How Credit Unions Can Bridge the Age Gap & Thrive in the Digital Era

It’s no secret that credit unions are struggling to sustain their member growth with younger generations opting for bigger national banks. According to Zest.ai, despite the youthful average American age of 38.5, credit unions are predominantly frequented by a more mature crowd, where over 50% of Americans over the age of 50 are members of credit unions. The AI lending company also revealed that credit unions seem to have a generational gap, as less than 20% of Americans under 40 are taking advantage of their services.

Deliberate and meaningful efforts to attract younger members are crucial for the longevity of credit unions. The problem is starting to fester and credit unions are starting to face declining active member engagement, and in turn a massive squeeze in deposit and loan growth and rapidly declining active member engagement.

Unlike Generation X and baby boomers, millennials and Gen Z prioritize digital convenience, seamless user experiences and transparency, especially regarding fees. Traditional methods that engaged older members won’t suffice for these younger generations. Both millennials and Gen Z have experienced financial instability – millennials during the 2008 financial crisis and Gen Z through their parents’ struggles – leading to a cautious approach to banking. They demand clear, transparent banking practices and personalized financial education.

While boomers valued personal relationships with their bankers, millennials and Gen Z favor self-service, speed and convenience. However, winning their loyalty requires more than just these features. They expect readily available guidance and hyper-personalized financial advice tailored to their specific needs. Transparency is crucial, as hidden fees are a significant deterrent. Additionally, they are more open to switching banks and often maintain multiple accounts across different institutions. Capturing and retaining their attention, engagement and loyalty requires continuous effort and adaptation from financial institutions.

The preferences and expectations of the younger demographic might sound daunting and impossible to achieve. Here, we’ll highlight some specific tools and features that credit unions should consider implementing to effectively capture these members. By embedding these features into their digital banking platforms, credit unions can create a compelling ecosystem that drives loyalty and engagement:

Real-time Payment Options

According to ACI, real-time payments in the U.S. are expected to grow at 31% CAGR from 2023 to 2028. However, less than 25% of credit unions support them, compared to over 50% of other financial institutions.

Both young retail and commercial members prefer real-time payments due to their speed, convenience and the ability to provide improved liquidity and a real-time picture of their finances.

By implementing real-time payments, credit unions can not only improve their member experience significantly, but also drive greater account activity if the members know they can send and receive funds instantly. And, credit unions can achieve all this while improving margins, as processing real-time payments is comparable in cost to non-instantaneous electronic payments and is actually cheaper than processing check payments.

In addition, for credit unions, implementing real-time payments can significantly enhance retention. Gen Z members, who value speed and convenience, are more likely to stay with financial institutions that offer these features. Since Gen Z is known for their low loyalty to a single bank and tendency to maintain multiple accounts, offering real-time payments can be a competitive advantage for credit unions to attract and retain these younger members.

Subscription Management

According to ScribeUp’s data, millennials and Gen Z typically juggle more than 10 subscriptions monthly, and over 70% have experienced unwanted subscription bills. As more companies enter the subscription economy to increase their recurring revenue – even the heated seats of a BMW are a subscription! – the recurring bills burden is expected to worsen as the consumer subscription economy is projected to reach $1.5 trillion by 2025.

Young members are actively seeking a streamlined solution to manage all their subscriptions in one place – and are willing to pay a decent amount for this feature. Currently, there are third-party personal finance tools like Experian and Rocket Money that are attracting these Gen Zers and millennials to open accounts and spend over $15 per month to have subscription management on top of their banking relationship. They highly value automated advance notices for upcoming subscriptions, one-click cancellation and information on the funds needed to cover recurring payments.

In addition to being a powerful differentiator that members care about, subscription management benefits credit unions too – specifically with the data that credit unions collect on external accounts when members are looking for recurring bills on other financial institutions’ banking products. By having a subscription finder (a feature to help members find all their recurring bills, not just within their credit unions’ banking products) within their digital banking experience, credit unions can access additional data to better support their members’ financial needs. And, younger members are happier because they find all their subscriptions and can manage them in one place!

Deeply understanding their members’ financial situations, beyond the credit unions themselves, and utilizing data sources provided by subscription management solutions enables credit unions to better assist their members’ loan refinancing and direct deposit needs. Embracing this data not only allows these institutions to better serve their communities but also strengthens their long-term relationships with members, fostering loyalty and trust.

By providing subscription management services in their banking app, credit unions can boost digital engagement rates, improve their understanding of members’ spending profiles to better cross-sell loans and direct deposits, and become the card-on-file as members increasingly route recurring expenses through them.

Personalized Financial Advisor

Younger consumers are signing up for third-party personal finance apps, like YNAB and Goodbudget, to track finances, analyze spending and receive personalized financial advice. However, there is a growing expectation for credit unions to offer these services since they already have access to member data.

Over 70% of millennials and Gen Z trust and seek financial advice from their banking relationships, but only a third feel adequately supported. This gap presents a significant opportunity for credit unions.

By giving members data-based insights and adding a personal financial advisor tool to their platform, credit unions can help members make better financial choices and strengthen their role as a trusted financial partner. This is especially valuable because credit unions can offer financial advice to people usually ignored by traditional wealth management services. They can improve their members’ financial health and long-term financial situation while staying true to their mission and securing the future of their institution.

As credit unions confront the dual challenges of an aging membership base and evolving consumer preferences among younger generations, the path forward requires proactive adaptation. By implementing these tools, credit unions can reinforce their position as member-centric institutions. The time to act is now as the future of credit unions lies in their ability to evolve, engage and empower the next generation of members!

Erica Chiang is Chief Commercial Officer for ScribeUp, a Los Angeles-based provider of a subscription management solution for credit unions, community banks and fintechs.