As Gen Zers Grow Their Wealth, Banks Are Competing to Understand Their Credit-Building Needs

In a Nutshell: As more members of the Gen Z cohort, born between 1997 and 2012, strive to make their way in the world, financial institutions seek to understand their unique needs. Fortunately, new research from a bank with experience serving zoomers is here to help. In a newly released comprehensive research study, Missouri-based Academy Bank takes a deep dive into the financial psychology of Gen Z members as they build credit and grow their wealth. Institutions interested in Gen Z’s credit-building priorities will find insights to act on.

Maybe we’re dating ourselves, but we shudder a little when we think of children born in the late 1990s assuming adult roles as consumers, parents, and the next generation of business innovators.

After all, for some of us, it seems only a moment ago when life for the oldest members of Gen Z — the term used to refer to the generational cohort born between 1997 and 2012 — was all about Tamagotchis.

Those were interesting times. Many Gen Zers remember events from the Great Recession to COVID-19 and wonder when the next crisis will come around. But as more take on pocketbook roles, they face the same imperatives of previous generations: to build their credit and acquire future-focused money management skills.

Naturally, Gen Z’s arrival in the marketplace has financial institutions looking into how they should tweak their approach to serve them better. Thanks to the recent release of an original research study from Missouri-based Academy Bank, all institutions interested in improving how they serve emerging Gen Z consumers have a new basis for self-evaluation.

In “Navigating Credit Scores: Gen Z’s Credit Knowledge and Challenges,” Academy Bank examines the Gen Z generation’s competency with credit, from their awareness and understanding of credit scores and credit building to the values influencing their worldview and financial goals.

The study finds much to be optimistic about as many Gen Zers are already credit-aware and taking steps to improve their credit scores. But it’s still Gen Z we’re talking about.

“The young people who make up Gen Z value different things than other generations,” said Jodi Vickery, Chief Digital Officer at Academy Bank. “It’s important for us to understand this emerging customer base so we can tailor support and services for them accordingly.”

The Academy Bank study looks at comprehensive survey data from individuals aged 18-27 years old. The bank conducts blind surveys through an online platform, so brand is not a factor in the results. Its goal is to gain a better understanding of clients and prospects to provide the right tools, services, education, and products to meet their needs.

“Those values are the core of who we are at Academy Bank,” Vickery said. “We’re always working to see things from our client’s point of view to provide faster, easier, more personal service.”

Academy Bank has preserved its community focus as it has grown to $2.7 billion in assets and more than 70 banking centers in Kansas, Missouri, Colorado, and Arizona. Simple banking solutions from Academy Bank provide easy access to tools and resources that help consumers, households, and businesses from all walks of life move forward to take on the next challenge.

That includes meeting Gen Z consumers where they are with products, services, and insights they want and need.

And that includes an app that doesn’t disappoint. Academy Bank’s mobile and online banking experience offers Gen Zers seamless on-the-go service. Products that reach out directly to Generation Z include the Credit Builder Secured Card, which gives up-and-comers an opportunity to build credit from the ground up.

“We are growing in the communities we serve in part through our focus on providing a seamless online banking experience — crucial for app-using Gen Zers accustomed to digitally managing their finances,” Vickery said. “It is clear that this tech-savvy and financially curious generation needs accessible tools to navigate credit-building.”

The “Navigating Credit Scores” survey captures respondents who feel confident in what they know. For example, more than 70% of those surveyed consider themselves at least somewhat knowledgeable about credit scores, and more than 50% report scores in the Very Good (740-799) or Exceptional (800 and above) range.

That’s evidence of a generation that is already actively working on their financial future by building credit and positive financial habits, Vickery said. It makes sense because this is a credit-card-using cohort. The survey found more than 80% of Gen Zers in the study said they use credit cards, with more than 70% owning them outright and only a fraction transacting as authorized users on someone else’s account.

