Understanding the Generations in the Credit & Collections Industry

EDITOR’S NOTE: The following was written by Linda Straub Jones, Director, Collections Compliance, LexisNexis Risk Solutions

Today’s credit and collections industry has an issue it has never faced before – dealing with multiple generations who are so vastly different from each other that you have to come up with different strategies to market to them, bank with them, communicate with them and collect from them. The generations that are involved in commerce today purchase differently, make decisions based on different factors and have different expectations from their creditors.

We are realistically dealing with four very different generations today, and an argument could be made that the youngest, the Millennial generation, could almost be broken into two, because the older Millennials do many things differently from their younger counterparts. But for purposes of this discussion, let’s say we are dealing with four generations: Traditionalists, also known as the GI Generation or the Silent Generation (born 1900 – 1945), Baby Boomers (born 1946 – 1964), Generation X, also known as Gen X (born 1965 – 1980), and Millennials, also known as Generation Y (born 1981 – 2000). Of course, we now have a new generation quickly coming into view: Generation Z, or as I call them, the Zombie Generation – they’re glued to their cell phones and can barely be bothered to do anything! Zombies are coming into their own, as far as credit decisions go, but we’ll leave them out of this for now, as the oldest Zombies are only 17 years old.

If we first take a look at what the different generations lived through, we may start to get a better picture of who they are, why they are the way they are and also an idea of how to work with them. The Traditionalists experienced the Great Depression and the New Deal, World War II and the Korean War, and the beginning of the Space Age. The nation experienced many hard times while they were growing up.

The Baby Boomers were involved in the Cold War, which encompassed both the Vietnam War and the Civil Rights movement, and they witnessed the first space travel. They were promised the American Dream, and they witnessed what this could look like, for the first time on TV, with shows like Leave it to Beaver and Ozzie and Harriet.

The Gen X’ers lived through Watergate, the Energy Crisis, the rise of dual-income families with women becoming more prominent in the workforce, but also a rise in single-parent families (because working women could now support a family on their own), latchkey kids, Y2K, a rise in activism, corporate downsizing, the end of the Cold War and AIDS. Gen X’ers are the first generation that were not quite as financially secure as their parents. They are also the creators of reality TV and all that goes along with it!

The Millennials have digital media, a more child-focused world (nobody loses, we’re all winners), 9/11, Osama bin Laden, school shootings and terrorist attacks. Many have divorced parents, are more sheltered or protected than other generations, and they all have schedules.

If we take a look at their personalities and their needs, this will also help to understand them and how to do business with them.  Since Traditionalists are older, ranging from 70 to over 100, they are retired, on a fixed income, and looking for things that will make their independence last longer. Traditionalists are all about the relationship – they go to the same bank and shop in the same stores because they have relationships with the people there. They need things that are familiar to them, and new isn’t always better for them.

For the Baby Boomers, while some are retiring, most are still in the work environment. They still want things to make their lives easier, but will consider change. They still have the same dedication to the relationship that their parents had and they are embarrassed if they do anything to hurt that relationship.

Gen X’ers are all about convenience; relationships aren’t as important and they’d rather go to the bank at the corner than drive 10 miles to the one their parents used. This generation is the first to really come of age with the internet, and they love it! They will research anything and everything, and will not take your word for it. They are all about getting the best deal available, and they know where to go to get it.  Because of their keen research skills, Gen X’ers are also the generation that will require proof: proof that you are who you say you are, proof that your product is what you say it is and proof that they owe what you say they owe on a bill.

And finally, the Millennials. This is the generation that has been brought up to believe that there are no losers, only winners, wherein everyone gets a ribbon or a medal for participation. They have also been more protected, nurtured and coddled by their parents. As a result, they need much more handholding and guidance and find it more difficult to make big decisions.

Knowing this about the generations, what influenced them and how they grew up, can help us in communicating with them, marketing to them and generally doing business with them.

To explain the differences in doing business with the different generations, let’s take the example of buying a car. Baby Boomers will buy a car based on the way their fathers and grandfathers did business, and they want to work with the people their fathers and grandfathers did business with. When buying a car, they don’t necessarily go for the best deal – or for that matter the best product for their needs – because they are more likely to buy from an old family friend with whom they’ve been dealing with for years and years than to try something or someone new.

Gen X’ers are all about the research. They are highly informed and highly motivated by price and quality of service. They definitely won’t go to their Dad’s friend Harold, simply because he was their Dad’s friend. While looking for a car, they may sometimes miss out on a great deal, because they are so worried about researching more options that the current sale or deal has expired by the time they make up their mind.

And then we have the Millennials, who aren’t interested in researching because they want instant gratification. In fact, most Millennials won’t even be looking for a car because they have Uber to ferry them around. But if they do buy a car, they will search on Craigslist for something cheap and instantly available, and will many times make a bad purchase because they don’t make the time to research.

When it comes to the credit industry, the generations also bank very differently. Traditionalists still like to bank in person, and they still like to write checks. Baby Boomers are moving away from checks and are getting comfortable with online banking, but they still like a personal touch. Gen X’ers are all about online banking, online chatting, online bill paying and automated services. They will even make their investments from an app and conduct all of their banking from their phone. Upon opening an account and being handed a checkbook, Millennials will look at you and ask, “What’s this?” It’s all about technology with Millennials, online access to everything, banking by ATM’s or phone, real-time access to their money and information about their accounts. But one interesting thing about Millennials is that since they have seen their parents struggle with money, they are more likely to be fiscally responsible, and also to have fewer accounts and credit cards than their parents.

Communication and collections with the generations is vastly different as well. Traditionalists are on a fixed income. Most will only have debt in their mortgage and possibly a vehicle. You will probably not run into them a lot in collections, but if you do, they need things explained in a little more detail. Baby Boomers still like letters and sometimes voicemail technology; cell phones are still a bit too confusing.  When they get behind on their payments, they are not only embarrassed, but they can’t believe that you are actually calling and asking them for a payment—because, after all, you’re friends. The Gen X’ers are the ones who are going to question everything you do. They’re the ones asking for validation and verification of the debt. They are savvy consumers who know their rights, and aren’t afraid to tell you so. They are so incensed that you have called them to collect a debt that they are going to make your life miserable for it.

And then there are our sons and daughters, the Millennials. They won’t answer the phone, they may answer your text, but you won’t be able to understand what they’re saying because it’s all in code. They are upset that you’re calling them, because of course it’s not their fault they’re in debt and behind on their bills – it’s the fault of whoever agreed to loan them the money or give them the credit card in the first place. They will do anything to avoid talking to someone on the phone or face-to-face, so if you can give them an app on their phone to make a payment, all the better.

Now more than ever, you need to be a chameleon in your marketing, banking, communication and collection tactics, and be able to change on the fly depending on who you happen to get on the other end of the phone, email or app. Educate your employees on the basics of the generations, and their different communication tactics. The better your staff understands who is on the receiving end of your calls, letters, advertising and communications, the better you’ll be able to service all of the generations and grow your business.


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