Gen Z and Millennials Favor National and Online Banking, Survey Finds – What Does This Mean for the Future of Credit Unions?

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With roots dating back to the mid-1800s, credit unions have become a mainstay of the American financial landscape, but their popularity may be waning. Generation Z and Millennials are less likely to do business with credit unions than with national and/or online banks, according to a new survey from GOBankingRates.

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The survey revealed that 26% of people between the ages of 18 and 24 use credit unions, while 36% of people in this age group opt for national banks such as Chase, Bank of America, US Bank and Wells Fargo. People aged 25 to 34 are even less likely to use a credit union, with just 14% being members. They too prefer doing business with a national bank (28%) but are even more likely to use an online bank, with 31% saying they do business with these institutions. People aged 35 to 44 also drastically favor online banks (36%), while only 19% of this cohort have banks with a cash register.

Meanwhile, older generations show much more loyalty to credit unions; 35% of people aged 45 to 54 use credit unions, as do 54% of people aged 55 to 64. Among respondents aged 65 and over, 60% are members of a credit union. So what does all of this mean for credit unions now?

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Credit unions need to do a better job of attracting young people

One of the biggest reasons credit unions lag behind national and online banks is their own flaw: a failure to market themselves as an option.

“In general, young people have less exposure and understanding of credit unions than previous generations,” said Matthew DiGangi, an executive at MassMutual in the strategic distribution division and a member of the bank’s executive advisory board. Insurance and Securities Association.

Consumers should not be expected to stumble upon credit unions or naturally understand their offerings and benefits (or inherit recognition from their parents); rather, credit unions should be expected to reach out and connect with young people who may be unaware of their values.

“What’s really the problem for credit unions trying to serve younger generations is educating them about what a credit union is and how their relationship works as an owner,” Brian Abner said. , Senior Economist and Market Strategist at Market Research Group LLC.

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Gen Z seems more interested in credit unions than Millennials

Although GOBankingRates’ survey shows that older millennials prefer online and national banks over credit unions, the research also shows an increase in popularity among Gen Z. This suggests that credit unions could correct the course and do more to attract young consumers.

“Credit unions are making strides to better educate millennials and Gen Z by adding products and services to add relevance to their younger members,” Abner said.

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Credit unions need to seize the digital day

Yet credit unions need to increase their digital presence and capabilities to engage a generation that is relentlessly dedicated to online and mobile convenience.

“[This] is a credit opportunity [unions] to reposition itself by embracing digital,” said Matthew Williamson, vice president of global financial services at Mobiquity. “It could, in fact, open up growth opportunities for them, serving existing customers more efficiently while attracting a new generation that won’t need to find another supplier if they change states and this co-op of credit is no longer available to them. Technology has also leveled the playing field: cloud services, open platforms and APIs provide cost-effective access to creating engaging customer experiences. »

In-Person Banking Is Decreasing, But Not Going Away

The fact that so many young consumers prefer online banking to credit unions means that the days of physical banking are coming to an end – which would be terrible news for credit unions that live by the “people who help people. In-person banking will decline – it already is – but jumping to the conclusion that in-person banking will disappear, leaving the credit unions that depend so crucially on it in a bind, is hasty and at short-sighted.

“In-person banking is always a key part of building a relationship with a client and more consultative discussions, such as college planning, retirement planning, insurance needs, counseling in investing, etc,” DiGangi said.

Ultimately, what credit unions need to do is strike a balance between in-person services — which are still very important for those making major financial decisions — and being digitally savvy. And they need to focus their digital advances on attracting new customers as well as showcasing their strengths, like the fact that they’re not for profit, unlike banks. This fact in itself could go a long way in winning over more Gen Zers, who tend to be wary of, if not strongly opposed to, overtly capitalist motives.

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There’s a place for everyone

“The big picture is that there is a place for banks and credit unions when serving communities,” Abner said.

Additionally, we must consider the bizarre and tragic times in which we live. With the pandemic raging more furiously than ever, the world of banking – and what consumers expect from financial institutions – is changing.

“From a financial industry perspective, the past 24 months has created a shift in the way services are delivered to consumers,” Abner said. “The technology, the relevant financial products and services, and the point of sale will be different.”

In the future, consumers will likely want a taste of both: the personal, unbiased service of a credit union, as well as the flashy convenience touted by a national or online bank.

“The future will see a hybrid type of exchange between institution and customer, as more mundane interaction will use varied high-tech systems, while more sophisticated transactions, such as loans and wealth management services , will be more personalized one-to-one interactions,” Abner mentioned. “The result should be more confidence and ease of transaction for consumers and their choice of a financial partner, whether it’s a bank or a credit union. Everyone has merit.

More from GOBankingRates

Methodology: GOBankingRates surveyed 1,335 Americans ages 18 and older across the country between December 1 and December 3, 2021, asking them twelve different questions: (1) Which category does your current financial institution fall into? ; (2) Have you considered changing banks in the last year? ; (3) If you have considered changing banks in the past year, have you had any of the following factors? (Select all that relate to it):; (4) What feature, benefit or other offer is most important to you when opening an account with a new institution? ; (5) Are you currently satisfied with all of your banking products and services offered by your bank/credit union? ; (6) Would you ever have different types of accounts in different banks? (ie check at Chase, but save at TD Bank); (7) What is your preferred banking method?; (8) Which of the following is the main reason you are staying with your current bank? ; (9) Which of the following bank accounts do you currently use/have you opened? (Select all that relate to it); (10) What is the minimum balance you keep in your current account? ; (11) How much do you currently have in your savings account? ; and (12) If you are in a relationship or married, do you share bank accounts with your partner? All respondents were asked to answer a filter question: Are you currently a member of any bank (including online) or credit union?, with a “Yes” response. GOBankingRates used PureSpectrum’s survey platform to conduct the survey.

About the Author

Nicole Spector is a writer, editor, and author based in Los Angeles via Brooklyn. Her work has appeared in Vogue, The Atlantic, Vice and The New Yorker. She is a frequent contributor to NBC News and Publishers Weekly. Her 2013 debut novel, Fifty Shades of Dorian Gray, received rave reviews from Fred Armisen and Ken Kalfus, and has been published in the US, UK, France and Russia – well let no one know what happened with the Russian edition! She has an affinity for Twitter.

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