Generation Z has entered the world asking questions, often wondering “why” things are done a certain way, and why certain practices are accepted as normal. It is no surprise that they are taking the same approach to banking. “Why do I need a bank?” This simple question leads to many others, questions that banks have been trying to answer for a while now. The good news is that many efforts are beginning to show progress.
In this article, we will explore why Generation Z feels disconnected from banks and share some ideas on how to better engage with this unique group. First, let’s define who Generation Z is.
Who Is Generation Z?
Generation Z includes those born between the mid-to-late 1990s and the early 2010s. They are often considered the first generation to grow up with the internet, smartphones, and social media as a normal part of life. While these tools are sometimes criticized for encouraging leisure and distraction, they have also sparked a desire for exploration and questioning.
This generation has been exposed to advanced technology from an early age, and they expect technology to be powerful, efficient, and often free. They are less tolerant of technology that is merely “good enough,” instead wanting smooth, intuitive experiences right from the start. This is an area where some banks have struggled to connect with Generation Z.
Why Generation Z Distrusts Banks
Let’s dive into Generation Z’s experiences and expectations while exploring opportunities for banks to build trust and grow their customer base.
Falling Short of Expectations
As digital natives, Generation Z tends to think about technology first. This can put traditional banks at a disadvantage because their strength has long been in physical branches and personal service. For decades, banks have focused on creating strong in-person experiences with well-trained staff and prime real estate that positions the branch as a cornerstone of the community. The challenge is that Generation Z feels more comfortable in the digital world, where this physical presence and personal service are harder to translate.
Early online banking was like a rough digital version of the branch experience. Over time, developers have learned that customers want different tools online than they do in person. They expect easy-to-use, intuitive experiences with quick access to data, often enhanced by artificial intelligence to provide smart solutions.
Trust and Security
Despite Generation Z’s openness to sharing their lives on social media, trust and security remain important to them. While they might trade privacy for convenience in some cases, there are limits. For example, when choosing a bank, many in this generation still prefer established legacy brands over newer, digital-only banks. A survey of 3,000 Gen Z customers by IBM found that 55% trust traditional banks more than neobanks to handle issues like fraud.
Banks should not overlook this trust. Promoting safety and security—core strengths of traditional banking—should be a key part of any digital marketing strategy, not just for Generation Z but for all customers.
Economic Uncertainty
Generation Z has grown up in uncertain economic times, witnessing events like the Great Recession. There is also a growing fear of another recession. While employment numbers may seem strong, the quality and long-term prospects of many jobs remain uncertain.
Many members of Generation Z have embraced side jobs, not just as a way to get ahead but as a necessity to make ends meet. Banks would do well to recognize this. Offering 24/7 online banking, for instance, is a logical solution for people working non-traditional hours. Having human support available through live chat during these hours could also be a valuable service for Generation Z.
Financial Guidance Gap
In a recent study, 70% of Generation Z respondents felt confident handling basic financial tasks like managing their expenses. However, their confidence drops when it comes to more complex matters, such as building an emergency fund (54%), saving for retirement (43%), or investing (29%).
A survey by Forbes showed that 79% of Generation Z respondents turn to social media for financial advice. This presents a clear opportunity for banks to step in and offer guidance on everything from basic budgeting to retirement planning and investing.
Ethics and Environmental Concerns
Generation Z places a high value on sustainability. A report by the World Economic Forum found that three-quarters of Generation Z prefer to prioritize sustainability over brand loyalty. This extends to their banking choices as well. The IBM survey mentioned earlier found that 64% of Generation Z would switch banks if their current bank did not meet ethical or environmental standards.
Banks, like many businesses, face challenges when it comes to ethics and environmental responsibility. To succeed, they must understand their audience and align their values accordingly.
Strategies for Reconnecting with Generation Z
A recent BlackRock survey found that despite economic challenges, Generation Z saves 14% of their income. As Generation Z becomes a dominant force in society, banks need to address the disconnect and offer services that align with their needs and values. Here are some key areas to consider:
1. Digital Innovation
Enhance digital platforms with a focus on user experience and security.
Consider how technologies like AI and blockchain will shape the future and start
integrating them where appropriate.
2. Financial Literacy and Empowerment
Develop programs and tools specifically designed for Generation Z.
Provide personalized financial planning services, like student loan repayment options and
savings calculators.
3. Physical Branches
Reimagine branches as community hubs or spaces for financial education and social
interaction.
Make branches appealing to Generation Z by incorporating technology.
4. Alignment with Values
Take clear stances on ethical issues and environmental sustainability.
Communicate openly about the bank’s efforts and achievements in these areas to build
trust.
5. Personalized Services
Offer personalized product recommendations and financial advice.
Implement feedback mechanisms to continuously improve based on Generation Z’s
needs.
Conclusion: A Generation Looking for More
Generation Z has grown up with instant access to information, and this has shaped their expectations in all areas of life, including banking. This presents a great opportunity for banks to build stronger relationships with this generation by enhancing digital tools and offering meaningful financial education.
