The pandemic has changed the way everyone banks (and here’s how)
Given the technological influence of the younger generations and the economic power of their parents and grandparents, the financial services industry stands at an interesting crossroads. Many banks and credit unions are now struggling to maintain their traditional in-person experiences for seniors while trying to appeal to 22-year-olds who prefer mobile account openings and speak to customer service at 2 a.m.
A new survey from BAI has found that as all consumers turn to digital banking more, there is increasing generational variation in what they want and how they expect financial institutions to deliver.
Generational differences amplified by the pandemic
BAI surveyed consumers through four generations and found that banking behaviors have changed dramatically since the start of the pandemic. Many baby boomers have gotten more into tech, millennials have quickly broadened their expectations for the mobile experience, and Gen Xers are increasingly concerned about fraud and trust.
âEnsuring an ongoing understanding of generational banking preferences will remain essential for financial services leaders as they develop the appropriate strategies to prioritize products and services for their clients,â said Karl Dahlgren, CEO of BAI.
( Read more: Don’t sweat Amazon and other big tech – steal their best ideas instead)
Generation Z: ambitious and mobile first
While it’s easy for older banking executives to view Gen Z as the spoiled kids who grew up with too many people on hand, their growing importance demands special attention from banks and credit unions. Morgan Stanley notes that these children will soon “reshaping the financial sector in their tech-savvy and mobile image first “as they enter the 25- to 40-year-old” sweet spot “to borrow.
It shouldn’t come as a surprise that the Gen Zers are mobile-centric. Many of them have tinkered with smartphones before they can walk, and few of them have ever set foot in a bank branch. BAI found that 37% prefer to use their phones to open a deposit account, a much higher proportion than any other generation (31% of Millennials and 24% of Gen X, and 4% of Baby Boomers).
Gen Z also has big expectations and big ambitions, even if they are not entirely shrouded in reality. While most still live at home and depend on financial support from their parents, 59% told BAI they were âfinancially independentâ and 75% planned to achieve a higher standard of living than their parents. . And while 61% of them do business at the same establishments as their parents, they bring their own set of digital expectations.
Gen Z can seem difficult to solve at times, but there is good news. Although primarily mobile and constantly immersed in technology and social media, they prefer to deal with financial institutions rather than technology companies. It’s quite surprising and welcoming at a time when tech gods like Facebook, Amazon, and Google are increasingly trying to break into financial services.
“There is definitely a clear separation between church and state, and most of these kids want to get their banking from a bank and not from a big tech,” said Warren Fisher, Founder and CIO. by Manole Capital Management. The financial brand. While this may mean a rising generation of consumers willing to stick with traditional banks, it doesn’t necessarily lead to unsecured loan profits.
Beware of credit:
Having learned from the mistakes of their parents who had too easy access to credit in their twenties, Generation Z mostly avoids debt and prefers to pay by debit card.
Only 17% say they prefer to pay by credit card, compared to 46% of Millennials, 35% of Gen Xers and 47% of Boomers, according to BAI. As they mature financially, banks and credit unions can help attract Gen Z by serving as a trusted partner in their future with classes or financial education.
Millennials: mature techies
With a population of 72 million people between the ages of 20 and 40, Millennials have the tech savvy of Gen Z but with a greater sense of maturity and financial responsibility. Over 70% are employed full time and 85% consider themselves financially independent, the highest of any age group.
High on convenience, Millennials value speed and want faster payments with faster transfers and a seamless omnichannel experience. This financial independence, growth and connectivity leads them to interact with their financial institutions at a rate of 114 interactions per month, according to the BAI study, nearly four times the rate of baby boomers and 50% more than the generation Z or Generation X.
While they prefer mobile, they also have high expectations of what the mobile experience should be like. In fact, 75% of Millennials say they would change their primary financial services organization to a better mobile app, a huge jump of 28 points from the same number who said it last year.
An alarming finding is that 85% of Millennials say they’re willing to bank with non-traditional banks like Amazon, Apple, or PayPal, research revealed. This is troubling given the growing size of the generation and the fact that these companies have a clear advantage in developing mobile applications. Yet rather than worrying about big tech, banks and credit unions should instead focus on using their ideas.
As they enter their peak earning years and start thinking more about retirement, their kids, and their financial future, Millennials are hungry for financial advice too. However, 84% said they were comfortable with AI-based financial advice, more than any other generation, according to BAI.
( Read more: Four Ways Banks Need To Change Before Gen Y & Gen Z Love You)
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Generation X: aging but agile
The MTV generation of “lazy, disgruntled youth” are now in their prime with graying hair and more worries about their children’s retirement and school fees than video games. While Gen Xers are comfortable with most digital services, they still share many traits with Baby Boomers, including a preference for traditional banks and some face-to-face interactions. Most small business owners also belong to this generation.
BAI found that Gen Xers generally have a high level of trust with their financial institutions. While only 39% of them have been victims of some type of fraud or identity theft, 95% believe their banking provider “has done enough to resolve fraudulent activity on my account quickly and efficiently.”
When it comes to what they wanted in a financial institution, the âbest ratesâ were by far the top of the list compared to other generations, as shown below. And although they would like to open accounts online for deposits and loans, almost half said they prefer banks and credit unions with branches, even if they don’t use them.
Reasons consumers choose a new primary financial institution
|Rank||Generation Z||Millennials||Generation X||Baby boomers +|
|Superior customer experience
|Cash incentives / rewards
|Cash incentives / rewards
|4||Large ATM network
|Convenient branch network
Boomers: Old School and Face-to-Face
With decades of work, experience and savings under their belt, it’s no surprise that baby boomers are more stable. The study found that 65% of them say they are either increasing their deposits or maintaining the savings status quo, compared to 38% of Millennials.
Financial institutions need to be careful not to alienate older consumers while obsessing over Millennials and other younger generations.
Baby boomers are using more technology than many realize, and their rate of adoption has only increased since the pandemic. Since digital skills can vary widely, banks and credit unions should seek consistent feedback on the usability of their digital services and offer support when needed.
Financial institutions will also need to think about how they will continue to ensure that older people use digital banking services after the pandemic is over. As a generation that still values ââphysical branches and face-to-face interactions, it’s no surprise that only 35% are comfortable receiving financial advice through artificial intelligence, compared to over 70% of other generations.
While many baby boomers are now more willing to bank through their phones than they were before the pandemic, they still prefer financial institutions with a branch or two nearby. BAI has found that nearly two-thirds prefer to open a deposit account in person, more than double the percentage of any other generation and four times the number of Millennials. Most of these older consumers are loyal and happy with their current banking situation, saying they are more likely to use the same institution next year.
One area that banks will need to pay special attention to is trust. While 89% of baby boomers say they trust their financial institution, according to the study, only 63% believe it will protect them against fraud and identity theft, the lowest percentage of any generation.