Who is Generation Alpha, anyway? Or more importantly, who will they become?
They are untouched by the financial woes of previous generations. The Great Recession of 2008? They weren’t born. The rollercoaster of all-time low to record-high interest rates? They weren’t old enough to finance anything. Even the tough market following the global pandemic did not impact this generation directly. However, growing up during and after the pandemic means Gen Alpha is highly shaped by e-learning, touchless interactions, and the tidal wave of generative AI.
Key Factors of Gen Alpha
(And what credit unions need to know to serve this demographic.)
- The Gen Z successors are predicted to be the largest population of all time, with the last of them yet to be born this year. The oldest members of this generation are currently 14 years old.
- Gen Alpha is the youngest demographic alive, so there isn’t much financial data on them yet. Like their Gen Z predecessors, they are expected to favor financial institutions that offer touchless payment options, cryptocurrency, and flexible yet secure credit options. From a banking standpoint, they will likely be more familiar with crypto than CDs—both the savings and musical kind.
- They are considered "mini Millennials," or children of Millennials. With only 14% of their Millennial parents banking at credit unions, the majority of this demographic is largely unfamiliar with the mission of a credit union and the value of banking with one.
- Gen Alpha is shaping up to be the wealthiest—and quite possibly least financially responsible—generation. Wealth turnover from Gen X and Millennials, coupled with the notoriously poor financial habits of their parents’ generation, means this demographic would benefit from the high levels of financial education that credit unions can offer.
The Alphas Are the Start of Something New in Auto Lending
So, how will this generation impact auto lending specifically? What risk management strategies will be necessary to reach a new market while ensuring portfolio protection?
The oldest members of this demographic cohort won’t be eligible for financing until 2028, so the countdown is on to prepare products, services, and messaging that appeal to them while building risk management strategies to protect collateral.
There are approximately 28 million uninsured drivers on the road today, or about 13% of all drivers. States with fewer insurance mandates have even higher uninsured rates.
Will Gen Alpha drive these uninsured numbers higher? At the onset of their credit journey, Gen Alpha will have little to no driving record, which will push their insurance premiums higher. Coupled with the rising costs of vehicle repairs, this may incentivize Gen Alpha drivers to accept the risk of driving uninsured.
Accurate insurance tracking will continue to be a vital source of risk mitigation. Knowing which vehicles are uninsured (or underinsured) and placing ethical, lender-held coverage as a last resort will be key strategies for lowering portfolio risk.
Preparing for Gen Alpha’s Unique Needs
Gen Alpha is growing up with an immense amount of tech embedded in their personal, educational, and soon-to-be vocational lives. They will value digital credit access and require unbiased, in-depth education about vehicle protection products.
Many Gen Alpha car buyers may bypass vehicle protection products to lower their monthly payments. Like their Gen Z predecessors, they will highly value fairness in their credit lifecycle. For those who take the leap and add vehicle protection products, fair and timely refunds on ancillary products will be crucial.
Everything important in auto lending today—optimized processes for insurance tracking and product cancellations—will only grow in importance with Gen Alpha.
The Good News and the Bad
Which do you want first?
Let’s get the bad news out of the way: Credit union membership is declining year over year. Not great.
But the good news? Gen Alpha is poised to become the largest population of all time. Credit unions have time to position themselves to take a piece of this market and prepare for the lending opportunities that Gen Alpha will bring.