Credit unions have long been beloved by their consumers for their service-centered contrast to the big bank experience and their ability to provide competitive and flexible offerings. While credit unions have a strong and established reputation amongst older consumers, their continued success depends on their ability to attract the next generation.
It’s no surprise that credit unions are tailoring new programs to attributes they believe are most attractive to younger consumer segments. Still, research indicates that credit unions have room for improvement when it comes to attracting Gen Z and millennial depositors.
A recent survey found that 26% of people aged 18 to 24 use credit unions and only 14% of people aged 25 to 34 are members. By contrast, this number is 35% for consumers aged 45 to 54 and a significant 54% for consumers aged 55 to 64.
The recent rise in interest rates provides a compelling opportunity for credit unions to appeal to younger segments that may be in the market for more competitive loans, then convert those consumers into loyal depositors over time.
Here are a few reasons credit unions are poised to win the hearts of younger consumer segments.
- Personal touch is part of their DNA
Banks are for-profit institutions, and a corporation-like feel often marks their services. Even a routine call to customer service can result in a convoluted phone tree that consumes significant customer time without necessarily guaranteeing answers. Banks have earned a reputation for cumbersome customer service and out-of-touch policies, two things millennials and Gen Z are less likely to tolerate. In fact, research indicates more than half of millennials will switch brands because of poor customer service.
On the other hand, credit unions are typically dedicated to financial literacy and well-being—principles inherently person-centered. Across the board, they are known for providing easy-to-use services and help centers managed by knowledgeable staff who can understand customer needs, answer questions, and make informed recommendations.
- They deliver fair and beneficial borrowing terms
While predatory lending may have dominated certain verticals when boomers made up the lion’s share of the consumer base, Gen Z and millennials bring a savvier perspective informed by bountiful research. This means high-interest loan terms are quickly found out and abandoned in favor of fairer, more competitive alternatives.
Because of their not-for-profit status, credit unions’ objectives are naturally aligned with those of their members. Their structure naturally allows them to offer loans at more competitive interest rates than other banks and pay back higher yields on savings products. Credit unions also tend to charge lower fees than banks.
- They put their local community first
Competitive and compelling products are important to Gen Z and millennials, but they are insufficient. In addition, these consumers look for companies that positively contribute to the world around them. In fact, research indicates that 80% of Gen Z members refuse to buy from companies involved in scandals, meaning they tend to align their capital with their beliefs. Millennials follow suit, with 56% willing to leave their bank for poor DEI policies and 54% willing to leave for poor ESG policies.
This is one of the driving factors that has led many younger consumers to steer clear of big banks altogether, often opting to put their money in FinTech upstarts or online banking options. Couple this desire to bypass the big bank with a desire to ‘buy local,’ and you have a perfect candidate for credit union membership. Unlike traditional banks, credit unions improve their local communities through programs focused on financial literacy, investment in local causes, and advocacy for small businesses.
Gain entrée into the Gen Z and millennial segments with LoanStar
Despite relatively low membership among Gen Z and millennials, credit unions are poised to win the hearts of younger consumers due to their customer centricity, superior offerings, and unwavering focus on community. Lending provides a powerful onramp to lasting customer relationships, but it must be done in a frictionless and simple way for merchants and consumers alike.
LoanStar delivers flexible embedded finance that is exclusively focused on the credit union community. Whether you’re looking to onboard new consumers through merchant loans in your jurisdiction or hoping to access superior lending opportunities on a national scale, LoanStar’s seamless platform can flex to your model, put your capital to work, and diversify your membership.
Are you ready to engage America’s largest consumer segment with a better way to loan? Contact LoanStar to get started today.
