Originally appeared in CUES Credit Union Management
Just when you thought you had your head wrapped around the idiosyncrasies of Gen Y, the first of Gen Z will be graduating high school this year! What makes the next generation of young adults tick and what can your credit union do to appeal to this group?
Generations by the Numbers
First some generational background. Start and end dates and sizes of generations are a little fuzzy, but for the sake of this discussion I’ve cross referenced dates, numbers and findings from U.S. Census data, Wikipedia, a 2012 JWT Intelligence study titled Gen Z: Digital in Their DNA, plus other popular demographic resources. There are likely five demographic groups within your credit union membership in 2013. Silent (aged 68 to 88), Baby Boomers (aged 49 to 67), Generation X (aged 34 to 48), Generation Y (aged 19 to 33) and the new kids on the block, Generation Z (up to 18).
The Silent Generation, also known as the Lucky Few, is a relatively small generation with 52 million U.S. citizens. The Baby Boomers are huge with 76 million U.S. citizens. Gen X, also known as the Forgotten Generation, is much smaller with 50 million. The Boomers’ kids, Generation Y or the Millennials, is the largest generation ever with 78 million U.S. citizens. As you can see, generations are cyclical—big generations have lots of kids and small generations have fewer kids. This means that Generation Z, the children of Generation X, will be a very small generation. To date, there are 23 million U.S. citizens in this group and there are only seven more years left, so it’s unlikely that Generation Z will even hit 50 million U.S. citizens.
However, don’t ignore Gen Z. Combined with Gen Y, these two generations represent the future of your credit union. All generations pass through young adulthood and have similar experiences. It’s a time of disruption, change and possibility. Young adults typically move from their parents’ homes to their own place. They transition from high school to college. They go from single to married. They buy their first cars and first homes. And, they have babies. All of these milestones represent great opportunities for credit unions to purposefully build products and services to attract and retain young members.
Members of Generation Z are the first true mobile natives growing up in a world of smart-phones, tablets and high-speed wireless Internet. Landlines and wired Internet connections are a thing of the past with always-on connections making the concept of on- and off-line foreign to Gen Z. There is an expectation that all information should be accessible instantly and easily.
The key device for so many people these days is the mobile phone and Gen Z is no exception. In fact, the mobile phone is everything, as separate game and portable music players are waning in popularity.
For credit unions, this means we need to be thinking about mobile first when designing the next version of websites and online banking apps. This generation is using smartphones with increasing frequency to check social networks and email, shop, surf and conduct their banking. In fact, Gen Z are being raised to use and carry cell phones to interact with parents and family members. It’s commonplace to see 12- and 13-year-olds carrying the latest iPhone or Android device. This sophistication and connectivity at such an early age was unheard of with past generations.
Kids are still watching TV regularly. From a credit union marketing perspective, online and TV will remain the two most viable channels. However, online advertising is having a tough time transitioning to mobile. People of all ages are not particularly welcoming of display ads on small screens due to limited screen real estate and privacy concerns. This will be an interesting and challenging area to watch and understand as mobile marketing matures over the coming years.
For most teens, Facebook is a big part of their life. A few other social networks are popular as well, including Twitter, Tumblr and Instagram. Facebook and most other social networks require members to be at least 13 years old, but tweens want in as well, and almost half are using Facebook. A significant percentage of Gen Z prefer socializing online vs. real life. Many feel it’s easier and more convenient to chat digitally. This will present challenges to the traditional credit union model of face-to-face in-branch member service. We’re seeing this now with Gen Y, but the expectation for seamless digital access and communication from the comfort of anywhere with amplify with Gen Z.
For Gen Z, digital connections with the world and with friends are essential. They value Internet connections and the ability to text friends more highly than allowance money and some material goods, and significantly more highly than real-world activities like going to the movies, eating out or attending concerts and sporting events. Again, with so much attention being placed on these tiny handheld screens, credit unions will have to work extra hard to be noticed and useful in the future.
Parents and Money
Generations are defined by the times they live through. For Gen Z, economic concerns weigh heavily and will influence their attitudes toward money and savings. Expect Gen Z to be more thrifty with their money and more pessimistic about the future. Gen Z will witness deeper parental unemployment than prior generations.
Parents of Gen Z will tend to keep their children in more controlled environments growing up with less time playing outside and more time in smaller indoor gatherings. The amount of time parents spend with kids will reach new highs. These may just be signs of the times—with increased media attention on crime and terrorism, the world doesn’t seem as innocent as it once did.
Because of these and other factors, members of Gen Z appear to be responsible spenders and most will consider their family’s financial situation before making purchases. Today, there is much more openness within families about money and financial decisions. Parents will continue to have a huge influence on where their children bank. Credit unions should consider this as they develop and implement marketing strategies. There is a real opportunity to promote financial literacy across generations. Seminars, videos, email newsletters, blogs and social media posts filled with useful and engaging information are tactics that should be explored.
Parents are generally involved in online purchasing, both because they need to be, as they hold the credit card, and want to be. Even though most e-commerce sites stipulate that a parent make the purchase, many teens who shop online are using their own payment methods, such as PayPal or their own credit or prepaid debit cards.
The payment landscape is of particular interest as so much of credit union revenue is derived from interchange income. In the near future, the notion of writing a check will be a crazy, antiquated concept to young people who will be accustomed to emailing money to friends through Square, Gmail (using Google Wallet), or Dwolla, to name a few up-and-coming payment vendors. It’s important for credit unions to keep abreast of these changes and align themselves with forward-thinking technology vendors that understand the changing payment environment.
With the economic downturn being a big part of their lives, Gen Z are most likely to be concerned about finding jobs down the road, and many are also worried about their parents’ financial situation. Acceptance into higher education is another common concern.
Credit unions can play a bigger role in these areas by making concerted efforts to help young people understand and establish credit, by offering affordable college financing options, and even offering small business start-up education and financing. Gen Z will be very receptive to financial institutions that they perceive as open and caring.
Gen Z have a somewhat pessimistic view of the future. Most see the world either staying the same or getting worse, with geopolitical issues, such as terrorism, wars and government leadership, getting worse. Closer to home, they are particularly concerned about the cost of living. Again, credit unions should position themselves as legitimate and affordable alternatives to the mainstream and old-fashioned national banks.
Local Less Important
Not only is socializing online more comfortable and convenient for many in Gen Z, it’s putting kids in closer contact with peers throughout the world. As a result, online socializing is collapsing geographical divides and radically reshaping the way kids interact with others around the globe. Because the world is getting smaller and more connected, credit unions may appear too local. Credit unions tend to promote the fact that they are small and community focused, but this positioning could backfire if done in isolation. Credit unions need to continue to educate members and potential members about their free ATM networks and shared branching. Credit unions must understand how open-minded and globally oriented Gen Z will be and learn how to tap into this mindset.
The ABCs of Gen Z There you have a brief introduction to Gen Z—the next generation your credit union will need to appeal to. The more you understand now, the better your credit union will be positioned to thrive in the future.
Tim McAlpine lives in Chilliwack, British Columbia, Canada. He is the President and Creative Director of Currency Marketing, an integrated marketing agency specializing in helping credit unions attract the next generation of members. Tim is best known as the creator of Young & Free and CUES Next Top Credit Union Exec, and co-creator of the CU Water Cooler.