When credit unions began, we were the original financial disruptors. Members would come to us to borrow money to finance cars and homes when traditional financial institution would not lend to them.
Today, we often hear that credit unions aren’t relevant to younger generations and the struggle now, is to find ways to keep from becoming a savings club where growth is stagnant. To grow your loan portfolio, you need to lend successfully across the generations. The needs of each generation—Baby Boomers (Born 1946 – 1964), Gen X (1965 – 1980), Millennials (1981 – 1996) and Gen Z (1997 and after) — are different and evolving.
The key to success is to be relevant to each generation. Here are three things to consider when lending and marketing across the generations:
Understand the behaviors and perceptions of each generation. The average age of credit union members across the United States is 48. It’s quite likely that the majority of your members consist of Baby Boomers, Gen X and some older Millennials. Look to your existing members and seek a deeper understanding of everything from cohort behaviors and perceptions, to what challenges each generation faced while coming of age and is facing today. This will help inform what lending products they want and need.
A recent Wall Street Journal article, Playing Catch Up in the Game of Life, Millennials Approach Middle Age in Crisis, reports more than half the 72 million (the biggest of all generations) American Millennials are now in their 30s, with the oldest turning 39 this year. They are approaching middle age in worse financial shape than every other living generation. Millennials came of age in the Great Recession and borrowed heavily to get their education. Because of this, their financial perceptions, challenges and needs are quite different. Looking at the next generation, what socio-economic factors are shaping the financial lives of Gen Z and how can your credit union influence their financial and lending perceptions as they come of age? Think about what challenges are facing your members who are Baby Boomers and Gen X and how can you provide loans that help.
Not everyone wants to buy a car, but there is one generation that absolutely loves them! Gen Z has grown up with access to ride-sharing services, and are not interested in getting their driver’s license, let alone buying new cars. A J.D. Power report found that those who do buy a car, opt for a used one much more than prior generations. Conversely, Boomers came of age when owning a set of wheels meant freedom, independence and just plain coolness, forging a lifelong love affair with the car. The Baby Boomers’ affinity for the car is still going strong and will likely continue long into their retirements. Baby Boomers spend close to $90 billion a year on automobiles, 28% more than the younger generations combined. And the best news is that they are willing to borrow to drive those cars.
Don’t assume that because they are older that Baby Boomers and Gen X have less lending demand than Millennials and Gen Z. Autos are just one example. Boomers are sitting on an average $200,000 in home equity and Gen X buys the most expense homes of any generation. In addition, Gen X is entering the prime earning years of their careers and their median annual income is north of $100,000. Both generations, Baby Boomers and Gen X alike, offer great potential for lending growth for years to come. Plus, they are the parents and grandparents of the younger generations and can likely be your ally in positioning your credit union as a viable lender.
Deliver relevant messaging or get tuned out. Once you have a solid understanding of your membership, their behaviors and challenges, you can work on creating the right marketing message to appeal to each generation. We’ve all been in a conversation with someone from a different generation when we make a reference to something and it falls flat. Just the other day I was in a meeting and a manager made a reference to Green Acres, the TV show. A member of a younger generation asked, “Is that the new subdivision being built?” Funny, but you get the point. Your auto loan, credit card, mortgages and HELOCs all have their standard features and benefits. However, how you position that to each generation determines whether or not your message will be heard and understood.
Baby Boomers are all about the experience. They have a desire to put their own stamp on the world and experience life to the fullest. Baby Boomers are buying the car for the adventures they can have while driving it, not the low rate of the loan. Whereas, Gen X is concerned with transparency. They don’t believe traditional promotional messages. Position a mortgage using the monthly payment or talk about options to put more money in their pocket. Millennials are very comfortable interacting with companies online and are also more likely to view companies using social media as trustworthy, rather than those using traditional means. For Millennials, get your products reviewed and encourage recommendations across all channels. And finally, for Gen Z, the generation that has never known a world without blazing fast internet, deliver your message, content and applications quickly. If you don’t, they will think something is wrong and move on.
There is opportunity to grow your lending portfolio in every generation. As credit unions, let’s do what we do best—help members borrow in ways that are as unique and dynamic as the many generations we serve.