Why CUs Must Embrace Digital Tech to Win Over Millennials & Gen Z

After serving as the financial backbone for communities across the country for more than a century, credit unions are at risk of becoming irrelevant among the next generation of potential members.

That’s because they’re facing intense pressure from larger rivals that are woo’ing younger members with upscale digital technology, along with multibillion-dollar investments in artificial intelligence and other emerging innovations. Just 26% of Generation Z and 14% of millennials use credit unions, according to a recent GOBankingRates survey, with most opting to instead use a large bank or online financial institution.

Arguably, credit unions fail to be the first choice among younger prospects because many are stuck in the past. They’re built for a generation that still goes into a physical branch, reads the paper letters from their financial institution, and remains loyal to the same banking partners that their parents and grandparents used.

When it comes to Gen Z and millennials, credit unions are dealing with a vastly different type of member. Increasingly, the younger generations, want a separate bank or credit union from the family account, according to a 2022 report from BAI. They have no problem jumping to another partner if their current one isn’t meeting their needs. And above all else, Gen Z and millennials are demanding a digital experience. Just look at the numbers:

• Even the need to pull out a laptop is becoming a step too far. Mobile rules all. In fact, just 22% of millennials and Gen Zers say they prefer the desktop experience over a mobile app, according to a BAI report that looked at Gen Z’s banking habits and attitudes.
• They don’t want to come into a branch. The percentage of Gen Z and millennial members willing to open a new account in person – 12% and 21%, respectively – is far lower than the 58% of members over the age of 55 that are still willing to go in, that same report found.
• Loyalty is a rarity. In fact, 60% of Gen Z and millennials say they would leave a bank or credit union for one that offered a better mobile application, compared to 22% of those over the age of 55, according to the 2022 BAI report.

While credit unions have made significant strides in modernizing their IT operations, it’s not ubiquitous across all the services that are offered, which often creates a disjointed experience for members. That’s because financial institutions use different point solutions to handle common tasks. There’s one tool for onboarding, another for loan applications, and the list goes on.

Credit unions need a way to link all those programs together to create the fully-integrated experience that members are demanding. And to win the trust of the younger generations, credit unions have to create a common digital foundation that can serve as the key support center for all the important tasks, including:

• Onboarding: It’s not uncommon for many prospective Gen Z and millennial members to drop out in the middle of the onboarding process if it’s too onerous or requires any in-person visits. To create a modern onboarding experience, new members should be able to quickly complete all the required steps via the credit union’s mobile app. That will reduce churn and start the relationship off on the right foot.
• Banking: Members of Gen Z and millennials demand easy ways to manage their money. But just as important are tools that can help them grow existing wealth. Digitally savvy credit unions should seek to build a data-driven experience that allows members to easily access both money management and financial wellness products.
• Lending: Frustrated by the loan application experience, many traditional bank and credit union customers have turned to digitally native competitors. Cutting down the administrative burden that comes with loan applications and making it possible for prospective borrowers to complete all the necessary steps on a mobile app will help credit unions process loans faster, improve conversion rates and boost member satisfaction.
• Member service: Members don’t want to wait around for answers. They don’t want to have to login to multiple systems just to get help. What they do want is to feel like the support representative knows and understands their specific situation. By embracing a digital and data-driven approach to customer service, credit unions can cut wait times, create a single touchpoint for member inquiries for faster service and build the personalized experience younger members are looking for.
• Personalized engagement through communication preferences of a member’s choosing: Choosing the right medium for marketing materials is now just as important as the message being sent. Knowing when and how to effectively use push notifications, SMS texts, email and other nudges to send personalized marketing materials can help credit unions boost engagement and ultimately persuade members to deepen the banking relationship.

Credit unions don’t have to sit around and watch as their member base gets pulled away by rivals with better, more advanced technology. By investing in the right technology to meet their institution’s specific goals, credit unions can create a personalized and connected experience and help rebuild their reputations as trusted financial partners with younger generations.

Brian McNutt is Vice President of Product for the U.S mid-market at the Atlanta-based digital banking services provider Backbase.