These were already uncertain times, but the recent collapses of Silicon Valley Bank and Signature Bank have made financial institutions' task of rebuilding trust with consumers even more difficult.
But one strategy has emerged as banks and credit unions alike look to assuage the concerns of members and engage with prospective ones — leveraging digital financial tools.
Digital banking app downloads boomed by 54 percent in 2022. This isn't a one-off that can be ascribed to COVID-19 as '22 was well after the shutdowns that forced both financial institutions and consumers to conduct more of their business digitally. This is a sign, an actionable insight, that demographics are changing, and with them so, too, are the priorities of the consumer.
Over the next decade, some $30 trillion in wealth will transfer from Baby Boomers to Millennials, according to Morgan Stanley. Many industry analysts have been saying for years that, as the premier emerging consumer demo, Millennials should be a focus of your long-term strategic vision. This $30 trillion wealth transfer shows why.
So what does it mean for us in our industry? It means we have to adjust to the wants and priorities of this new, emerging demo, as it will soon represent 75 percent of the workforce. It’s an important undertaking, because younger generations are very different than the Baby Boomers we’ve marketed to for the last few decades.
Millennials have a complicated relationship with banking and finance. They’re the most indebted generation ever at their current age, thanks mostly to student loans. For many, this has tainted their perception of all things finance. As a consumer segment, 85 percent of Millennials say they fully comprehend financial literacy — a National Financial Capability Study, though, shows that only 44 percent really do. Sixty percent of Millennials will not bank with their parents’ financial institution.
The big takeaway is that Millennials are difficult to engage.
What about the generation born right after them, Gen Z? This is the social media generation — Gen Zers can’t remember a time before Facebook, many of them used Snapchat as preteens, and most of them are on TikTok now. They aren’t familiar with a non-smart phone.
It follows, then, that 84 percent of Gen Zers rely on friends, family, and social media for information. Seventy percent say they didn’t/don’t receive personal finance education in school, with 53 percent recognizing they need help improving their own financial literacy. Three-quarters of Gen Zers seek out financial guidance via the internet/social media. And, 3 percent of them won’t work with anyone/anything that’s not online or doesn’t have a social media presence.
At Spave, we wanted to better understand what Millennials and Gen Zers want, so we conducted our own consumer research. Here’s what they told us:
- They want more control over their finances.
- They want us to show them that we know them, and to make them trust us.
- They know what they want, and they want it now.
- Whatever we do, we cannot make them work for it.
- They want to know that what they’re doing is making a difference.
Here’s what that means for our industry — We have to offer simple and relevant financial tools to attract and engage Millennials and Gen Z, AND we have to serve a greater purpose. That's why Reseda Group, our parent organization, has invested in fintech like Spave. It's also why Michigan State University Federal Credit Union, our sister institution, has created a new, completely digital credit union. Here's more on that from the Credit Union Times:
Nearly 60% of 2022 college grads, according to Bankrate, will be responsible for repaying college loans as well as fulfilling other financial needs as they build their careers and lives.
That gave the $7.2 billion Michigan State University Federal Credit Union an idea to launch a new credit union, or more precisely a new digital credit union, to attract a segment of new members.
On Jan. 31, the credit union launched AlumniFi, a digital credit union complete with a stand-alone branded website and mobile app that targets its new niche of serving the specific financial needs of MSU’s alumni.
AlumniFi was developed through a collaboration between the credit union and its fintech partners, and MSUFCU President/CEO April Clobes predicted it will transform the way people think about personal finance, as well as the way credit unions think about digital banking as a catalyst for a better member experience.
Since it was founded in 1937 by just eight faculty and staff, MSUFCU has been the preferred financial institution of the MSU community and its students, many of whom became members when they arrived on the East Lansing campus.
“What we saw changing is that students are coming to campus with an account that is tied to the accounts of their parents,” Clobes explained. “And so, we thought of creating a specific brand for new college graduates because this might be their first account on their own that could also help them develop good financial management.”
Useful digital offerings aren't younger consumers' only demand of their financial institutions, though. Corporoate social responsibility is a priority, too.
According to a recent study featured by Forbes, Millennials and Gen Z are four to six times more likely to purchase, protect, and champion purpose-driven companies. That same study shows that 70 percent of those two generations believe a brand should have a purpose that they personally believe in.
So, to recap, here’s the checklist of must-haves that our industry has to meet in order to satisfy Millennial and Gen Z consumers:
- Simple but relevant digital tools.
- Pervasive financial literacy and wellness.
- A clearly defined, popular purpose.
- A platform that empowers them to make a palpable difference.
Wouldn’t it be awesome if there was a singular tool that helps credit unions to check all of those boxes at once?
Spoiler alert — That’s what Spave is! Our first-ever and one-of-a-kind financial wholeness tech that focuses on giving and inspiring social good is exactly what credit unions need to resonate with younger demos. And beyond that, our simple, secure saving and giving capabilities can uniquely position credit unions to seize on the magnitude of this current moment, when consumers want to make an impact but need to rediscover their faith in their financial institutions.
We can custom label the Spave experience for your financial institution within days. Partner with Spave and we'll help you to rebuild trust at a time of great consumer uncertainty and to engage emerging younger generations with completely different priorities.