This guest post was written by Caleb Danziger, co-owner and editor of thebytebeat.com.
The banking industry has changed drastically over the years. Just a few decades ago, you had to walk into a bank to handle all withdrawals, deposits and account transfers. All banking was done in person — you didn’t have any other choice.
Today, however, most customers can handle most, if not all, of their finances online, leading to the rise of digital banking.
This new trend has proved a hit among younger generations, who would rather avoid physical channels of banking. Generation Z is one such group of young people. Born roughly between 1997 and 2012, Gen Z has never known life without the internet. So, naturally, they often look to technology to solve their problems. They expect digital solutions to be accurate, innovative and omnichannel — and finances are no exception.
Gen Z and Finances
People’s views on finances are often shaped by economic events that occurred during their childhood. For Gen Z, that event was the financial crisis. The early 2000s were marked by a decline in economic activity and a rise in unemployment, which continued to climb even after the recession ended. The Great Recession, which began in December 2007 and ended in June 2009, also resulted in the collapse of banks and the value of both stock markets and housing prices.
The effects of the recession were long-lasting. Many important economic variables didn’t regain pre-recession levels until as late as 2016. So, most of Gen Zers’ lives have been marked by the economic downturn — which, in turn, has made them more pragmatic and clear-eyed. As a result, the generation as a whole is hard-working, debt-averse and frugal, with some already saving for retirement.
To budget better and save smarter, Gen Zers are banking their money. Roughly 71% have either had a bank account in the past or currently own an account or joint account. These teenagers and young adults are saving for both the near future and life after retirement. Doing so early on in their careers will create good saving habits that should last throughout their lifetimes.
However, most of this young generation’s members aren’t using traditional brick-and-mortar banking methods to save. Instead, they are turning to banking apps, mobile sites, automatic transfers, and online services to simplify the process and do most of the work for them.
Shaping New Banking Trends into the Digital
Banks have switched to a more digital approach to help members better manage their finances and to accommodate Gen Z.
Today, most banks with physical branches also offer online banking that enables customers to access their account information, transfer money, deposit checks, pay bills and manage spending. Some financial institutions have even taken digital banking a step further by solely offering online services, eliminating the need for physical branches.
Gen Zers can then do all their banking from home, making the process simpler and convenient than ever.
As online banking becomes Gen Z’s primary interaction channel, banks are working overtime to keep up-to-date with the latest digital technology trends, investing their efforts and resources to remain relevant and competitive.
One way banks are implementing technological advancements is the incorporation of artificial intelligence (AI). About one-third of the work done at banks today can be automated. So, many banks use AI to collect data on customer habits and computerize customer service interactions.
Most financial institutions also have mobile-friendly platforms and apps to serve the younger generation. About 50% to 80% of smartphone-owning Gen Zers are already using mobile banking, so branches must work to keep their mobile interface simple and streamlined to provide the best services and customer experience. Mobile platforms also allow Gen Z to access their account no matter where they are, eliminating geographical barriers.
Companies such as banks are also increasingly adopting immersive technologies like augmented reality (AR) to provide a better digital customer experience. This relatively new technology allows users to locate the nearest bank with their smartphone camera or see a visual representation of the balance in their bank account. As AR technology advances, it’s poised to become an even bigger part of banking among members of Gen Z.
The Future of Banking in a Digital Age
Although no one knows precisely what the future of banking holds, banks, customers and investors should expect more experimentation and shifts in strategy as technology continues to improve.
Undoubtedly, young adults will facilitate a more complete transition to digital banking as they gain a stronger voice and presence in the economy.
Understanding what makes Gen Z tick, therefore, is critical for marketers and developers looking to cater to young customers and create services they’ll be eager to adopt. This will mean creating more than just a digital banking interface. Banks that want to attract and retain Gen Z will have to think outside the box.
For instance, while 21% of Gen Z had a bank account by age 10, 48% are already using a payment app on their smartphone. So, banks shouldn’t keep a sole focus on creating banking apps, per se, since these are already considered the norm.
Instead, they should take extra steps to design other apps that offer lifestyle banking and interpersonal money transfers to attract a new generation of potential customers. By creating practical and relevant services, they can hope to market their bank to young app users.
Attracting Gen Zers now while they are still young could lead to fruitful relationships in the long run. Their value will increase as they grow older, earn more money and expand their engagement with financial products and services.
So, investing in Gen Z is a smart idea for any financial institution looking to stay ahead of the competition and better serve Gen Z — and many other generations — for decades to come.