Gen Z Is Ready to Stay if Credit Unions Step Up Digital Innovation

Gen Z is often typecast as a different species, a pervasively anxious one that never knew daily life without the internet, thrift shops, and consumes social media voraciously.

But in many ways, these consumers, roughly 28 years old or younger, are just like the rest of us. Steeped in a digital-first mindset, they just have different tools and plans to get what most consumers want.

Take Gen Zers, who make up more than 1 in 5 credit union members, according to PYMNTS Intelligence data.

The mobile-first generation that can’t function without its smartphones values better online or mobile banking, along with free ATMs, at rates close to the averages for all generations, according to a forthcoming PYMNTS Intelligence collaboration with Velera. Yet Gen Zers are more than twice as likely as the average credit union member to consider leaving their credit union, typically for a traditional or digital bank. More than 1 in 3 already have the door propped open and say it is somewhat likely they’ll switch to another financial institution in the next 12 months.

The reason: They want more bank-style convenience, better digital technology for financial services, and no fees. They demand mobile experiences that are seamless, straightforward and with no hassles. They see their mobile banking app as an open-banking Grand Central Station for all their financial interactions, including ones with other financial providers. They’re not just digital-first, but fundamentally digital-native, with a focus on the mobile-centricity in which digital banks and larger conventional ones have invested a lot of money.

The report details how for credit unions — institutions historically known for their local community banking and personable service — the loyalty of these younger members can no longer be considered a slam dunk. With Gen Z’s collective purchasing power estimated to reach a $12 trillion within five years and assets projected to surge to $84 trillion by 2045, thanks to the coming flow of inherited money, credit unions ignore the generational cohort’s roughly 70 million U.S. individuals at their peril.

Nearly two-fifths of Gen Z credit union members express at least some inclination to switch financial institutions in the coming year, more than twice the average for members of all ages. Some 14% of Zoomer credit union members use their pint-sized institution as their primary financial account. Which means that if they’re more than twice as likely as other members to bolt, credit unions could face a sizable slash to their membership base.

The report makes clear that the younger cohort is sounding alarm bells for credit unions. More than 8 in 10 Gen Z would-be switchers intend to transition to something other than a credit union. Nearly 4 in 10 are eyeing a national bank.

The threat means that many credit unions must step up their game, and now. Solutions like a single application process for a combined credit card, savings and checking account is one tool. Financial literacy, budgeting and retirement planning are other ones. Digital onboarding is nonnegotiable: Gen Z consumers want that 78% more compared to the overall consumer population.

Meanwhile, prioritizing intuitive mobile applications, responsive member service and expansive ATM access can go far in retaining members. So can making loyalty rewards and integrated card management features a core offering.

Key takeaways:

• Gen Z poses a flight risk: A large proportion of Gen Z credit union members are considering switching financial institutions, predominantly favoring larger, technologically advanced banks over other credit unions.
• A digital-first strategy is imperative: Gen Z demands seamless, mobile-centric experiences, bundled financial products, accessible wealth-building tools and transparent, flexible services.
• Proactive and continuous change is critical: Credit unions must prioritize digital onboarding, personalized engagement and innovation in product offerings and services to attract and retain this pivotal, digitally native generation.

Read more:

Gen Z’s Digital Expectations Force Banks Into Innovation Overdrive

Spending Dips 13% As Gen Z Makes Saving ‘Cool’

Three in 10 Gen Zers and Millennials Use Telehealth, But Paying the Doctor is Full of Friction

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