The Credit Union Journal recently published an article on the growth of credit card lending at credit unions reached $59.8 billion in August 2018, up 8% from a year earlier, reaching pre-recessionary levels according to the latest Credit Union Trends report published by CUNA Mutual Group. Credit cards are consumers’ preferred payment among several demographic groups as more purchases are made online, though debit is still preferred overall in stores, according to PSCU’s “Eye on Payments” report conducted in September. This report shows that younger millennials are now nearly as likely to prefer to use credit cards as baby boomers, a demographic that traditionally favors credit cards. While a CO-OP Financial sponsored webinar cited data claiming debit is the preferred payment method among credit union members, both organizations agree that younger adults, Gen Z, hold the bulk of the growth in payments, but have different expectations for banking than baby boomers. Gen Zers communicate more digitally than older adults and are concerned about security and convenience. They are highly tech-savvy and expect more personalized support from their financial institutions.
PSCU’s Tom Pierce,”it’s (Gen Z) a demographic CUs need to be paying close attention to.“Now as Gen Z members are starting to establish their own financial relationships, it’s clear that they are starting to look for that relationship where they can have that personal type of support and be safe and secure,” Pierce said. “So credit unions have the opportunity to target these groups as new members to join their forces.”
But those younger consumers will want to conduct business in entirely different ways than older members, warned Pierce and Lynch. Engaging that younger demographic could prove challenging, since many younger consumers avoid making phone calls in favor of utilizing e-channels. The pair said SMS text messaging and emerging forms of artificial intelligence such as chatbots should be on CUs’ radars.
GenZ generally refers to people born between 1996-2000. Experts claim this age group is replacing millennials as the latest force to enter our workforce, estimated to be about 61 million Americans, according to Bridge Works, a consulting firm specializing in generational behavior, who claims they act differently than millennials or any other generation. Mercator Advisory Group’s latest CustomerMonitor Survey Series report identifies Gen Z as 18-24 year olds, younger adults who often have different payment habits than even older young adults. Our latest data shows that indeed, credit card use is strong, the most popular payment type and its use increased in 2018 to 62% of U.S. adults whose household uses general purpose credit cards, while use of debit cards declined to 54% of U.S adults surveyed. Credit cards are now consumers preferred payment online, at online retailers, for travel, digital content and now, even for online bill payment. Yet, young adults, especially GenZ are less likely than older adults to use credit cards, probably because they are less likely than average to pay their bill in full every month. Credit availability is an issue for young adults, especially Gen Z, as they are twice as likely as average to wish they had more credit available on their credit card and more than twice as likely as average to prefer to use instant financing at an online retailer when purchasing expensive items. The youngest adults rely most on smartphones and digital technology to communicate, and are more likely than average to use every type of option to communicate with their bank by using their mobile banking app to video conferencing to speak with a specialist remotely, virtual assistants or chatbots, online chat and customer service from their FI website and even visit tellers or customer service reps in a branch since they are likely to need to open new accounts, engaging more frequently than any other generation. This demographic is more likely than any other generation to use credit unions and least likely to use national banks.
Overview by Karen Augustine, Manager, Primary Data Services at Mercator Advisory Group