Aug 15 2008
Attracting Young Adults: What Do We Know About Their Use of Financial Institutions and Payment Behaviors?
Which financial institutions do young adults use most frequently? Why this particular financial institution? This report aims to learn more about young adults financial behaviors.
PhD, Professor of Consumer Science and Research Associate at the Center for Human Resources Research
Ohio State University
Report Number 161
Every generation thinks it is different from past generations. To a certain extent, this sentiment is valid. Today’s young adults grew up in different times than previous generations and therefore may have significantly different viewpoints on political, consumer, economic, and technological issues than you or I. These shifting perspectives influence people’s behaviors. Edward A. Filene understood this powerful dynamic when in a radio address in 1937 he said, “Let’s be honest about it. In such changing times as these, we of the older generation are not equipped to tell the younger generation how to live. For the world in which we got our experience has passed away; and it is up to you to learn how to live in a very different kind of world.” In other words: It is your world . . . create it.
What is the research about?
As credit unions seek to understand and better serve the next generation of consumers, it becomes essential to understand how young adults are creating their financial lives. therefore, this research project studies young adults’ financial behaviors and compares these behaviors (when applicable) to all households. Jinkook Lee, a professor of consumer sciences at Ohio State University and a Filene Research Fellow, utilizes the Consumer Finance Monthly, a nationally representative sample of U.S. households from a monthly survey con-ducted by Ohio State University, to conduct the research.
What are the credit union implications?
Today’s 18–34-year-old demographic represents the next generation of credit union borrowers and savers. Credit Union National Association (CUNA) reports that since the mid-1980s credit unions have struggled to convert this demographic into full- service members. Careful study of how this new generation is different from (and similar to) past generations could help reverse this long- term trend. More important than careful study, though, is action. Every day that credit unions delay a well- thought-out young adult strategy is another day their competitors gain in cementing a relationship with this demographic. Therefore, we propose three practical implications:
- When describing your value proposition to a young adult market, study the top reasons this segment chooses their primary financial institution. Credit unions rightfully promote the service advantage they possess over banks, but this factor may not weigh heavily for a consumer who is new to financial services.
- Young adults evaluate financial institutions along roughly the same key dimensions as all other households: Convenience, for example, is always the most important element. However, a 25-year-old’s perception of convenience may be very different from a retired couple’s. Take the opportunity to understand what elements of convenience matter most to young adults. Hint: Convenience may not mean an extensive branch network, but a cohesive multi- channel delivery system that includes storefront branches, online banking, kiosks, and drive- throughs, each with varying degrees of importance based on the task the individual consumer is trying to accomplish.
- Data on specific payment choices provide a host of signals for credit unions to understand how young consumers are creating their financial relationship. These behavioral cues may permit you to create services and products that truly meet the needs and wants of the coveted young adult market.
Okay, what are you waiting for? Read on . . . the clock is ticking.