TransUnion reports on Gen-Z and their preferences in a recently published report on consumer preferences.
What is important here is how will lending, particularly credit card lending, will fare in the next 20 or so years. With millennials (born 1980 to 1994) aging into their thirties and still rejecting traditional credit, Gen Z-ers, (born between 1995 and 2010) are the feeder group for credit card growth in the 2020 decade.
- “The dynamics of having a bank account, mortgage and credit card with the same institution are changing. Increased competition has greatly impacted the industry,” said Paul Siegfried, senior vice president and credit card business leader at TransUnion.
- “Consumers have more choices at their disposal, and a greater value has been placed on reward programs and customer experience, especially with younger generations. Financial institutions must take a long-term view and evolve their strategies to build and nurture their relationships with consumers.”
- While TransUnion studies have found that consumers generally have a much higher propensity of opening their next credit product with a lender with whom they already have multiple relationships, this doesn’t appear to hold true for Gen Z. Younger consumers are engaging with new lenders rather than going to existing lenders for new products.
Legacy products, look out. You can’t hide behind expensive reward programs!
Interesting facts about card retention. TransUnion is a an ideal source given their long-standing interest in credit records.
- Average tenure for open credit cards in months by age group
- Format: Age Group, 2010/2017
- 18-25, 50/41
- 30-35, 75/70
- 40-45, 98/93
- 50-55, 117/113
- 60+, 147/150
The only group where credit card retention grew was the 60+ age cohort, where the average age of credit card ownership advanced from 147 months to 150. All other dropped. Note the Gen Z category going from 50 months down to 51. Part of this is from the CARD Act requirement for Ability to Pay, but the indicators show loyalty is a thing of the past.
That means, either really beef up credit card rewards or find a new business model.
Oh, to be in my twenties again!
Overview by Brian Riley, Director, Credit Advisory Service at Mercator Advisory Group