BOSTON–New research suggests members of Generation Z are a “flight risk” for credit unions and are open to switching to another financial provider.
According to the new research from PYMNTS Intelligence and Velera, Gen Z, roughly those who are 28 years old or younger, are “steeped in a digital-first mindset and simply have different tools and plans to get what most consumers want.”
Gen Zers represent one-in-five credit union members, according to PYMNTS Intelligence.
“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,” the two organizations said in offering a preview of research that will soon be released. “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 one-in-three already have the door propped open and say it is somewhat likely they’ll switch to another financial institution in the next 12 months.”
Seeking E-Grand Central Station
The reason for the restlessness, PYMNTS Intelligence and Velera said, is that Gen Z wants 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.”
PYMNTS and Velera said the new report will detail 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,” the companies said.
‘Sizable Slash’
Additional findings in the research include:
- 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.”
- More than eight in 10 Gen Z would-be switchers intend to transition to something other than a credit union. Nearly four in 10 are eyeing a national bank.
How to Fix Things
“The threat means that many credit unions must step up their game, and now,” PYMNTS and Velera are cautioning. “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,” the companies added.