Banking for Z next generation

By David Whitcomb

More than 10,000 baby boomers are turning 65 every day, and over the next 20 to 30 years, an estimated $68 trillion of wealth will transfer to their children. The landscape of financial customers is changing as millennials and Gen Z’ers age (and as Gen Z influences the decisions of their parents in Gen X).

While we tend to think of Generation Z as a young demographic, the reality is that the oldest Gen Z’ers have entered the workforce, and their purchasing power is expanding. As the world’s first generation to be 100 percent digitally native, Gen Z professionals are changing how companies spanning all industries interact to meet them where they are. Gen Z thinks about finances differently and more digitally than any previous generation, and according to a recent study, Gen Z and millennials are less likely than baby boomers to completely trust their banks. However, the study also showed trust and security were leading factors in choosing a bank.

Banks can build trust with both current and potential customers by embracing modern digital solutions that are more secure, reliable and seamless, and that meet customers where they need the most help along their financial journey. By harnessing and organizing customer data, banks can offer valuable tools to cater to the next generation. Here are three ways to re-evaluate and boost your digital offerings.

1. Connect financial data securely

Consumers’ financial data holds a lot of promise—but it’s disjointed, unorganized or unavailable. Consumers want a consolidated view of their finances but many have accounts and relationships across multiple institutions. Banks have an opportunity to increase consumer engagement with modern connectivity solutions.

A top priority for all banks should be to put financial data back in the hands of the consumers. This means protecting consumers with better monitoring and control over who is able to access their financial information. We’re seeing an increasing number of banks protecting their clients and helping their clients protect by deploying FDX APIs to increase transparency of third-party data access. This also means examining relationships with other partners in the financial space. Increased transparency about how a partnership uses data will lead to increased trust among customers.

2. Automate financial advice

While most American adults report satisfaction with their banks, according to 2022 Morning Consult survey research, a 2021 survey showed that some customers believe they are not getting enough financial help from their banks. When asked if their bank helps them become financially strong, 50 percent of respondents said “No, they don’t really help.” What’s more, the COVID-19 pandemic showed increasing gaps in financial literacy and financial well-being. An annual survey conducted by the Federal Reserve revealed that “nearly one-fourth of adults were worse off financially than 12 months earlier, the highest share since the survey began collecting this information in 2014. This increase occurred broadly across segments of the population, and likely reflects financial distress resulting from the pandemic.”

With this in mind, there are many ways banks can help their customers improve their financial lives. For years, banks have focused on financial literacy: Give customers tools and classes and they’ll improve. But in most cases, financial literacy has only worked for those motivated to improve. It’s time to move to a world of financial advocacy: providing timely insights that guide and protect banking customers.

In order to advocate for their customers, banks must focus on a few things. First, focus on finding the right partners to help harness customer data. These partners should be transparent and clear about how they utilize that data in ways customers can understand. Through these partnerships, it should be easier to target certain customer demographics with the offerings they’ll find most useful—for example, ensuring only homeowners are targeted when sending out fliers for home loan refinancing, or inviting younger customers to a session about starting their first savings account.

Additionally, banks can build in more opportunities to offer financial advice and planning directly to the consumers who want it most. Gen Z and millennials in particular show an interest in banks providing automated financial guidance or virtual assistants for help managing their finances. Touting those perks can help attract younger generations that might be unsure of where to start banking.

3. Embrace and educate consumers on new types of investments

Consumers today are looking for new ways to invest and to expand their portfolios. Cryptocurrency and certain digital assets are great examples of the shift in consumer trends—but many consumers aren’t always sure what they are getting into. A full 55 percent of bitcoin investors said they only started investing in 2021, according to a recent study. This provides a great opportunity for long-standing institutions like banks to provide trusted advice on these new technologies.

Teaching analysts and managers to bring cryptocurrency into long-term wealth planning and banking portfolios can set a bank apart. Learn how to identify which customers would be good candidates for a cryptocurrency infusion into their current financial plans and provide them with the know-how to get started from square one.

Ramping up and evolving digital services can seem like a daunting task, but it doesn’t have to be unmanageable. When banks start with the goal of providing better services and increasing trust among customers, finding the right partner to establish new programs can be surprisingly easy. Being digital is bigger than buying a new online banking platform or upgrading your mobile application. Gen Z experiences everything digitally, across apps, websites, and payment platforms. By keeping in mind what customers truly want and need from their banks, it’s possible to increase your impact as younger generations start their financial journeys. Banks can rely on their foundational trust with consumers as they grow services to meet the needs of the next generation.

David Whitcomb is VP of product and connectivity experience for MX.