By growing up never knowing a world without cell phones and the internet, the Gen Z demographic is driving credit unions to redefine approaches to traditional banking, technology, communication and philosophy.

“This generation’s preferred mode of communication is digital, primarily through social media and texting,” said Jessica Schindel, digital experience coordinator at Community 1st Credit Union in Ottumwa, Iowa. “They are all about technology and they expect their financial institution to offer digital capabilities that are easily accessible and user friendly.”

While Gen Z is generally defined as a person born after January 1, 2000, Community 1st CU categorized this demographic as ages 3 to 23. In total, the $560 million-asset credit union supports 57,000 members, 11,049 of which are classified as members of Gen Z.

“We have found that the best way to communicate with Gen Z is through texting, live chat, social media and our secure messaging system for mobile and online banking,” said Schindel.

She called Gen Z is a “generation of savers” who are “pretty enthusiastic” about products that encourage saving and living within a budget.

“This generation is doing things much differently than past generations and they seem more practical with how they use their money and how they earn it,” she said.

Demographic quandary

According to a recent report from Raddon that surveyed approximately 2,500 Gen Zers between the ages of 16 and 18, 57 percent of respondents said they use their smart phones several times an hour and 55 percent base product purchasing on information found on a social network site, such Instagram or Snapchat.

“A key mistake financial institutions can make when trying to address Gen Z is to assume that all young people are exactly the same,” asserted Matt Baaki, CTO at Member Driven Technologies, which supports 115 credit union clients. “Just because both Gen Z and millennials share a fascination with their smartphones doesn’t mean they are identical. Credit unions must recognize that this emerging Gen Z demographic has some key differences that they must cater to in order to forge successful relationships.”

While Gen Z is commonly defined by its focus on technology and its immediacy, there are other characteristics that might more closely resemble baby boomers, such as Gen Z’s want for brick and mortar structures and the insistence on saving money.

“Our research indicates that while mobile and online banking rule this demographic, there is a strong attachment to primary financial institutions that have at least one brick-and-mortar location, but are embracing financial technology such as iPay, PayPal and Square at a higher rate than prior generations,” said Ruthann Varosi, marketing manager at Extra Credit Union in Warren, Mich.

The $200 million-asset credit union supports 20,000 members and two branches. The Gen Z demographic equates to 3.1 percent of total membership. Varosi qualifies the age of Gen Z as those born after the year 2000.

Matt Baaki, CTO at Member Driven Technologies
Matt Baaki, CTO at Member Driven Technologies

The Raddon survey also indicates that Gen Z views banking institutions differently than millennials or Gen Yers. This falls in step with the recent push among credit unions to increase partnerships with fintechs. To this end, 44 percent of Gen Z forecast anticipate augmenting banking services with tech solutions from fintechs. Millenials and Gen Xers were also polled on this topic and responded at 28 percent and 23 percent, respectfully.

“Gen Z will likely be more open to financial tools and programs earlier than previous generations,” noted Baaki.

Attract and retain

As with other generations, if a parent is a credit union member, the CU is in a good position to attract their children – no matter the demographic – as future members. But in today’s market, a multi-pronged education and technology approach is critical.

Community 1st CU’s Schindel said her credit union “is constantly looking for ways to enhance our digital platforms and cater to the younger demographic. In the past year we have rolled out digital wallets, including Apple Pay, Google Pay and Samsung Pay, online and mobile banking upgrades, rewards checking and more. We also offer live chat, an online schedule an appointment tool and our members can even text us with their banking questions.”

Schindel also explained that the CU offers a “Dollar Dog Kid’s Club,” a savings educational program for members under 12 years of age, and the “Your Voice Club” for members 13 to 17, which is geared toward teaching budgeting and saving techniques.

“They also have access to their own Your Voice website, which includes a blog, videos [and] financial information that they can actually relate to,” she added.

Those programs appear to be working, as Community 1st CU 1,305 loans to Gen Z members on the books, equating to $8.6 million in loan balances (primarily auto loans). Additionally, Gen Z members represent 10,857 savings accounts, 5,804 checking accounts, 5,000 debit cards and 234 credit cards at the credit union.

“Understanding how to pay for college or purchasing your first car can be overwhelming for young generations,” said Schindel. “We recently launched an online education center full off short, interactive learning modules, including topics like auto loans, financing higher education, and budgeting tools that can help young adults build the foundation they need for long-term financial success.”

Extra Credit Union works with local schools on financial education for students all the way from kindergarten to 12th grade. Varosi explained that the CU recently launched new guidelines for its “Futurity” program, which provides a checking and a savings account for members as young as 16 with or without a parent or guardian (provided they meet the eligibility requirements and restrictions). Features include the CU’s mobile app, e-alerts and statements, bill pay, text banking and more.

“We have a dedicated school and community relations coordinator who is in the schools each week to provide assistance,” said Varosi. “Reaching Gen Z early and educating them on financial responsibility is key to helping our members reach their financial goals.”