What Do Credit Unions Need to Attract Millennials & Gen Z?

In 2023, credit unions are seeing loans grow at record rates while deposits are dwindling, creating a liquidity shortage. This shortage threatens to become long term if credit unions don’t attract more members of the millennial and Gen Z generations.

According to Raddon, around 75% of credit union deposits belong to members who are baby boomers or older, making the outreach to the younger generations all the more important. As of now, both millennials and Gen Z prefer national banks to credit unions, according to a 2022 GOBankingRates survey, while the cohort aged 25 to 34 is most likely to use neobanks.

Considering the intense competition in the financial services industry, credit unions can’t afford to assume young people will discover them on their own. Instead, they must make a concerted effort to attract millennials and Gen Z – not just with marketing but also with banking products that are aligned with their needs.

Educate Millennials and Gen Z About the Value of Credit Unions

Credit unions lag behind traditional banks and neobanks for a simple reason – millennials and Gen Z don’t know they’re an option. “In general, young people have less exposure to and understanding of credit unions than previous generations,” Matthew DiGangi, an executive at MassMutual Financial Group, stated upon release of the GOBankingRates survey.

When speaking to these demographics, it’s important to steer clear of generational cliches, such as Gen Z being overly sensitive. Instead, pay attention to their core financial needs and highlight how your credit union can uniquely help them achieve their financial goals.

According to a 2022 YPulse survey, millennials’ top five financial goals are to save money, grow income, repay all debts, be financially stable and make a home purchase; Gen Z’s top five financial goals are to save money, grow income, get a job, purchase a vehicle and be financially stable.

With both generations prioritizing saving money, credit unions can emphasize their personalized rates and fees as the ideal solution for the young, budget-conscious consumer. It’s also important to appeal to millennials’ and Gen Z’s strong sense of social responsibility. Because they are more mindful of who they do business with, credit unions and their not-for-profit structure will appeal to young people who want to support businesses that aren’t driven solely by profits.

The educational efforts of credit unions will have to address one important issue – trust. In the case of Gen Z, only 20% trust credit unions with their personal financial data, compared to 44% for national banks, as reported by The Financial Brand. To build trustworthiness, meet Gen Z on the social platforms they use to find financial advice and provide educational content that speaks to their concerns.

The recent rise of “finfluencers” is an excellent example of how social media has become a financial literacy tool for millions of young people. Forbes reported that nearly 80% of millennials and Gen Z have used social media to find financial advice, with YouTube, Reddit and TikTok leading the pack as the most trusted platforms. Using these platforms to talk about investing, budgeting and passive income will establish you as a trustworthy voice among this audience and grow memberships.

Offer Relevant Saving Features

Inflation, stagnating wages and an uptick in layoffs in some industries have made millennials and Gen Z anxious about their future. And despite some of the differences in their financial goals, they agree on one thing – saving money is a top priority. For credit unions, this means offering savings products with features that young people want.

According to Raddon, millennials value the following savings account features:

• No or low requirements for a minimum deposit;
• Zero fees or penalties for withdrawing money;
• Access to round-the-clock customer support; and
• Saving money automatically.

Young consumers also gravitate toward savings accounts that let them separate their money into different buckets. Ally Bank, for example, allows customers to organize their funds according to different savings goals. It also allows them to save money on the go by rounding up transactions and transferring the extra cash to the customer’s savings.

Continue to Support Digital Innovation

Good digital experiences are a must if you want to attract and retain millennial and Gen Z members. The first step is to replace paperwork with digital solutions.

Take the loan application process as an example. How do you verify an applicant’s employment status? If you ask them to upload their paystubs or tax forms manually, know that millennials, and especially Gen Z, won’t be happy. A more automated process where you retrieve this information from a verified database is a better alternative.

In 2023, adding digital solutions to physical locations will be a major trend for credit unions — and it will also help with attracting new members of the millennial and Gen Z cohorts. Although digital apps are their preference, welcoming them with self-service options when they do visit a branch will contribute to a good impression.

Self-service machines also free up branch employees’ time to focus more on providing financial guidance. In comparison to baby boomers and Gen X, millennials and Gen Z are more likely to go to their bank’s account managers when they need advice, a Cornerstone Advisors study found. By freeing up branch employees’ time with technology, your credit union can focus on providing a consultative in-branch experience.

Other areas to focus on include advanced identity and credit protection, automated financial advice and virtual assistants for money management, which all belong to the top five features Gen Z is looking for in a banking provider, as reported by The Financial Brand. Strategic fintech partnerships are crucial to implementing these functionalities quickly, as building a virtual assistant or another complex feature in-house would take too much time and too many resources.

More advanced banking technology also helps credit unions overcome one of the limitations to their adoption – the fact that moving to another state or region means a member might need to find a new credit union. However, a well-designed banking app that allows members to make transactions, apply for new products and get support when they need it could make up for geographical limitations.

Ultimately, a multi-pronged approach that targets education, relevant financial products, and adoption of new banking technologies will allow credit unions to become the primary financial institution of an ever-larger proportion of millennials and Gen Z. With the oldest millennials reaching middle age and Gen Z becoming full-fledged adults, they are reconsidering their financial goals, making this the best time to capture their membership.

Kate Marienthal is Client Solutions Lead for Pinwheel, a New York, N.Y.-based provider of income data insights to financial services providers.