Unsurprisingly, student loans were the next most used line of credit, at 33.6%. Everything else — auto loans, personal loans, and mortgages — took a back seat. Still, the numbers tell a story banks and credit unions should be interested in, Vickery said.

“When compared to millennials, Gen Z is engaging with credit earlier — and that comes with some risks,” Vickery said. “This is a generation that is hungry for reliable, trustworthy sources of credit and financial education.”

We view as a bit of generational self-modesty the fact that only 19% of respondents considered themselves very knowledgeable about credit scores, given that almost 40% reported checking their scores at least once a month.

That 40% figure is particularly impressive in light of research in articles like this one from BadCredit.org that found that 31% of Americans said they didn’t know their credit score.

That said, as the first generation to grow up entirely in the digital age, Gen Z often seeks financial education and resources within mobile banking apps. Recognizing this, banks can meet them where they are by offering tools and campaigns designed to empower them to build healthy credit habits, Vickery said.

It turns out they’ll find a receptive audience. The Academy Bank survey found that almost 50% of Gen Zers say they have learned financial education lessons from their families, and another 27.9% have learned these lessons from blogs, websites, and social media sites.

While only about 12% reported learning from school, we expect surveys like this to record larger future numbers in that category as more school systems adopt mandatory financial education coursework.

Nevertheless, despite their exposure to financial fundamentals, respondents identified a lack of knowledge about credit as their biggest challenge — bigger than any other category, including interest rates, income, and managing existing debt. Another 20.1% reported difficulty in getting approved for credit as a challenge.

One way Vickey said banks and credit unions could step up is through better mobile pay features to help Gen Z users increase their credit scores through on-time payments. Another is through savings and budgeting tools that indirectly support creditworthiness by promoting sound money management habits.

Banks and credit unions can also step up by providing more practical guidance on financial literacy topics, including credit management, and by providing more products like the Academy Bank Credit Builder Secured Card we described above.

“Academy Bank wants to be a resource for this emerging generation,” Vickery said. “We have great tools built into our current online banking and mobile app platform and plan to continue building in functionality to support Gen Zers with even more education and resources.”

Continuing its probe of the malleable Gen Z ethos, Academy Bank then tackles what inspires Gen Zers to do what they do financially. The key takeaway for financial institutions is you’re dealing with folks who are long past the Tamagotchi stage and facing their own financial challenges, some of which are unique to their time.

Baby boomers and Gen Xers born in the 1960s and ‘70s valued homeownership and retirement planning over other motivations. Millennials born in the 1980s and 90s focused on paying off student loans and achieving work-life balance. Gen Zers seem to be embracing whatever works.

Traditional financial planning goals claim a high priority. Academy Bank found that 77% of survey respondents prioritized growing their savings as their primary financial goal. Just over half of survey participants (50.5%) listed building credit as their next most popular goal, followed by increasing income at 48.6%.

Building a better credit score is integral as well, with 90% of respondents claiming a good credit score was at least somewhat important.

Gen Zers also appear more receptive to entrepreneurship than their precursors. The Academy Bank study cites research that found half of Gen Z members aspire to become entrepreneurs or start a business and that Gen Zers own homes at higher rates than Gen Xers and millennials did when they were the same age.

Those trends set up positive potential business outcomes for financial institutions of all sizes. Substantial numbers of Gen Z members are taking lessons from experience and sticking to financial fundamentals. Common sense leads many to embrace balancing short-term tactics for earning and acquiring more assets with a longer view that embraces investing and retirement planning.

What that should tell financial institutions is that investments in education and resources to help young adults achieve their aspirations are good bets. Like many, the Academy Bank team is committed to supporting this emerging cohort of future leaders to hit their marks so they can give back when it’s their turn.

“It’s critical that banks are helping Gen Z understand and build credit,” said Vickery in the survey. “Whether that’s through credit monitoring tools built into banking apps or secured credit cards, we believe helping Gen Z build strong credit profiles will help all financial institutions foster positive long-term relationships with this emerging customer base.”