Are credit unions ideal for Gen Z?


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There are two things Gen Z tends to expect from their service providers: digital ease of use and values ​​that match their own. Wall Street’s heightened cynicism and concerns about privacy, environmental and business practices have led young consumers to seek other options. In light of these trends, credit unions, with their member-owned model combined with modern technology, can position themselves as a socially responsible, modern, non-corporate alternative for young consumers.

What’s wrong with banks?

Gen Z hasn’t had to deal with banks in a very long time. But he already has preferences. As of this writing in 2022, Gen Z is made up of young people between the ages of 10 and 25. While the lower end of this bracket is obviously not yet a target consumer demographic, the higher end has a unique set of expectations and requirements. It’s a generation that can’t remember a world without the instant gratification of Amazon, YouTube, Spotify and ridesharing apps. This is a generation that avoids formal procedures, waiting and bureaucracy.

This impatience, combined with a general disdain for the world of business and finance, means that the stuffy world of traditional banking could struggle to attract these digital natives.

In fact, a survey found that 75% of Gen Zers get frustrated when they have to go to a physical branch to apply for a new credit card, open an account, or take out a loan. Another 73% are frustrated with physical paperwork. In other words, failure to digitize enough will keep Gen Z out in the cold. Unfortunately, many traditional banks still require going to a physical branch to complete physical documents, at least in some cases.

But the lack of technological preparation is not their only complaint. Gen Z expects to be treated in a personal and caring way. When they interact with a human being, they want that experience to be, well, human.

The same survey found that 51% of Gen Zers considered switching banks due to a poor customer experience. This is double the rate of the other age groups in the study. If Gen Z is not treated well, they will move on to greener pastures.

Why Credit Unions Keep Their Promise

Given Gen Z’s lack of tolerance for slow in-person processes and disappointing interactions with bank employees, credit unions have the potential to supplant banks when it comes to winning over younger members.

This generation’s lack of experience with financial institutions is an unexpected advantage for credit unions. They just haven’t had time to build loyalty and they’re open to better alternatives that come their way. In fact, 82% of Gen Z respondents said they would switch financial institutions if the alternative offered them superior digital experiences.

Already, credit unions are outpacing traditional banks in digitalization. According to a study by Lightico, only 7% of credit union members were redirected to an agency during an online interaction. In contrast, many traditional banks have struggled to offer customers a journey that begins and ends entirely online.

graph of survey results Source: Lightico

Fee flexibility is another secret weapon that credit unions have in their arsenal. The survey found that 52% of Gen Z would switch financial institutions if lower fees were offered. Unlike traditional for-profit banks, credit unions are known for offering custom fees and rates. This is particularly appealing to cash-strapped and individualistic young people.

And remember that more than half of Gen Zers would consider switching banks if they had a bad customer experience? Well, credit unions are considerably better at delivering memorable and personal interactions. For example, credit union employees are typically trained to seek out opportunities to help members based on their individual needs.

Finally, Generation Z is perhaps the most “awakened” generation. These young people have zero tolerance for inequality. With their greater flexibility and not-for-profit structure, credit unions are there to serve their members – not the big Wall Street moguls. This is likely another differentiating factor that can draw potential members away from large, faceless institutions and closer to the welcoming embrace of credit unions.

The essential

Gen Z represents a new opportunity to attract the younger generation of members. By offering robust digital offerings, a personalized member experience, flexible fees, and a fair mission, credit unions can potentially capture more of this group.

Therefore, credit unions should continue to invest in these areas, as well as creative advertising campaigns on channels such as Instagram and TikTok. After all, it’s not enough to provide a superior experience – the target group needs to be aware of your existence.

Gilad Komorov Gilad Komorov

Gilad Komorov is Chief Revenue Officer at Lightico, a New York-based digital customer interaction platform provider.

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