Are Credit Unions Ready for the Big Generational Shift?
The time to engage with the generation that will be running the nation’s credit unions in a few decades’ time is now.
As a childfree older millennial who is also niece- and nephew-free, Gen Z is a bit of a mystery to me. I know that they live on their phones and on TikTok, which is difficult to fathom because, first, I received my first cell phone (a Nokia brick used strictly for phone calls) as a freshman in college; second, the primary way I communicated with friends in school was through passing notes; and third, I’m about 1,000 times more likely to post something on Facebook that contains the laughing face emoji than log on to TikTok – a sure sign of how ancient the under-25 cohort must think I am.
I also know Y2K fashion nostalgia is a thing among the generation – another reminder of my maturing age given the very first iteration of the Juicy Couture velour tracksuit was a go-to outfit in my early 20s. And on a more serious note and in a very welcomed societal change, I know Gen Z is more ethnically diverse, and more accepting of differences in race, ethnicity, religion, sexual orientation, gender identity, etc. than any previous generation.
Comprised of individuals born in the late 1990s and 2000s, Gen Z currently makes up about 20% of the U.S. population, according to the U.S. Census bureau, and are beginning to infiltrate workplaces and influence consumer spending trends. They’re expected to comprise 27% of the global workforce by 2025, according to McCrindle Research in Australia, and a fall 2021 Bloomberg report valued Gen Z’s total buying power at $360 billion.
Since I began working in the credit union space in 2011, the big challenge for the industry was attracting millennials (or Gen Y, as they were often called) in an effort to bump down the widely-known average credit union member age of 47. With some millennials now in their 40s, many in that generation may have established long-term relationships with financial services providers, leaving credit unions to focus on reeling in the generation that was born into an online world and have yet to make big financial decisions, including which organizations to trust with their money.
Unsettling recent research revealed that so far, trends around Gen Z’s feelings about their financial services providers have not favored traditional financial institutions, including credit unions. According to an Alkami Technology study (which our reporter Peter Strozniak covered for this issue’s Focus Report), only 27% of Gen Zers who bank with credit unions, regional banks and community banks see their relationship with the institution growing over the next year, compared with 35% of those who use major financial institutions, 51% of those who utilize neobanks, 53% of Gen Zers who do business with fintechs and 57% of those who bank with big tech companies. The study also emphasized that about 25% of Gen Zers have yet to establish a stable relationship with a financial services provider, leaving the door open for credit unions to swoop in and court them. But credit unions must act fact, and flaunt the promise of an exceptional digital experience to grab their attention – not at all a surprising conclusion given that smartphones are practically an extension of Gen Zers’ bodies.
Embracing digital transformation is an obvious necessity for credit unions looking to win over Gen Z, but there are a few other strengths common to credit unions that they can leverage to become more appealing to these kids (yes, I know some Gen Zers are technically adults now, but calling them “kids” allows me to keep pretending I have nine years left in my 30s, not nine months).
One is credit unions’ commitment to and concern for their communities and societal causes. Numerous studies have shown that Gen Z cares more than their predecessors do about where a company stands and how it’s taking action on issues such as racial justice, LGBTQ+ rights, climate change and gun violence; one example is a 2021 Forrester study that found 51% of Gen Zers ages 18 to 23 will always research a company to ensure it aligns with their position on corporate social responsibility before making a purchase. Things like strong diversity, equity and inclusion programs, community investments that support marginalized groups and efforts to reduce carbon emissions should proudly be made public by credit unions that want to attract Gen Z.
Another Gen Z-friendly move credit unions can leverage is deepening their relationships with youth – or in some cases, just helping them better understand what a credit union is – through recognition programs. Scholarship programs have remained strong and plentiful throughout the pandemic, and while credit union membership is typically a requirement for applicants, scholarship recipients may be more closely exposed to the benefits of membership throughout the awarding process. Some credit unions have also run contests targeting Gen Z, like Alltru Federal Credit Union ($337 million, Wentzville, Mo.), which launched a Juneteenth Heritage Award (featured in this month’s Community News column) inviting individuals ages five to 25 to illustrate what Juneteenth means to them in the form of spoken word, written expression, dance, film or visual artwork.
Credit unions are not only preparing to serve more Gen Z members, helping them manage the money they earn and inevitably have passed down to them from older generations, they’re preparing to welcome more and more of them onto their teams as employees – and not too far in the future, as leaders. The fast pace of executive retirements that have been occurring in the industry since the pandemic began are a reminder that the baby boomers’ workplace ideologies and leadership styles are being replaced with a new set of expectations and perspectives. While we have not collected official data on credit union industry retirements, we can confirm anecdotally that we have received more CEO retirement announcements over the past two years or so than ever before. And official data on CEO departures at all U.S. companies shows that the uptick we’ve observed isn’t just in our imagination: According to a May 2022 report from Chicago-based executive outplacement firm Challenger, Gray & Christmas, Inc., the number of CEOs who left their posts from January to May of this year (668) was the highest ever recorded by the firm since it began tracking monthly CEO changes in 2002, and up 24% compared to the same time period in 2021. Reasons for the ongoing exodus have included burnout resulting from any number of COVID-related stressors; concerns over exposure to COVID in the workplace; business closures amid economic upheaval; and reprioritization of things like family, friends and community due to the pandemic’s glaring reminder that life is short.
What trends will define Gen Z’s migration into U.S. workplaces? A January 2022 LinkedIn survey found their top priorities include a flexible work policy including remote work options, working for an employer whose mission and beliefs align with their own (but not at the expense of good pay), and career growth opportunities. As CUNA Mutual Group Director of Talent Andrea Cooper explained during NAFCU’s “State of the Industry” virtual event in June, Gen Z is setting the standard for what future employees will expect from their work experience, and meeting their needs is going to require credit unions to build new systems and processes. That’s a big ask, but one way to start chipping away at it involves assessing culture – Cooper suggested credit unions pay attention to what makes their culture special and consider how to amplify it without requiring all employees to be in the same room.
As much as we don’t want to be reminded that we’re getting older, the time to engage with the generation that will be running the nation’s credit unions in a few decades’ time is now.
And, speaking further to my disconnection from Gen Z, who am I to presume that CU Times’ entire audience is comprised of the generation’s older siblings, parents and grandparents? Maybe you’re a Gen Zer reading this right now. If you are, feel free to tell me how off the mark this is – and know that fashion tips and TikTok tutorials are welcomed as well.