From Aging to Z: How CUs Can Capture Younger Generations

Credit unions (CUs) face a generational challenge. Their membership is aging faster than the customer base of other financial institutions (FIs), leaving their futures uncertain. Many millennial and Generation Z consumers are opting for digital-first banks over credit unions. For CUs, capturing younger generations isn’t just about survival. It’s also about maintaining relevance in a rapidly evolving financial landscape.

Unquestionably, winning over younger members demands digital innovation and mobile-driven strategies. However, research suggests that it also requires targeted outreach toward digital natives, who may be less aware of credit unions as a banking option. In fact, digital-first strategies — essential as they are — may not be sufficient to convert a new generation of consumers without meeting them in the channels they frequent. Critically, credit unions that both innovate and communicate their advantages to younger generations could avoid ceding further ground to other FIs in capturing these key demographics.

• CUs Face Aging Membership as Gen Z Leans Toward Banks
• Unfamiliarity Keeps Gen Z From Joining CUs
• Digital Features Drive Gen Z’s Expectations
• How Credit Unions Can Stay Relevant

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CUs Face Aging Membership as Gen Z Leans Toward Banks

Credit union members skew older than bank customers, with baby boomers outnumbering millennials and Gen Z combined. Attracting younger members is vital to long-term CU viability and growth.

CUs risk losing ground with younger generations as boomers dominate membership.

According to McKinsey, baby boomers now make up 39% of CU membership — up from 28% in 2015 — while millennials and Gen Z account for just 31% combined. Meanwhile, Filene Research Institute finds that the average CU member age is 53, significantly older than the United States average age of 38.5. Banks now serve as the primary FIs for most younger consumers, signaling a growing gap that CUs must close to stay competitive.

39%

of CU members are baby boomers, compared to just 29% of bank customers.

CU leaders agree that Gen Z engagement is critical but unevenly executed.

CULytics data indicates that while 80% of CU leaders see attracting younger members as “extremely important,” only 40% report real traction with this consumer segment — highlighting uneven progress across the sector. Without addressing this imbalance, CUs risk significant market share erosion as older members retire and their borrowing needs decrease. Banks attract younger consumers by offering seamless mobile experiences and simplified onboarding — areas where many credit unions still lag. However, PYMNTS Intelligence and other research identifies an even more basic explanation for the trend: a lack of Gen Z familiarity with credit unions.
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Unfamiliarity Keeps Gen Z From Joining CUs

Gen Z lags behind older consumers in credit union engagement, with a lack of familiarity posing a key obstacle to membership for this demographic.

A large portion of Gen Zers are unaware of CUs as a banking option.

20%

of Gen Z consumers have engaged with a CU, compared to 33% of baby boomers.

According to research from Apiture and The Harris Poll, a significant hurdle to Gen Z engagement for CUs is simply one of communication. Nearly one-third (30%) of Gen Z consumers don’t know that CU membership is an option. Historically, CU outreach relied heavily on traditional marketing channels that Gen Z seldom uses, deepening the familiarity gap. This finding confirms earlier PYMNTS Intelligence data showing that only 20% of Gen Zers have had some contact with a CU, compared to 33% of baby boomers. Pivotally, Gen Z consumers are 53% more likely than baby boomers to cite lack of familiarity with CUs as a reason for not joining.

To remedy this, digital discovery and embedded banking can expand CUs’ reach with Gen Z. Many Gen Zers expect fast, branch-free account setup. Embedded banking — such as offering account opening via college portals — can help CUs meet digital expectations and reach younger users where they already are.

Targeting youth early can help close generational gaps.

One specific strategy CUs are taking to bridge generational gaps is by rolling out new tools for kids and teens to build brand familiarity early. Kachinga’s white-labeled app, for instance, directly integrates with credit unions’ core systems to offer family-friendly financial tools that teach budgeting and saving. In addition, initiatives like Credit Union Youth Month — ongoing every April — reinforce these strategies, aiming to build loyalty from childhood on and ensure long-term membership stability.

A FinTech-CUSO partnership aims to convert Gen Z borrowers into lifelong CU members.

Another effective strategy for reaching younger consumers is to develop solutions targeting their specific needs and concerns. Credit union service organization (CUSO) Envisant’s new partnership with FinTech Sparrow, for example, helps its client CUs address Gen Z’s student loan challenges. The initiative offers fast onboarding and tailored support for younger borrowers.

