Gen Zers are the true digital natives. From streaming to
sharing, those between the ages 18 to 24 expect seamless connectivity — and
their finances are no exception. The banking industry has shifted servicing
dramatically from its beginnings as a brick-and-mortar stalwart to become far
more digitally flexible. As one of many pandemic impacts, having a choice for
complete online banking is an ageless expectation, however for Gen Z it has
become a table stake.
As FinTech (financial technology) companies and products,
such as Crypto, and installment loans,
adjust to serve this demographic, we explored exactly what Gen Z wants out of
their banks and the ways traditional money management can intersect with
evolving consumer mindsets. So in August 2020, we conducted a single-question
format survey with 500 U.S. Gen Zers to learn directly from the source. Backed
by unique insights, our survey questions do more than identify consumer
expectations — they highlight the importance for the FinTech industry to exceed
them.
Until very recently, brick-and-mortar consumer retail banks
had a complete monopoly on the market. Even though the first “online banking”
system was introduced decades ago, what is commonly understood as online
banking is very different today. In fact, our survey demographic for these
results were born after Wells Fargo’s innovative service was created, and a
digital means to everything is all they’ve ever known.
Of course, simply having a digital banking option doesn’t
prevent economic turmoil. In their lifetimes, Gen Z has experienced major
financial uncertainties in the early 2000s, The Great Recession, and now
COVID-19. Each time period was accompanied by an uptick in unemployment and a
sharp fall in economic activities. Given the aftermath of these events — and
Gen Z’s unique ability to watch them unfold in real time — it’s no wonder they
are taking their money management roles seriously.
But what about Gen Z looking to open accounts with new
banks? Do they prefer to open the door to a branch or simply click on an app?
Gen Zers, despite being born into a digital age, clearly
still find comfort in brick-and-mortar stability. Part of this may be
attributed to how their parents initiated their first bank accounts, as well as
influenced by where their parents primarily have banked their money. A physical
branch’s tangible, reliable, and person-to-person aspects are notably different
than the myriad of digital startups that Gen Zers have seen fail. Furthermore,
nearly all physical banks already have online and mobile solutions, helping
bridge the divide between the traditional and the future.
Still, a significant number (37.5%) of Gen Zers would only
choose a digital or online bank. Thanks largely in part to better UX,
state-of-the-art security, and always-on availability, digital banking has
taken a surprising hold on the collective Gen Z psyche. Whether this is a
byproduct of the contactless movement accelerated by COVID-19 or an indication
of where the market was already heading, the end result will be the same: Gen Z
expects the option for an entirely digital bank.
Even as digital banks continue to pop up, it’s worth
exploring Gen Zers’ mentality by demographic. By gender, our results for this
question were roughly the same (38.7% of women and 36.1% of men would open an
online bank account). Similarly, there was only slight disparity by region:
Those living in the West, South, and Northeast regions of the U.S. were quite
open to online-only banking (39%, 38%, and 40%, respectively), and the Gen Zers
of the Midwest (32.5%) were not too far behind.
While there may still be a sizeable cohort of Gen Zers
nationwide who are not quite ready to give up their traditional brick-and-mortar
banks, FinTech should be ready for that dynamic to change. The vast majority
(71%) of 18- and 19-year-olds take advantage of mobile banking solutions, so
even if they haven’t entirely embraced digital banks, they’ve certainly
embraced digital banking. Given that Gen Z is slated to become the most
populous generation ever, their expectations of banks will not so much dictate
the consumer market, but will dominate it. Forward-thinking FinTechs are
already realizing this.
Having established where Gen Z banks nationwide, the next
logical question becomes what their expectations are from a digital or online
bank.
While a frictionless customer support experience represented
a commendable number of respondents, no other perk to digital banking held a
candle to the desire for fee-free banking. Clearly FinTech are listening, based
on the fast rise of existing and new entrants to “buy now, pay later, no fee
installment loans” that have dominated a new fintech lending market.
Compared to our previous question though, where respondents
felt more or less the same across the board, the demographic data here offers
considerable insight for FinTechs to bear in mind:
Gender: Whereas men felt more strongly about avoiding
fees than women (68% compared to 64%), women were far more interested in some
of the less obvious aspects of online banking, particularly connectivity to
other payment apps (9.7% women to 6.5% men) and automatic, built-in savings
tools (8.4% women to 3.4% men). Regardless of gender differences, the
unimpeachable fact that digital banks offer more options than brick-and-mortar
ones can lead to a proliferation of unique experience tailored to consumers’
values.
Region: Whereas question one’s results were disparate
only between the Midwest and the rest of the country, respondent data here was
as different as account numbers:
South: Whereas 70.3% valued no bank fees and 14.2% valued
always-on support, there was very little interest in the other options.
West: In a considerable shift, 62.5% wanted no fees, 11.9%
wanted 24/7 support, and 11.3% wanted app connectivity.
Midwest: Interestingly, the region where banking preferences
were quite different than the overall sample was closest to the median when it
comes to perks. There, 67.2% valued a fee-free system, 11.6% valued 24/7
support, and nearly 9% valued app connectivity.
Northeast: While only 59.7% turned out in support for no
fees, 10% did for app connectivity, 9% for automatic savings, and 8.7% for always-on
customer support.
Let’s face it: “No bank fees” was always going to have the
widest margin of consumer support, and 24/7 call, chat, and email customer
support has always been a major draw to all ages, genders, and regions.
However, connectivity between payment apps seems to be taking on considerable
steam among Gen Zers — especially compared to the other automated, built-in
services that are already widespread perks within both online and
brick-and-mortar banks. A recent SYKES poll exploring digital banking shifts in
the era of COVID-19 reveals that 11% of users of mobile payment apps, such as
Venmo and Cash App, only began using them in response to the pandemic, and a
further 12% will only use contactless payment after the virus has subsided.
While Gen Zers are hardly ever without their mobile devices,
we recognize that consumers are incorporating and interacting with connected
devices in unprecedented numbers. The Internet of Things (IoT) allows consumers
to link just about everything in their homes, cars, and businesses, including
means of payment. As the IoT revolution continues, the FinTech industry should
move forward with innovations made in the connected-device domain, adapting to
consumer expectations and creating frictionless experiences for the newest
generation of bankers & shoppers.
Tech savvy and no strangers to financial disruption, the
digital natives of Generation Z are poised to define the systems of banking.
Brick-and-mortar banks have adapted enough to ongoing technological shifts that
they continue to be the most popular form of banking — for now. Still, the
aftermath of COVID-19 is out of knowledge’s reach, (just as the retail branches
have been as well) and if all predictions take form, far more people will rely
solely on contactless means of banking. Whether online or in the branch, banks
must prepare for the future by offering secure financial solutions with
seamless connectivity, a customer-centric support approach, and tailored
options to what will become the largest generation in history
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