Credit Unions Can Lead the Era of Digital Disruption

The rapid digital transformation of the past two decades has decimated traditional industries that were unable to keep up with the blistering pace of innovation. The transportation and hospitality sectors stand out as a striking example, with Uber and Airbnb flipping the industries on their head, seemingly overnight.

But none is more unique than the seismic disruption that Netflix and other streaming platforms brought to the cable industry a decade ago fueled by the adoption of the youth demographic. The number of cable subscribers overall decreased by 28% in just 10 years.

Interestingly, Bernstein Research found that children’s programming in particular had taken a sizable hit from Netflix, with Nielsen ratings for Nickelodeon falling more than 30%. Today, more than 44% of all adults report to have never engaged with cable services, and according to Nielsen, streaming viewership surpassed cable TV for the first time in July 2022, underscoring the importance of maintaining market share among younger generations.

The financial services sector faces a similar challenge, because the next-generation of consumers adopts and engages with financial services differently than their predecessors. A report by Fiserv found that people 40 and under prefer digital (mobile and online) over brick and mortar at a rate of nearly six to one. Their interactions with financial services firms are digital-first and offer an array of unparalleled advantages: Seamless convenience, user-friendly interfaces, cost-effective alternatives and personalized offers accessible through digital apps at the mere touch of a button.

Furthermore, Gen Z has an elevated level of financial sophistication, having used many fintech apps in their everyday lives to pay peers’ bills and even to invest in stocks and buy crypto. Gen Z’s values continue to evolve, but it is clear that they demand financial institutions that they can trust to provide not just services, but also tools and educational insights so that they can achieve their financial goals.

It is imperative for the financial sector to transform and address these seismic changes, and as member-focused organizations, credit unions are uniquely positioned to lead the charge.

Before the tidal wave of disruption from Generation Alpha hits, these are the lessons learned from the cable industry that we can draw from:

First and foremost, kids lead the charge: The cable industry was mostly impacted by the consumers who never used the service, not the ones who canceled it. In the U.S., more than 35 million consumers have never had cable.

Secondly, if industries don’t capture the next generation today, they may not be viable options tomorrow: Young people who never used traditional banking or financial services may rely on new alternatives for their needs, never considering the incumbent players.

The upside is that it’s still early in the game and there is an opportunity for traditional financial services to capture the hearts and minds of young people. According to Raddon Research Insights, 91% of parents want a financial services application for their children but only 12% are using one, and even more importantly, 71% of parents prefer that their kids’ applications are connected to their bank account, with only 17% preferring it to be offered by a fintech company.

Furthermore, parents want their children to access financial services such as savings accounts and debit cards, and they want these applications to offer financial education because they consider that teaching them how to manage money and build wealth for the future is of paramount importance.

Traditional service providers now have an opportunity to meet the needs of parents and younger generations alike. But to do this, they must take the decisive step of transforming into genuinely digital-first enterprises and tailoring products and services to cater to the evolving demands of Gen Z and the customers of tomorrow.

Gen Z has an insatiable appetite for digital content and values experiences overall, and the unprecedented usage of digital applications on their devices cannot be underestimated. When it comes to financial services, they value rewards and education and their goals are to invest and save. Interestingly, the way that they consume educational content is much different from the traditional classroom setting. They get their knowledge through conversations with adults, online research, and entertaining videos that reflect pop culture and the formats that they are used to seeing on TikTok, YouTube and other applications.

The tidal wave of disruption in the financial services industry is imminent, but there is a way forward. It starts with ensuring that services remain compelling and engaging, and are delivered in a way that resonates with younger consumers and meets them on their devices, where they spend a great part of their lives.

Tanya Van Court is the founder and CEO of the New York, N.Y.-based fintech Goalsetter, a provider of a mobile banking, debit card and investing app just for kids.