The following post is part of a series of blogs written by MeridianLink® Partners.
By: Scienaptic AI
Gen Z and Millennials Are up for Grabs
Young consumers are facing significant financial strain. A Charles Schwab Modern Wealth Survey revealed alarming statistics, with 73% of millennials and 66% of Generation Z living paycheck to paycheck(1), making them the most financially burdened generations. Consumers are turning to their financial institutions for assistance, as evidenced by a survey indicating that 59% of retail bank customers expect their FIs to play a role in improving their financial health(2).
Despite these pressing needs, credit unions (CUs) are currently only serving a small fraction of the younger generation, with just 5% of millennials and 4% of Gen Z individuals being CU members(3). Even more striking is the fact that 60% of children of credit union members choose to bank elsewhere. This calls for immediate attention, compelling credit unions to adapt and cater to the needs of younger demographics in order to remain relevant.
With over half the world population being under the age of 30 (4), young members will soon become the most influential consumer group. To prepare for the impending generational wealth transfer, credit unions must offer financial tools specifically designed for younger generations. These digital natives anticipate seamless digital experiences, and credit unions must rise to the occasion to meet their expectations.
Harnessing AI to Bridge the Gap
Advancements in AI present a valuable opportunity for credit unions to better cater to the financial needs of Gen Z and millennials. By automating loan application assessments, AI technology frees up underwriters’ time, enabling them to focus on building personalized relationships with members who have unique stories.
A significant challenge in today’s credit landscape lies in the lack of traditional credit history among younger borrowers, particularly Gen Z and millennials. However, AI models are stepping in to bridge this gap by considering alternative credibility histories. These generations possess non-conventional financial histories, often tied to gig work or fluctuating incomes. AI enables the identification of responsible and stable financial behavior, recognizing and leveraging these FCRA-compliant alternative indicators of creditworthiness.
AI proves to be a win-win solution for both credit unions and their younger members, offering mutual benefits that contribute to a thriving relationship. By adopting fair, transparent, and regulatory-compliant AI-powered underwriting, credit unions can gain a deeper understanding of their members, leading to the provision of hyper-personalized offerings that foster trust.
Real-world examples highlight the positive impact of AI-based lending, such as a credit union in Arkansas experiencing a 24% rise in approvals for Gen Z and millennials. A New York credit union achieved an 80% gain in automation, empowering it to extend credit to deserving members and tailor offers that align with modern-day expectations.
By leveraging AI-based lending, credit unions can effectively evaluate the creditworthiness of younger borrowers, ensuring they receive the financial support they need.
The Time To Act is Now
AI is not exclusive to large credit unions, as cloud-based solutions have made it accessible to institutions of all sizes, including yours. Seamlessly integrating AI with your existing MeridianLink Consumer Loan Origination System (LOS) allows you to harness its power at a fraction of the previous cost.
If doubts linger about the suitability of AI-automated underwriting for your credit union, it’s time to reconsider. AI has become an essential tool for success, enabling credit unions to meet the demands of modern lending and position themselves for a transformative future. Embracing AI today will empower your credit union to thrive and effectively serve the next generation.
- (1): Charles Schwab’s 2021 Modern Wealth Survey
- (2): Accenture’s 2021 Global Financial Services Consumer Study
- (3): CUNA Mutual Group’s 2020 Credit Union Trends Report
- (4): Statistica