tim McAlpine. “I will say 45% is a really successful investment.”

Young and Free is a Facebook-like community Web site with a focused interest in teaching members how to be financially savvy. According to the site’s metrics, over 90% of its users are between 17-25 years old. “The idea is to get to customers at young age and hope they will remain as our members when they grow older,” said the site developer.

Blogs, videos, and chat rooms, the site got them all. What’s more, Young and Free offers members from 17 to 25 to quickly open a Y&F Account, or a Servus checking account, by filling out a simple form. A customer services representative quickly follows up for confirmation. The whole process is free.

“We are selling Servus checking account as a product packaged in a way as a social media membership,” McAlpine said. “It’s time to make real money online.” This is a business model that might be valuable to other industries that are looking to make some dough online.

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