Banks looking to attract younger customers should prioritize their digital banking offerings and promote their work on diversity, equity and inclusion and environmental social governance issues, according to a report from the consulting firm BAI.
The survey, taken from 2020-21, found that the top ways banks can improve their digital offerings for Generation Z customers (born between 1997 and 2012) include giving them the chance to turn debit and credit cards on and off and offering online account opening and faster payments. According to the survey, only 12 percent of Generation Zers prefer to open a new deposit account in a branch; the remainder opted overwhelmingly for remote options.
According to the survey, 56 percent of Gen Zers say it is important that their primary financial services organization be committed to diversity, equity and inclusion issues. Nearly six-in-10 Gen Zers and millennials (norn 1981-96) said they would switch financial services organizations for one more committed to DEI or ESG.
According to the professional services network KPMG, banks looking to invest in ESG should forge a firm understanding of common expectations for stakeholders and build awareness of leading practices, especially among senior management and board members; and speak with their regulators to understand what is expected of them and how those expectations could change over time. “Bank executives (and particularly boards) should be ensuring that ESG risks are a lens through which all decisions are made, especially in relation to credit and valuation risks in their portfolios, reflecting the strategic nature of these risks,” the firm stated.
Cryptocurrency also has proven a large draw for younger bank customers. Last year, the market capitalization of all cryptocurrencies reached a record $2 trillion, and there are almost 10,000 different cryptocurrencies. Younger generations are fueling this growth: More than half of Gen Zers and millennials have either directly invested in crypto, or are in a fund with crypto exposure, according to the BAI survey. Younger generations are also less likely to stick with their main banks and use multiple banks at the same time than older Americans.
A separate survey of more than 1,000 people taken by the financial data platform MX found that less than half of Gen Z respondents had an account with a traditional bank, credit union, neobank or tech company. More than four-in-five of Gen Zers and millennials use a money transfer app. Those groups are also less likely to trust their FIs than baby boomers, the report found.
“The greatest opportunity for banks and credit unions is to capitalize on the level of trust they’ve already established with their customers,” said Shayli Lones, vice president of Go-to-Market at MX. “This includes offering competitive and valuable products and services, and keeping the human touch even as interactions move into digital channels.”