In recent years, a key target demographic (and buzzword, conversation starter and general point of confusion) for the financial industry has been the elusive millennial. How do we connect with them? What is the best platform on which to engage them in a meaningful way? Where do their motivations lie? How can we empower them to be successful in their careers? I think it's safe to say that the exploratory period has been exhausting – literally and figuratively – and the answer to all of these questions really boils down to the realization that there is no one-size-fits-all approach to bridging the generation gap.
For the fatigued among us (myself included), the good news is that this seemingly perpetual, one-topic conversation has begun to broaden as the next wave of consumers, Generation Z, enters adulthood. By 2020 – two years from now – Gen Z will make up one-third of the U.S. population. This generation presents new opportunities – and challenges – for credit unions, as these consumers are in many ways dissimilar to the millennials who preceded them.
In order to best serve potential Gen Z members, we must first begin by trying to understand them – a feat surely easier said than done. For the sake of brevity, let's start with the 30,000-foot view:
1. Digital is their first language.
Unlike millennials, Gen Z doesn't know a world without the internet. It's almost hard to fathom when you step back to think about it. Millennials certainly are glued to their phones, but Gen Z uses up to five screens per day. To this end, a seamless online and mobile banking experience across multiple platforms will no longer be a differentiator – it's a deal-breaker. Gen Z has been conditioned to expect information instantly, when and where they need it, and will settle for nothing less. A study by Koski Research found that while cash is still top-of-wallet for this group, three quarters of them are using P2P and payment apps – higher than any other generation. It remains to be seen if cash will go the way of the dinosaur.
2. Saving is a priority.
According to a study by American Express, 77% of Gen Z is carefully tracking their finances already. Furthermore, most of them – 72% – already have a checking or savings account. It has been speculated that Gen Z is more vigilant regarding their finances after watching their millennial relatives move back into their parents' homes after the recession in 2008. They're more discerning about debt, and are carefully considering life choices like which college to attend in order to manage it. They'll still take out student loans, but will be more focused on finding the most economical options. The bottom line: This group doesn't want to end up living in mom and dad's basement.
3. Loyalty has not yet been established.
Credit unions have a real opportunity to market checking and savings accounts to Gen Z, getting them in the door at an early age. This newest adult generation has not yet established allegiance to a financial institution, so credit unions are perfectly primed to step in and provide the services they need now – turning them into lifelong members. Because saving is such a priority, financial education programs and community outreach certainly will be very attractive to these younger members. Credit unions need to remain adaptive and agile in order to compete with fintech startups that are increasingly taking market share. By playing a critical role in making sure this generation stays out of debt, manages their finances responsibly and sets themselves up for a successful future, credit unions can position themselves for growth – a win-win. 4. They are diverse.
Gen Z is the most diverse generation in U.S. history. Consider this: 22% of Gen Z are Hispanic, and more than half of children in the U.S. will be of a minority race or ethnic group by 2020. The opportunity for credit unions to serve the Hispanic community is well documented, and the NCUA has already made it a priority to reach these members. Hispanics' general distrust of banks and the number of unbanked presents a fantastic opportunity for credit unions to help. Credit unions presently are deeply involved in their communities and, by continuing to be inclusive, will have a unique advantage over other financial institutions.
5. They are the business leaders of the future.
Members of Gen Z are 55% more likely to start a business than millennials. The price of college continues to increase dramatically, and Gen Z has seen the effects that student debt has on their millennial peers. Although they're still attending college, they increasingly are freelancing and looking to gain real-world experience over mountains of post-grad debt. As they start their own businesses, Gen Z will look to credit unions as a trusted partner to manage their business accounts. This group undoubtedly will be the one to watch in coming years as their entrepreneurial ambitions become a reality. Credit unions need to be prepared to seize the opportunity.
6. We still don't know what we don't know.
As Gen Z enters the workforce, they still represent a big question mark to businesses large and small. Will we struggle to connect with them to the same degree at which we still struggle to reach millennials? Do these markedly different characteristics translate to ease-of-doing-business-with? Are we witnessing the birth of the next cycle of endless speculation? Well, one can only speculate. What we do know is that credit unions need to be ready to respond, and the time to plan for 2020 is now. You can bet our industry's competition isn't playing a game of wait and see with the group poised to overtake millennials in terms of purchasing power.
Rhiannon Stone is COO at EPL, Inc. She can be contacted at 205-408-5300 or [email protected].
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