Born between the years 1997 and 2012, the demographic given the moniker “Gen Z” now comprises more than one-quarter of the world’s population. Gen Z members are true digital natives, adept at sailing oceans of data. They have also made both social media and social awareness vital aspects of their lives.
They currently comprise 25% of the workforce, and that makes them highly influential as consumers and brand ambassadors. Yet only 4% of Gen Z currently belong to a credit union (their Millennial peers are a blip higher at 5%). And therein lies the rub. Young people need a trusted and secure financial partner to assist them with major life decisions, and credit unions need a steady supply of new and younger members to remain viable.
That’s why credit unions need to have a strategy in place now, in order to attract and retain these young people who will reshape the financial environment. For a digital generation, that means providing digital options to consumers who expect a seamless process.
As a father of three Gen Z members, I’ve seen first-hand the financial ‘tools’ they utilize. Their credit union share accounts (savings) and debit cards (checking) are simply used for mobile check deposits, part time job payroll direct deposits, and paying for retail purchases. They all have Stockpile online trading accounts and have learned the benefits of dollar cost averaging.
They have absolutely no interest in cash exchanging hands among their friends and prefer Venmo usage when sharing the cost of dinner. Other than the day they set up their accounts, and one or two early deposits for (forced) learning purposes, they haven’t set foot into a branch – and those days were battles to get them to enter a so-called ’brick and mortar’.
A concept proving very attractive to younger generations is that of buy now, pay later (BNPL). The ability to convert some purchases to installment payments over time appeals to generations made wary of the higher interest rates associated with credit card debt. These higher rates are certainly one of the reasons Gen Z has turned away from the use of traditional cards with only a 41% usage rate as compared to 71% for Generation X and almost 74% for the Baby Boomers. All things direct pay are now on the cusp of being the norm and I anticipate they will continue moving forward.
Credit unions could also gain traction with younger consumers by increasing outreach efforts that show them to be a trusted source of financial education and advice. Almost one-third of Gen Z members either do not know their individual credit scores or lack them completely. Eight out of every ten Gen Z and Millennial consumers turn to social media for financial advice. Clearly, there is an opportunity here for credit unions to be the go-to for sound financial planning, money management, and credit discipline.
Prior to my son heading off to begin college, he asked if he could transfer a position of his savings to the electronic trading platform Robinhood for what he dubbed, “investment purposes.” That meant where his friends and peers were also participating in equity and crypto purchases. My ‘all eggs in the crypto bucket’ concerns were put aside recently when he shared his diversification perspective, 80% equities and 20% crypto, in that account.
Gen Z may also be the most socially aware, and socially active generation in human history. And as consumers and potential investors, they look for products and services tied to their values. Environmental, Social and Governance (ESG) investing will be their touchstone. As soon as 2025, 33% of all global assets under management are expected to have ESG mandates. ‘Recycle/re-use’ is a clear mantra to which my youngest daughter subscribes so I expect that to spill over into her investment philosophy.
Think of the engagement opportunities this offers. Lending programs for electric vehicles and bicycles, options for reducing student loan interest, interest matching programs tied to charitable donations, and eco-friendly branches are just a few pathways to open a floodgate of potential new members. While our kids certainly understand interest rates vary from FI to FI, they haven’t yet expressed an interest in shopping their credit union savings account in favor of a couple of higher percentage points.
Of course, no generation is a monolith, and every human being is unique. But if credit unions start now to offer products and partnerships attractive to a large segment of the population hungry for a trusted financial partner, the effects could be beneficial for every generation.