As technology advances, everyday services like banking are in a constant state of innovation. The information age has transformed banking in the last several decades, making processes more efficient and less time-consuming. Each generation has its response to digital banking advances; younger generations adapt more quickly, and older generations take time to adjust but are receptive to changes. Standard banking services are handled digitally now, and competition is growing steadily in favor of online banks. Consumers are no longer limited to their neighborhood banks and can fulfill their banking needs through several channels. With the rapid growth in technology within banking, the differences between generations and how they bank become clearer. Trends are shifting to show consumers place more emphasis on how their bank can serve them digitally and personally. Traditional banks are tasked with improving digital banking capabilities, attracting younger generations, and offering a personalized approach..
While each generation approaches finances and banking differently, there’s a consensus that most prefer to bank digitally. Millennials and Gen Z are “digital natives”; these customers want a better omnichannel approach, a seamless communication channel between customer service and self-service. Gen X and Baby Boomers approach new technology more cautiously, allowing younger generations to prove the value of the new offering before they learn something new. Gen Z is the first generation to be mobile-first consumers, making them a complex demographic to target. Their emergence into the market has disrupted traditional banking models, and there’s an opportunity to build a lifelong banking relationship at the start of their financial independence. As Boomers age, with the youngest turning 60 next year, the country will soon start to see wealth transfer to their Millennial and Gen Z offspring. The next two decades will transfer $84 trillion in assets between generations. However, only 50% of Gen Z and Millennials expect to give future deposits to their current bank; the rest are considering other providers. Across all four generations, loyalty drops notably when consumers consider a provider for future loan or investment needs. Gen X and Boomers are less receptive to banking offers, Also common among the generations is a want for personalized service, the personalization varying from digital to in-person. Each segment has different needs and wants, banking should be addressed in the same way. Many bank products and services function the same; how it is presented should feel more personal.
Despite generational differences, everyone can agree that they like seeing their bank have branches in their neighborhood. Two-thirds of adult consumers, ages 18-75+, have said they like to see a branch of their bank in the neighborhood, but over 95% of interactions with the bank aren’t done in person. Clients are taking charge of their banking experience through online banking with virtual assistants like Bank of America’s Erica. These intuitive AI systems help clients solve many problems without speaking to a customer service representative. Digital banking is now the number one reason consumers are switching banks, beating customer experience and satisfaction. Though trends point towards a future of self-service and limited interactions between clients and banks, clients still enjoy personal interactions. Clients want to effortlessly transfer between communication channels when seeking service from their bank, whether online, in-branch, or through customer service. Clients may feel a lack of support in their bank if they have to start problem-solving at the beginning when needing help beyond digital banking.
Fintechs have strengthened the trust consumers have in them by providing better digital assistance, referral-based programs, and implementing a range of technologies to keep their data safe and secure. Opening an account with a fintech is also easier and more accessible, enabling unbanked and underserved communities to take control of their finances. In 2021, fintech use approached or surpassed traditional banking use among this population. Fintechs tend to offer fee-free banking options, making them an appealing adversary to traditional banks. A November 2022 survey found that 20-25% of consumers feel their financial institution can better serve them by decreasing or eliminating fees. Traditional banks are adding checking accounts that have no or low monthly fees, no overdraft fees, or limited checkwriting to compete. Consumers with less complex needs are attracted to this simple approach to banking. Fintechs make finance and money easier to understand, individually and socially. A study found that one in four Black and Hispanic respondents did not track their credit score until they began using a fintech app. Existing brands like Apple have started to offer credit cards and high-interest-earning savings accounts through a partnership with Goldman Sachs. These offerings are digital-only and fully integrated. Cash rewards from the credit card can be deposited into the savings account, encouraging consumers to establish healthy spending and saving habits.
One of the biggest challenges the traditional banking sector faces is a growth in trust between consumers and their digital competitors. Around 40% of adults trust digital banks and fintechs, compared to 65% trusting traditional banks and credit unions. The lack of trust in digital banks comes from a lack of understanding and relationship, which can be remedied and close the gap. Gen X trusts their primary financial provider more than any other generation, at 91%, and Boomers follow closely behind at 89%. That percentage falls to around 50% with younger generations; they respond well to brands with similar values and make them feel heard. These consumers want resources, like educational content and coaching, to guide their financial wellness journey. After a year of rapid inflation, rising debts, and the lingering fear of a recession, consumers of all ages look at their banks for empathy and advice. Traditional banks still have the advantage of physical locations and personal interactions despite fintechs growing their customer base. If branches were to offer seminars and provide advice on getting the most out of the bank, consumers would be more likely to visit in person. Technology can supplement this effort by allowing consumers to engage with brands more frequently through different channels. Products like loans are simply a means to an end, like purchasing a vehicle or home. Bank of America recently introduced the Digital Car Shopping tool that enables users to search an inventory of over one million vehicles, prequalify for a car loan without harming credit, and calculate different payment amounts and loan terms. The tool was designed to save users time when going through the car buying process. Digital banking and technology can be the greatest resource to connect consumers with their banks and improve their banking experience.