3 Keys to Attracting Younger Audiences During a Generation Crisis

A turning point is on the horizon for community banks and credit unions: The looming generation crisis. Deposits might not be everyone’s strategic goal today, but increased competition and changing preferences of future generations could mean that by the time you need them, it’s too late.

This creates a new strategic goal for smaller financial institutions: Attract the younger generations. BAI reported that almost two-thirds of bankers said the deposit competition had increased over the past year and over two-thirds expect it to increase in the next year. The time to take action is now. If small financial institutions wait too long, by the time deposits are needed, larger institutions will have already swept in and captured the younger generation.

The Looming Generation Crisis

A recent Kasasa study helped to clarify the age distributions at credit unions and community banks. Often financial institutions see a huge portion of their deposits from customers or members over the age of 50, and even though people over 60 only make up 35% of accounts, they make up over half (50.38%) of deposits.

Financial institutions often see around a quarter of their deposits held by consumers over age 75. These discoveries highlight that chances are heightened that a quarter of funding could disappear in the next four years, so the problem should be obvious to financial institutions since the median life expectancy is only 78.74 in the U.S.

For many community banks and credit unions, this means deposits will fall off the cliff sooner rather than later, so targeting a younger generation may be the best hope in winning deposits over megabanks and larger financial institutions.

In fact, “As the economy has improved, surging loan growth has put more pressure on the need to grow deposits. Loan-to-deposit ratios are rising, and as banks need to fund further growth, demand for deposits will rise,” according to Bank Director. To grow deposits, financial institutions will have to work harder to attract millennials and Generation Z – these generations expect the latest and greatest when it comes to their experience at their bank or credit union.

“Millennials and Gen Z make up more than half the world’s population and, together, account for most of the global workforce,” Deloitte noted. “They aren’t the future – they’re the present. They can make or break entire enterprises, and they aren’t afraid to let their wallets speak for them.”

These account holders have matured as they age and their accounts have matured alongside them. But, capturing the attention of the younger generation isn’t always as easy as it sounds, and smaller financial institutions are behind in targeting this audience.

Attracting the Younger Generation

What can community banks and credit unions do? Marketing specifically to millennials and Gen Z with technology and services designed specifically for them is the first step in attracting these younger people.

According to the 2018 Consumer Banking Study, almost 75% of Americans would choose a local financial institution over a megabank if they had innovative products or a great reputation for supporting the community. However, that loyalty won’t last unless these community banks and credit unions learn how to meet the needs of these younger generations by creating innovative products that feed their hunger for convenience.

This generation is looking for more from their financial institutions. They are looking for:

1. Authenticity: This is often lost in the banking experience when customers place their money in larger megabanks. Community banks and credit unions are known for their heightened awareness, ability to work directly with their members and customers, and giving superior customer service. Establishing a higher level of personalization with these generations can go a long way in earning their trust and deposits.

2. Digital Innovation: People often think larger financial institutions will have better digital innovation, but many community banks and credit unions have heavily invested in innovation, even partnering with fintechs to stay ahead of offering the best digital experience to consumers, according to Bank Innovation.

3. Value: Smaller institutions can often offer more value to their customers by providing them with more options and better benefits like free checking accounts with higher than average rewards, which will capture the attention and the deposits of their target audiences.

Beneficial for All

With a major generation crisis on the horizon, community banks and credit unions are at risk of losing more than a quarter of their deposits in the near future, so focusing on the younger generation is now key to growing deposits and staying competitive against larger financial institutions. Now more than ever, financial institutions should recognize the buying power of millennials and Gen Z, including their potential to increase their deposits as their accounts mature.

Ultimately, there are seemingly endless options when it comes to depositing money, and financial institutions must find a way to stand out and gain loyalty from their customers and members. Smaller financial institutions have the opportunity to win over the younger generation by providing authenticity, digital innovation and value. This ensures a mutually beneficial relationship between the financial institution and the consumer. And, it differentiates the community banks and credit unions from their competition while providing superior banking services for the consumer, ultimately growing deposits.

Keith Brannan is Chief Marketing Officer for Kasasa. He can be reached at keith.brannan@kasasa.com.