A 2016 study by financial tech company FIS found that digital-only banks had surpassed traditional banks in terms of satisfaction among U.S. consumers. Fast-forward five years, and you’ll see the same thing, especially within rising consumer demographics. Generation Z, in particular, is leaning toward digital banking over traditional methods.
As technology continues to advance, established businesses, including banks, will fall behind the rest of the pack. Does this mean traditional banks don’t stand a chance with Gen Z? They do, but they’ll need to make certain adjustments.
Understanding what young consumers want from their banking experience will help established banks cater to their needs and remain relevant in their lives. Here are just a few of the banking musts expressed by Gen Z:
Standard Websites Won’t Cut It
Most banks today have a website with basic information and a customer portal. For the members of Gen Z, that’s simply not enough. According to Chime, Gen Zers want a more immersive digital experience from their bank.
For starters, traditional banks can keep up by launching their own apps. Being able to access their balances and transactions on the go is a must-have for Gen Zers. Apps provide much quicker access to this information, bypassing the need to visit a website.
The more versatile the app, the bigger a hit it will be with young users. Being able to control your debit card directly from your phone is a huge selling point. The same goes for being able to transfer funds the moment they’re needed.
Online Communication Is Key
Gen Zers spend so much time online that it’s second nature to them to communicate through digital platforms. In fact, many of them so prefer online communication that they actively avoid having to speak with a service rep.
Part of the success formula online banks have concocted is comprehensive online customer service. Automated chatbots get the process started, quickly directing customers to their destination based on frequently asked questions. Online service reps get the rest of the job done.
Having text bubbles or even video chats available makes Gen Zers more comfortable when seeking to get a question answered or a problem resolved. Old-line banks that force customers to call in or visit them on the location are causing younger consumers to flee.
Physical Cards Are Old School
A debit card is all well and good, but Gen Z considers that piece of plastic so old school. Most of the transactions they make are online anyway, so a physical card doesn’t do them much good. Gen Zers prefer versatility with their payment options.
Mobile wallets are their new method of payment. You can make transactions online or at stores that support these wallets with nothing more than your smartphone. This sort of technological ingenuity and convenience is what traditional banks should be trying to emulate.
Fees Drive Customers Away
Most banks charge fees for various activities, such as using an ATM or overdrafting on your account. Nothing will turn Gen Zers away faster than such fees. Online banks have lower overhead than their physical counterparts, so they can waive or reduce many fees and still turn a profit.
These lower overhead costs also allow online banks to offer higher interest rates on accounts. Watching your money make money is a consumer’s dream. It may be more difficult for traditional banks to fit these changes into their business model. Still, re-evaluating their fee structure can pay off in the form of new customers from Gen Z.
Security Is a High Priority
One thing online banks and fintech companies always stress is security. When you trust any institution with your hard-earned wealth, you want to know you’re leaving it in good hands. Such a strong focus on security has drawn many Gen Zers away from traditional banks that seem more passive in their security efforts.
Traditional banks should publicize their security efforts and look for ways to improve in that area. The fear isn’t that the local bank is going to be robbed. Rather, consumers fear their stored information can be swiped by crafty hackers who will use it to make fraudulent charges.
Online banks place a strong emphasis on security measures such as two-factor authentication. They also implement AI-driven security measures, using automated programs that are constantly searching for suspicious activity in their networks. These efforts are comforting to Gen Zers, who are still finding their financial footing.
Entrepreneurial Mindsets Guide Decision-Making
A Nielsen study shows that over half of Gen Zers would like to launch their own businesses. If this is the mindset they bring to the workforce, it will dictate the decisions that they make. These entrepreneurial desires are likely to lead them away from conventional banking for a number of reasons.
Since they’re relatively new to the industry, online banks are less likely to have landed huge corporate accounts. This makes them more willing to approve small business loans used to help entrepreneurs get started. That openness, paired with beneficial interest rates and unparalleled convenience, makes online banking a no-brainer for young business minds.
Old-line banks do have a leg up in certain respects, such as the ability to accept physical deposits. However, they’ll find greater success by opening their doors more willingly to the next generation of entrepreneurs and catering to their needs.
Data Will Tell You Everything
For traditional banks that are feeling thwarted trying to reach Gen Zers, it’s time to look at the data. Data analytics will show you what’s working and what isn’t in your attempts to sign up Gen Zers for your financial services.
A great place to start is with data from your marketing campaigns. Check out engagement rates from each demographic to determine how Gen Z is responding to your messaging. Tracking the number of leads and conversions you get from these campaigns will help you see whether you’re getting through or not.
You can also acquire useful data by surveying Gen Zers to learn about their banking experiences and preferences. Listen to their input, and you’ll know exactly what they’re looking for and can make the appropriate changes.
Gen Z is still growing, and businesses will need to continue to adapt as it continues its rise. Both traditional and online banks will benefit from efforts to woo the generation that’s poised to have great influence over the economy in the coming decades.