In recent years, Generation Z has begun to enter the workforce and wield a lot of influence over consumer trends, including — and especially — in banking. In the US alone, their buying power exceeds $140bn.
Having been born into the age where technology is integrated into pretty much every aspect of day-to-day life means these people expect their financial services to be fast and convenient. Gen Z is increasingly used to managing everything, including finances, online. Nearly half of this generation’s respondents said that they prefer using digital wallets and modern payment methods like Google Pay and Apple Pay.
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For banks, this can only mean one thing — they need to focus on being simple, efficient, and, what’s more important, digital. The traditional approach isn’t going to work here.
Younger generation preferences change the banking
I’ve already mentioned that Gen Z actively uses mobile apps as their main tools for financial activities. Many banks have them, but sometimes, they can forget that these apps have to be quick and intuitively clear.
To achieve this goal, some banks are partnering with fintechs. This indeed might be helpful in offering integrated services, such as budgeting apps, crypto wallets, or investing platforms. These products fit Gen Z’s interests, so presenting them as part of the bank’s ecosystem may increase customer base and retention. Because these products come from collaborations, banks don’t have to waste so much time and money building them in-house. So it’s a win-win situation.
Rewards and the feeling that something was given for free are other things that Zs appreciate. They want to feel like they’re getting real benefits from using that particular bank’s services. So, I would argue that it’s a good idea for banks to consider loyalty programs and perks that align with this generation’s lifestyle — cashback for online shopping, discounts for streaming, and things like that.
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By GlobalDataChallenges are yet to come for traditional banks
Many banks are not as flexible as, for example, fintech companies, so they are struggling with their own legacy systems. Lagging in adopting technologies can scare away the younger generation because, as an alternative, they have rapidly developing fintech companies that offer a much more tailored approach.
The fact that traditional banks are usually not present in online space also makes them less common to Gen Z. This generation mostly lives online, so to connect with them better it is a must to be present on social media.
Besides bolstering digital outreach, banks must also be able to provide quick answers and 24/7 support. As I already mentioned several times, Gen Z values speed, especially in the age where chatbots and instant messaging apps have become the norm.
Leveraging AI to drive automation of services and customer interaction would make round-the-clock support much easier to provide. It would also help by offering a greater level of personalization in services, further scoring loyalty points for this generation. Of course, many people would still rather deal with fellow flesh-and-blood humans, so real customer service representatives will not be disappearing any time soon. Rather, I would argue that a hybrid approach would yield better rewards here.
Innovate, but don’t forget about older customers
Digital transformation is certainly a good thing to implement. However, Gen Z are not the centre of the universe — it’s only one layer of the bank’s client base. So, traditional institutions have to be careful when transforming their services and not forget about older customers who may still prefer the more traditional service options.
One solution I can suggest here is to develop universal comprehensive interfaces, simple enough for younger customers but also familiar for older ones. And maintaining traditional customer service channels (like phone support and in-person branches) while enhancing online-based support would allow banks to better cover their bases and serve multiple generations.
Final thoughts
From where we are now, Gen Z’s impact on banking is only going to grow. Banks will have to adapt to the new reality and “run faster” to outpace their fintech rivals.
Roman Eloshvili is founder and CEO of XData Group, a B2B software development company
