Alisha Stair, CUDE, PayNearMe
Millennials have reshaped the way money moves. They split dinner bills through Venmo, send rent payments via PayPal and seamlessly handle other expenses with a few taps on their phone. Yet, when it comes to loan payments—one of their most important financial obligations—they’re forced back into an antiquated system that feels completely disconnected from their digital-first world.
The stark reality facing credit unions is this: while baby boomers now represent 39% of credit union membership, Gen Z has stagnated at just 10% and millennials are actually losing ground as a share of membership. These digital natives expect their loan payments to be as intuitive as their day-to-day payments. Unfortunately, many credit unions still operate with systems that feel like financial fossils.
Listen up. Your longtime, loyal credit union members are aging out, and the younger generation has different expectations. To retain and attract digital natives, credit unions need to solve three payment problems preventing you from capturing your next generation of members:
Problem 1: Payment Friction Creates Delinquency Stress
Nearly three-quarters of millennials (73%) live paycheck to paycheck, facing unprecedented financial pressures. Between March 2022 and February 2024, their credit card debt surged by 50%, while serious auto loan delinquencies increased by 20%.
Here’s what’s critical for credit unions to understand: when millennials miss payments, it’s rarely about unwillingness to pay. It’s about payment friction. Cash-strapped millennials prioritize bills they can pay quickly and easily, especially on payday when funds are available. When their preferred payment method isn’t available, more than half (51%) will abandon purchases entirely, and the same behavior applies to loan payments.
Consider millennials who receive their Friday paychecks via direct deposit and need to pay their auto loans, but their credit unions require ACH transfers that take 2-3 business days. They submit their payments Friday evening, but these don’t process until Tuesday, after their Monday due dates have passed, triggering late fees and notices. This isn’t financial irresponsibility; it’s credit unions forcing customers into an outdated payment experience that virtually guarantees late payments.
When younger members repeatedly face penalties for payments they submitted on time, they don’t blame themselves, they blame their financial institution.
Problem 2: Loan Payments Feel Ancient Compared to Friend Payments
Millennials have fully embraced digital payment methods, with nearly 70% using mobile wallets regularly. Despite these payment preferences, many credit unions still treat digital payments as “alternative” options rather than primary payment types.
Millennials don’t see Venmo as an alternative to writing checks; they see check-writing as an obsolete practice from their grandparents’ era.
The member experience gap becomes stark when comparing loan payments to everyday transactions. A millennial can split a $200 dinner bill among six friends in under 30 seconds using Venmo, but making a $200 loan payment to their credit union requires logging into online banking, navigating multiple screens, entering routing numbers and waiting days for confirmation. One process feels effortless; the other feels punitive.
This creates a perception problem that goes beyond individual transactions. When every loan payment feels like a chore compared to seamless peer-to-peer payments, members begin questioning whether their credit union understands their needs. This disconnect creates a member experience problem that makes credit unions vulnerable to losing younger members to competitors who offer modern payment solutions.
Problem 3: Limited Payment Options Restrict Membership Growth
Credit unions face a significant membership growth challenge with younger consumers. More than one in five millennials (21%) aren’t even aware that credit union membership is an option for them, and the problem is even worse with Gen Z, where 30% lack this basic awareness. This knowledge gap is particularly pronounced among younger consumers who live outside traditional credit union branch footprints.
Even when younger consumers do know about credit unions, most choose to bank elsewhere. Currently, just 20% of millennials and 14% of Gen Z consider a credit union their primary financial institution, with most banking at large national banks instead. Yet nearly half (47%) say they’re open to switching to a credit union.
One major obstacle to converting this interest into actual membership? Payment inflexibility. When credit unions limit loan repayment options to ACH, checks, cards and in-branch cash payments, they miss opportunities to attract the 39% of millennials who want the ability to pay loans through stored mobile wallets, and the 41% who want to use different payment types each billing cycle.
When potential millennial members compare credit unions to their current banks, payment limitations become deal-breakers. Why join a financial institution that makes loan payments harder than splitting a dinner bill?
Adapting to How Millennials Actually Pay
Rather than tackling delinquency, member experience and growth as separate problems, forward-thinking credit unions are adopting modern payments platforms that solve them holistically. Modern payments platforms offer native integrations with PayPal, Venmo, Apple Pay, Google Pay and CashApp that work “out of the box” without requiring third-party apps or plugins. This gives members instant payment options instead of relying on ACH payments that can push Friday payments to Tuesday, creating a cascade of late payments.
The right payments platform also eliminates the friction that turns loan payments into frustrating, multi-minute ordeals. With 42% of borrowers citing remembering logins, passwords and account numbers as their biggest challenge when paying loans online, and 80% wanting payment details pre-populated, look for a payments platform that enables one-click payments without requiring login credentials. This simple change can transform what used to be a cumbersome multi-step process into the type of payment experience the younger generations have become accustomed to and now expect for every transaction.
Credit unions must shift from asking, “How do we get millennials to pay the way we want?” to listening to how millennials prefer to pay and adapting their payments strategy accordingly.
The most successful credit unions will embrace payment strategies that mirror how millennials already move money in their daily lives. They’ll recognize that making loan payments as intuitive as splitting a dinner bill isn’t just about convenience, it’s about reducing delinquencies and improving the member experience.
Millennials are ready and willing to pay, they’re just waiting for credit unions to make it as effortless as sending money to a friend.
About the Author
Alisha Stair is Sales Manager at PayNearMe, where she partners with credit unions and banks to modernize the payment experience through mobile-first, self-service solutions. With nearly a decade of credit union leadership experience, she holds both the Certified Credit Union Development Educator (CUDE) and Certified Credit Union Executive Manager (CEM) designations. Connect with her on LinkedIn.