Half of Gen Zers and millennials are open to switching to local financial institutions

The news: Over half of young consumers are considering switching to community banks, per a PYMNTS Intelligence report, reflecting a trend of dissatisfaction with impersonal service.

By the numbers: The report revealed that:

• 52% of Gen Z and millennial customers are considering a switch to a community bank.
• 47% would consider a credit union as an alternative.

And the driver could be a growing desire for personalized services such as advice.

• 54% of banking customers expect their financial institutions (FIs) to use their data to enhance personalization.
• They appreciate that personalization too—76% act on personalized financial advice provided by their FIs.
• And poor, impersonal customer service is a big driver for closures. Twenty-one percent of customers who closed bank accounts cite poor customer service, but only 5% cite a poor mobile experience. 

The hometown-style difference: These findings echo a study conducted by The Wall Street Journal earlier this year. It revealed:

• Deposits and loans at community banks and credit unions with assets less than $10 billion are growing at a rate that’s outpacing some of their larger counterparts.
• The Wall Street Journal detailed numerous angry customer testimonials, like a dissatisfied customer who switched from a bank she loyally used for 40 years after PNC acquired it. 
• Her reasons included her local branch closure and a desire for hometown-style customer service.

The type of warm, personalized customer service these customers crave is something many local FIs do naturally. 

The marketing problem: This ongoing trend means small FIs have a significant growth opportunity among young consumers, but they’ll need to remind them that there are alternatives to larger competitors.

• A recent study by digital banking services provider Apiture found that 30% of Gen Zers and 21% of millennials aren’t aware of credit unions as an option to meet their banking needs.

The solution: Aside from social media marketing, which should remain a priority for reaching young consumers, local FIs should prioritize building key local partnerships that increase their brands’ repeated exposure to young consumers.

• For example, Michigan-based Community Federal Credit Union (CFCU) has built and grown partnerships with 56 local school districts to offer students their first FI accounts. This could be a way for FIs to undo young consumers’ tendency to just bank where their parents do.
• It also partners with well-known local influencers and with local municipalities on key events.

Larger FIs that want to prevent the outflow of young customers must continue to prioritize personalized services and excellent, human customer service.