Notably, 70% of users engaging via CU channels were nonmembers who later expressed interest in joining, signaling a clear path to membership growth. With Gen Z representing one of the largest and most influential emerging demographics, strategically targeting this segment can substantially increase its engagement. However, solutions such as these also showcase the first necessity of engaging younger members: meeting these consumers’ digital-first expectations.
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Digital Features Drive Gen Z’s Expectations

Gen Z expects fast, mobile-first financial tools. Credit unions looking to stay competitive must offer the digital payments, seamless authentication and app-based credit card management these consumers demand.

Gen Z expects always-on, intuitive digital banking experiences.

Generational outreach, of course, must go hand in hand with digital innovation to meet younger consumers’ expectations. More than half of Gen Z and millennial consumers rank modern digital tools as their top requirement when choosing an FI. Eight in 10 say digital banking is central to their experience. Their frequent use of peer-to-peer (P2P) payments, budgeting tools and credit monitoring reflects high expectations for 24/7 digital access.

21%

of Gen Z consumers want mobile card management apps from their FIs — more than any other innovation.

CUs still struggle with digital experience and loyalty-building for younger members.

In the CULytics survey, all CU leaders cited seamless digital experience and FinTech competition as top challenges. Sixty percent also pointed to difficulty building loyalty and engagement with Gen Z and millennials, highlighting the broader strategic gaps credit unions must address to attract and retain younger members.

In fact, Gen Zers appear to see more value in banks as their digital expectations grow. Just 49% of Gen Z credit union members say their CU offers strong value, compared to 60% at big banks. As digital demands rise, younger consumers increasingly associate value with mobile features, seamless authentication and spending control — areas where banks are pulling ahead of many CUs. FinTech companies and digital banks already excel in these mobile innovations, only adding to the pressure on credit unions to act swiftly.

Velera is simplifying card updates to streamline digital payments for CUs.

As in the earlier Envisant-Sparrow example, credit unions can gain a leg up in digital innovation by tapping into CUSOs and other third-party solutions. Velera’s new Card on File feature, for example, allows CU members to update payment credentials across more than 115 merchants in one step. This feature removes friction from digital payments, boosts card usage and helps credit unions meet Gen Z’s expectations for seamless, app-based financial experiences. Mobile-first solutions not only satisfy Gen Z’s need for convenience but also offer greater security and real-time financial control — features crucial to younger users.
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How Credit Unions Can Stay Relevant

Younger generations invariably demand seamless, mobile-first financial experiences, so credit unions must urgently modernize digital offerings. However, modernization alone could still fail to engage younger consumers who remain largely unaware of credit unions as an option. CUs must therefore tailor outreach strategies to meet Gen Z and other younger age groups on familiar platforms.

PYMNTS Intelligence offers the following strategic roadmap for CUs to preserve relevance and expand membership with younger generations:

• Prioritize competitive digital innovation. This includes mobile functionality, biometric authentication and spending controls. Align CU digital offerings with — or surpass — those of FinTech and bank competitors to attract younger users who increasingly equate digital excellence with value.
• Innovate solutions aimed directly at younger consumers. Introduce mobile-driven tools like card management apps, embedded account opening and automated payment credential updates. These solutions offer the security and convenience younger consumers expect. Consider developing solutions that solve generation-specific challenges, such as student lending.
• Target informational outreach toward key demographics. Launch campaigns via digital channels, partnerships with FinTech providers and educational institutions to enhance Gen Z awareness. Strategic outreach efforts represent high-impact investments for long-term membership growth.

Credit unions that take proactive steps to meet the expectations of digital natives and effectively convey their value can build lasting loyalty with younger generations.

Winning the loyalty of younger consumers begins with building lifelong relationships. Supporting members at every stage of their financial journey is key — from their first checking account in college to buying their first home or saving for their child’s future. It starts with meeting younger members where they are — digitally. By offering instant digital cards, rebranding checking accounts as spending accounts, and providing rewards on things they already use like food delivery and streaming services, we’re making sure we’re at the front of their wallet and the center of every financial milestone.”

Joan Opp
President and CEO, Stanford Federal Credit Union

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