The numbers have come out, and Gen Z is still available for the taking.
With just four percent of our youngest generation registering as members of a credit union, the cooperative movement still has a way to go to attract this youthful, but powerful age group. Sporting an estimated $360 billion in economic purchasing power – and no established loyalty towards any mainstream financial institution to date – the youngest consumer generation is primed to substantially impact the financial services industry for the foreseeable future.
They’re also feeling the growing pains of inconsistent financial health and literacy. According to PYMTS research, 66 percent of Gen Z are currently living paycheck-to-paycheck, with Millennials even further ahead of them at 73 percent. Adding to that uncertainty, these younger consumers face large-scale, more generalized pain points. This demographic often lacks essential financial education and literacy. According to FICO, Gen Z exhibits the lowest levels of credit education, with 29 percent of individuals in that age group unaware of, or even lacking, a credit score.
Amidst such uncertainty, therein also lies hope and opportunity. This realization also means Gen Zers are also perfectly positioned for credit unions to become their financial institution of choice. It’s just that the current number of Gen Zers who are members is pretty low at roughly 19 percent.
So what reason can be attributed to this finding, and how can credit unions help solve it? Due to the fact that so few Gen Zers and Millennials are currently credit union members, the credit union movement as a whole must endeavor to attract and retain these established and up-and-coming generations.
And while there’s a whole lot of ground to make up with Gen Z, it’s not like the credit union movement is starting at zero. For over a century, credit unions in America created a worldwide reputation for their not-for-profit status that, contrary to banks, continues to reinvest revenue back into the welfare and benefit of their members. They create the products and services of a bank but at reduced costs that lift up the lives of the credit unions’ communities and residents themselves.
Cooperatives have been largely successful in their efforts at innovation and meeting the needs of their communities, efforts that lead to higher member satisfaction scores. In an always-changing and evolving financial services ecosystem, however, credit unions have to continue to innovate to meet member demands.
The challenge for cooperatives lies in recognizing the importance of connecting with younger, digital-aware members and offering more personalized digital services. Remember that Gen Z doesn’t have a memory of life without the internet. From the moment they were born, they don’t know what it’s like not to have 24/7 access to thriving broadband internet. Largely digital natives, Gen Z and many Millennials both expect and demand a smooth digital service experience from their financial institution.
Gen Z was born into a world that has not only adopted digital innovation but has fully embraced it. It’s for this reason that Gen Z doesn’t want their financial institution to offer the standard online basics and necessities. They want something more; a living, breathing, all-in-one experience from an institution that shares their life perspectives and values.
Gen Z a better fit for credit unions than banks
Today’s younger groups have seen through the angles and pressures prior generations have experienced with corporate entities and financial institutions that clearly did not have their best interests in mind.
For instance, the overwhelming corporate atmosphere banks exhibit has proven to be a noteworthy turn-off for Gen Z. The for-profit, shareholder-centric stance gives banks very little, if any, flexibility on things like fees, for which credit unions are inherently known for, along with their versatile nature and adaptability.
Even if one takes the “big business,” corporate, shareholder-centric vibe out of the scenario, credit unions still exercise a healthy advantage over traditional banks. Their perceived advantage, their sheer size, actually works against them because it makes it incredibly difficult to adapt to modern changes like fintech.
Banks still prefer their customers walk into a branch location to perform routine tasks they could easily fulfill such as apply for small-dollar loans, apply for credit cards, or simply open accounts. Gen Z finds having to do any or all of those things in-person hilariously unnecessary, according to a Lightico survey, while 73 percent are frustrated by the very idea of paperwork. Cooperatives have proven much more willing to adapt to technological advances such as fintech, thereby giving a significant edge in members’ ability to connect with and interact while on the go.
As mentioned above, credit unions built their 100+-year reputation on community-building, member service, warm, genuine interactions, and concerted investment in finding solutions to the challenges their member-owners are experiencing. While earlier generations accepted the opposite experience as standard operational procedure from banks, apparently Gen Z isn’t having it. According to the same Lightico survey, 51 percent of Gen Z consumers considered switching banks due to poor customer service. That figure more than doubles up the rate of any other age category in the study.
Cooperatives are renowned throughout the last century and into this one their memorable, attentive, and personalized interactions and relationships with members. Famously regarded as the most trustworthy financial institutions, many employees are specifically trained to discern opportunities or forecast products, services, or specific pain points in assisting members during interactions.
Get to Gen Z while the gettin’s good
Gen Zers’ purchasing power will only increase as the years advance, and at the moment credit unions have the chance to integrate and build upon the advantages and attractions that will establish that generation’s loyalty and trust for the rest of their lives. Again, they’re more than willing to switch to an alternative institution that makes those extra adjustments or spirit of culture if your credit union presents them.
That’s not just hyperbole: A 2022 Credit Union Times article written by Gilad Komorov stated that a staggering 82 percent of Gen Z respondents claimed they would switch financial institutions if an alternative offered a better, more superior digital experience.
From what Gen Z has shown so far, it appears the credit union movement inherently understands what Gen Z wants, and how perfectly they sync with the cooperative mission. By adapting marketing objectives and targeting and specific financial services appropriately, the credit union movement possesses a remarkable opportunity to grow and succeed throughout much of this century.