Time is Money: Exploring Gen Z’s Relationship with Banking

Gen Zers grew up in the digital and mobile banking era. Unlike earlier generations, who relied on in-person banking, Gen Zers expect that most, if not all, banking operations can be performed digitally. For instance, when I deposit a check, I do so from the comfort of my couch using my bank’s mobile app. According to a study by Global Payments, Gen Zers currently own $360 billion in disposable income, which will grow as more join the workforce. Meeting the needs of this segment of the population is necessary for banks to be successful in the coming decades. Institutions that act sooner rather than later will reap the benefits of taking over a generation that values personalized digital experiences and considers more varied factors than its predecessors when choosing a bank.

What does Gen Z prioritize when picking a bank?

Family connections still matter in banking; however, their effect on Gen Z is decreasing. Over the last two years, the number of Gen Zers who bank with the same institution as their immediate family has decreased by 11%. Younger customers are more aware of the market options, and they value different things when selecting a bank. 68.8% of Gen Zers selected cashback/rewards programs as their most important banking benefit. In contrast, earlier generations consistently reported that fees are the biggest dealbreaker. Although I take advantage of cashback and rewards on my credit cards, I believe that I underuse these resources when compared to fellow Gen Zers, and I would prioritize having a card with top-notch customer service and efficient digital resources.

Before college, I created an account in the same bank as my parents. However, as I got more knowledge about the several types of accounts, credit cards, and investing, I decided to find other options that better fit my banking needs. Credit card companies are trying to make their services more appealing to Gen Zers by offering higher cashback rates to locations that are popular with the young demographic. Travel has spiked among Gen Zers, which is one of my considerations when looking for a new credit card. Recently I traveled to catch a Purdue football game for the first time as an alumnus. Like a significant portion of Gen Zers, I took advantage of an airline-associated credit card to rack up points for future trips.

Another key consideration when picking whom to bank with is digital accessibility. It outweighs name familiarity when it comes to younger clients making their choices. 60% of respondents to a MoneyWise study said that they would switch to another bank for better mobile and digital capabilities. In addition, an article published in The Financial Brand showed that “nearly three-quarters of Gen Zers would use a single bank if they found one that met all their needs.” The conclusion that can be drawn from these two data points is that brand loyalty exists among Gen Zers, but primarily due to convenience/consolidation of accounts and not by any direct affiliation to the brand. Those born in the digital age do not hesitate to bank with nontraditional, digital-only players. I have not had a banking account with a digital-only institution yet, primarily because of my belief that if there is a serious issue with my account, such as identity theft, going to a branch will be the most efficient way to get help. Digitalization has particularly affected customer service, and it is a key factor for Gen Zers when choosing a bank, notably the increased personalization and instant, AI-supported helplines.

If it’s not digital, I’m not interested

Although banks are making efforts to tailor their customer experience to Gen Z better, according to a recent survey, 64% of Gen Zers reported that they had to print, sign, and email paper documents at some point in their banking experience. Harvard Medical School concluded that Gen Zers have difficulty focusing on lengthy documents, especially in written format. Pearson Learning highlighted that only 47% of Gen Z students accessed materials on paper to study for their classes and do homework, compared to 60% of millennials. This shows the younger generation's decreased exposure to hard copies of materials. I was surprised when I saw this low percentage for Gen Z since I like to combine digital resources with a notebook and a pen when studying. On the other hand, like most Gen Zers, I am “turned off” by long paper contracts filled with jargon. As a Gen Zer who recently bought a car, it is safe to say I was not a fan of the “dealership experience,” known for endless paperwork and bureaucracy.

Gen Z made banks restructure their foundation

In addition to a large amount of digital information, new generations consider distinct factors related to ESG (Environmental, Social, and Governance), including diversity, inclusiveness, sustainability, and culture when picking a bank. If Gen Zers disagree with the morals of a company, they might boycott the products entirely and get their friends to do so as well. Metrics like the ESG score are widely used by corporations to advertise their forward-looking policies and to draw in young investors. ESG’s three-pronged approach looks at a company’s practices to safeguard the environment, manages relationships with its employees/community, and screens the company's leadership. Data released by the U.S. House of Representatives in 2020 showed little diversity among the nation’s 50 largest banks — 70% of top executives were male, and 80% were white. A study published by the Bank Administration Institute (BAI) reported that over half of Millennials and Gen Zers would switch banks for a higher commitment to ESG and DEI, which is a staggering increase compared to 33% for Gen X and 20% for boomers.

The digital transformation must continue for traditional financial services institutions to get a hold of Gen Zers. Having a wide array of services available and offering personalization and instant access to virtual assistants is paramount to keeping young customers. Investing to capture Gen Zers at the beginning of their careers will pay off in the future as the purchasing power of this generation grows and banks add more high-net-worth individuals as customers.

Learn more about how to meet evolving customer demands at our Banking and Financial Services Consulting Practice.