Credit unions face the continual mission of figuring out what members want and working to provide those products and services in an effort to exceed expectations. This is particularly challenging because each generation seems to have its own set of unique needs and expectations; what the baby boomers want is not always what Gen X wants, just as Gen X’s expectations can be different from those of millennials and so on. And now, as the cycle continues, credit unions must assess the unique wants, needs and behaviors of Gen Z.
Gen Z refers to those born between 1997 and 2012. This generation’s oldest members are now either nearing college graduation or already in the workforce. Consisting of approximately 68 million Americans, this generation will have significant purchasing power in the U.S.
Now that Gen Z is starting to enter the workforce and earning money of their own, credit unions must focus on how they can best serve this next generation. Before they can put a strategy into motion, however, credit unions need to understand this unique generation’s background to better understand their expectations when it comes to finances.
Gen Z and the Great Recession
This generation grew up amid a tremendous financial collapse. The older members of Gen Z experienced the Great Recession in 2008 and remember the effect it had on their families, friends and country as a whole. The reality of financial hardship that they witnessed at a young age has played a role in shaping the way they view money and financial institutions today.
Much of what they experienced in 2008 and onward has caused Gen Z to question the role or value of financial institutions in their lives and has also caused a lot of anxiety about personal finance. Watching many financial institutions struggle to survive, with many going through mergers and acquisitions, all while observing how people’s lives changed as a result of the recession, has Gen Z questioning whether or not they should trust these institutions — particularly when these young adults can easily turn to alternative service providers such as prepaid cards and the ever-popular Venmo.
This mistrust, doubt and uncertainty about money has made Gen Z wary of debt. Though many members of this generation are at some point in their college career (either planning for college or in college), they are more reluctant than millennials to take out student loans. They have seen that a college education does not necessarily translate into a higher-paying job, so this heavily weighs on them.
This generation has also expressed a preference of avoiding going into heavy debt to buy a car or a house, and Javelin Strategy reported that 51% of Gen Z members do not even plan to apply for a credit card.
The role of financial education in Gen Z’s financial outlook
Generally speaking, Gen Z also feels a lot of anxiety when dealing with financial matters because of their lack of financial education. Much of this generation does not know basic information about credit, borrowing money, saving and other important financial topics. They simply have not been taught a great deal about how to manage money, so it does not come as a surprise that they feel unease toward it, since people are prone to fear what they do not know.
Most important, this situation presents a prime opportunity for credit unions to reach out to educate this generation about finances in general, and about smart payments tools that give Gen Z advice about payments, spending and saving to help them feel more at ease with their finances. This opportunity also allows credit unions to serve their role as trusted advisers and a source of education.
The most digital generation
This generation also grew up with access to technologies like smartphones and social media, personal assistants like Amazon’s Alexa, YouTube and more, all at their disposal, as well as access to all the information in the world via the internet. This part of their upbringing also colors their attitude toward finance, since whereas other generations have grown to see value in what technology can do for them, this generation already expects it.
According to a recent digital-payments study from Billtrust, 79% of Gen Z reported using P2P payment platforms at least once per month, more than any other generation. Superior user experiences through digital apps and mobile payments are not simply an option for Gen Z — they are a requirement. This generation expects information instantly and expects banking and payments to be quick, easy and seamless experiences as well.
Unique opportunities to serve a unique generation
The unique attitudes of Gen Z toward finance present unique challenges and opportunities for credit unions. They have the opportunity to offer education and resources to Gen Z to help them feel more confident in their financial decisions. By stepping into an educational role, credit unions can help Gen Z understand best practices for money management. When they do, they have the opportunity to build valuable relationships and earn trust with this generation that can develop into new memberships.
It will not be enough, however, for credit unions simply to serve as advisers or teachers — they must also provide smart, innovative technology solutions if they want to attract Gen Z. These solutions must add value to and simplify Gen Z’s lives, making money management easier and more convenient.
It is imperative that credit unions provide solutions that help ease Gen Z’s anxiety toward personal finance. Offering features like proactive bill payments can show Gen Z that their credit union cares about them and wants to make their lives easier. The same goes for other payments experiences; Gen Z does not care how their payments are made; they are more concerned about accomplishing them quickly and easily. For credit unions, offering simple payments options that do the hard work for members will ensure that Gen Z experiences the value the relationship with their credit union can add to their lives.
There is also an opportunity for credit unions to go above and beyond simply offering proactive payment options by providing technology that can make money-saving recommendations for Gen Z. A payments tool that gives users insights on how they can make the best use of their money is crucial, especially with a generation that values saving as much as Gen Z.
When credit unions are able to offer innovative solutions and much-needed financial education, they will become a trusted resource and ally in Gen Z’s mind. When Gen Z realizes the value and importance their relationship with their credit union holds, they will be more likely to trust that financial institution with larger life decisions, including large loan accounts and wealth management services.