In the face of Gen Z’s digital-driven behavior, how can banks keep up?

By Puja Sharma

It seems like only yesterday that Millennials were the up-and-comers, their digitally-driven behaviours forcing change in the financial industry. Now it’s Generation Z, half of whom are already adults, and all of whom are digital natives. Meanwhile, the Alpha generation – the under 10s – are hot on their heels.

What’s shaping the money mindsets of these younger generations, and how will financial institutions (FIs) need to evolve to keep them as customers?

Generation Z is generally described as people born between 1995-1997 and 2010-2012, depending on the researcher. They are today’s tweens, teens and twenty-somethings. This year, with the oldest Zs aged around 25, there are now more adults in this generation than teenagers. And some are already investing.

Even the youngest Gen Zs are using apps to manage their money, with help from parents or guardians.

These are generations with no awareness of “digital transformation”. It’s not “digital banking” to them, it’s just banking. They’ve grown up with technology enabling their lives and lifestyles, from home to school to the workplace. Unlike their parents and grandparents, they haven’t had to adapt from a non-digital world. There isn’t the frustration or awkwardness around using new technology that older generations have experienced as they try to keep up.

Looking to the future, the Gen Z and Alpha cohorts are set to inherit from older generations. Banking strategies must be adjusted now to take their needs and expectations into account, from credit cards to car loans and home loans.

Mobile apps as a given

Many younger customers today don’t choose an FI so much as they choose a mobile banking app. FI brands need to have a presence in the app stores as a bare minimum.

Mobile apps don’t need to offer all the bells and whistles from the outset. There are legions of existing customers who need to be looked after in parallel with Gen Zs and Alphas, and those older customers don’t necessarily want a 100% mobile app-based experience.

Some FIs may also be grappling with legacy technology. In that situation it’s not a fast or easy project to provide innovative feature sets like those offered by their younger, digital competitors. And on top of that, there are the regulatory and compliance pressures.  As a result, functionality may need to be added incrementally, but FIs still need a basic mobile app to be in the game and appeal to younger demographics.

Taking a Mobile first approach to grow the customer base

By introducing mobile banking apps and exploring banking technology that Gen Zs and Alphas will use daily, FIs are not only keeping younger customers happy, but they’re reducing their cost to serve. They’re cutting back on the overheads attached to call centres, branches, operators and the technology infrastructures that support them. Financial institutions can use those cost savings to further invest in product development, based on customers’ needs.

It’s a win-win – offering digital tools that make banking more flexible and give insights to guide customers, alongside digital services and channels that help them self-serve and communicate, 24/7.
With Generations Z and Alpha advancing, it’s time for strategies that adapt to the needs of these tech-driven customers.