Bank On It: Gen Z Wants Digitized & Personalized Banking Experiences

Generation Z, born after 1996, represents the next generation of banking consumers. This generational cohort was born in the internet age and are true digital natives who have never known a world without smartphones. Gen Z currently numbers over 67 million people and represents approximately 20% of the U.S. population. The oldest of Gen Z are now entering young adulthood and beginning to start their financial journey. These facts highlight the significant marketing opportunity Gen Z represents for credit unions. Business Insider found that Gen Z wields purchasing power of more than $143 billion, and Boston Consulting Group projects Gen Z’s spending power to increase by more than 70% in the next five years.

While credit unions are strong with the baby boomer and Gen X demographics – the average age of credit union members is 47 – attracting the newest and soon-to-be largest pool of banking consumers will require credit unions to offer the same kind of experience these consumers are used to from other industries. Specifically, credit unions will need to offer digital, personalized solutions tailored to Gen Z’s needs and preferences.

Gen Z Is Digital-first, Highly Educated & Financially Savvy

What makes Gen Z tick? This question is an important one for credit unions to understand. Gen Z is known to be both practical and frugal. They take a conservative approach to managing money, which was born out of watching their parents’ financial struggles during the Great Recession of 2008. When it comes to their financial journey, Gen Z is focused on homeownership, retirement and being debt free. A 2019-20 report on Gen Z by The Center for Generational Kinetics, cited by CNBC, noted 91% plan to be homeowners and 69% think saving for retirement should be a priority. Additionally, 66% are worried about accumulating or not being able to pay off debt.

To attract this demographic, credit unions will need to take a digital-first approach to financial service offerings that tap into these financial priorities.

Gen Z expects digital services and values the ability to manage their money from anywhere and on any device. A recent consumer banking survey from Zafin examining personalization, digitization and loyalty trends across generations revealed that online and mobile banking capabilities are the most important factors for Gen Z when selecting a financial institution.

Seamless, Personalized Experiences Vital to Gen Z Members

Investing in next-generation technology to build out digital and mobile banking platforms is critical to building out the infrastructure needed to serve this generation. Doing so will allow credit unions the ability to offer Gen Z intuitive, frictionless experiences for managing financial tasks like bill payments, as well as using mobile apps to get answers to financial questions.

The ability for credit unions to attract and retain Gen Z members also relies on creating and delivering highly personalized banking experiences. According to the Zafin consumer banking survey, 64% of the Gen Z demographic are looking for a personalized banking experience with product and service recommendations relevant to their unique situation.

Companies like Netflix, Amazon and TikTok continue to shape Gen Z’s expectations for hyper-personalized experiences. These companies use algorithms to tailor suggestions for content and products using consumer data, creating customer loyalty and longevity through personalization. Credit unions should take a page out of their playbook and build personalized incentives and programs to attract and retain Gen Z consumers.

Strategies to deliver on Gen Z’s desire for more personalized member experiences can include incentives and rewards programs, product bundles and benefits such as fee waivers, cash back, a free Spotify account, VIP concert tickets and gadget insurance.

To increase market share of Gen Z members, credit unions can and should get creative with incentives and rewards programs tied to achieving financial goals. Examples might include offering incentives for credit union members who are successfully saving for a down payment on a home or rewarding a member who is a basketball fan with a chance to win a trip to the NCAA Final Four tournament for achieving a goal of paying down student debt.

Credit unions can also personalize the Gen Z banking experience by tapping into this generation’s desire for guidance in developing financial literacy and navigating major financial decisions. Personalized budgeting advice and money management tips are valuable services for Gen Z members who have a strong desire for financial education.

Credit unions, like all community financial institutions, have been experiencing a migration of members to the competition. However, Gen Z has given credit unions a clear roadmap to better serving their needs – offer them value, show them you really know who they are through personalized experiences and make it easy to bank across all channels.

With this roadmap in hand, credit unions can set their course on how best to act on these insights, whether on their own or with an ecosystem of fintech partners.

Michael Lee is EVP of community and regional banking, Zafin, a Toronto, Ontario, Canada-based provider of product and pricing technology for financial institutions.