August 1, 2024
As the fintech ecosystem expanded and matured, it coincided with the coming of age of the Millennial generation.
This confluence shocked traditional financial services and kickstarted a wave of digital transformation. Now Gen Z is here and about to dominate the workforce. Moreover, this generation—like their Millennial predecessors—are once again shifting the goalposts for financial service providers.
To attract and engage this generation, credit unions and community banks need to meet them where they are. In a recent 22 Minutes in Lending episode, Barry Kirby, co-founder and chief revenue officer of Union Credit, shared his vision for how credit unions and community banks can do just that.
Credit Union Members Are Aging Out
In June 2023, PYMNTS released a study that cited just 4 percent of Gen Z were credit union members. Now, that figure rattles through the halls of many credit unions as they look to the future.
“This is discussed at the board level and the executive level,” says Kirby, who launched Union Credit in January 2023. “The average credit union member right now is 55. If you peel off indirect auto lending, it’s closer to 60. This is a real risk for community lenders.”
While executives acknowledge the challenge, they’re uncertain about how to navigate it. “With liquidity as tight as it is right now, credit unions are understandably talking about ways to keep the powder dry. The counterpoint to that though, is that liquidity won’t be an issue at all in five years. If a credit union has served them well, no 65-year-old should need another loan, but they also won’t be depositing much more. So, where’s the growth going to come from?”
Long-term Growth Is a Long-term Play
According to Kirby, this long-term balance sheet growth is a long-term play—but one that needs to start now.
“We know a 25-year-old doesn’t have money underneath their mattress for a CD. They’re not going to bring in large deposits straight away, but credit unions do have the opportunity to position themselves as the financial partner that will work with a younger member now, regardless of what’s in their wallet today.”
So, for the credit unions willing to make that long-term investment, where do they start? The answer is ‘everywhere’.
Everything, Everywhere, All At Once
Union Credit emerged on the credit union scene intending to usher in a new era for community banking. By providing a “marketplace”—essentially embedding credit union products and solutions within native apps like Experian, Bankrate etc. that are already used by consumers—it can extend the reach of community lenders into valuable digital real estate.
At first glance, the Union Credit marketplace could seem a little overwhelming as it includes all consumer loan products and deposit products, except for first mortgages. However, the breadth and depth are intentional, as consumer behaviors continue to change.
Millennials, for example, who lived through the Great Recession were cautious about overextending themselves and their credit, shying away from products like credit cards that were tarnished in the wake of the ’08-’09 crisis. This is no longer the case with their Gen Z successors, however.
Kirby explains, “We’ve found that the value of a personal loan can be comparable to that of a credit card if consumers are educated on their similarities. For example, when you introduce a credit union credit card with no annual fee and rewards alongside a mainstream bank card that charges $500 a year, consumers begin to appreciate the value and long-term benefits of working with a credit union.”
Leveling the Marketing Playing Field
Ultimately, like other Network Lending solutions, the value of Union Credit’s marketplace increases with broader use and engagement—with the more credit union participants engaged, the broader the reach and impact for the system en masse.
“I’m concerned about community lenders because often, [the person who] gets in front of consumers comes down to who has the biggest marketing budget,” adds Kirby.
“If you Google ‘credit cards’ in your area it is Chase, Citi, SoFi, LendingClub… Where are the credit unions and the community banks? They can’t spend to keep up with those guys, so they’re not listed. Our marketplace reintroduces the best kept secret in banking, which is these community lenders that so many consumers haven’t even heard of.”