We know millennials have had an immense impact on how banks operate and with the rise of Gen Z, as well as new technologies, there promises to be more change on the banking horizon. Gen Z is an important population for banks to take into consideration, not only because they have buying power of $44 billion, but also because the older cohorts are starting to enter college. This means that they’ll likely be taking out student loans, setting up bank accounts and applying for credit cards. This presents banks with the perfect opportunity to not only understand this generation, but appeal to them with the right balance of traditional offerings and innovative technology-driven services.
According to research from Accenture, 23 percent of Gen Z visits their bank branch at least weekly, which is more than any other cohort. However, this generation still expects access to digital technologies to make their lives easier, with 69 percent preferring mobile bank applications. Banks must focus on the offerings that provide the most value-add for Gen Z to become loyal customers.
Striking the right balance
Banks that can pair digital capabilities with access to physical bank branches and human interaction will be well-positioned to engage Gen Z customers. While traditional banks should feel encouraged that they’re still the preferred choice of Gen Z, they must continue to innovate. Collaboration between financial services and financial technology companies will be necessary to provide this generation with the best of both worlds. An IDC survey, commissioned by SAP, found that six out of ten global banks were open to partnering with fintechs and one in four would consider an acquisition. This type of collaboration will set banks up for success down the road as Gen Z enters the workforce and increases their spending power.
Many banks have started to strike the right balance by implementing technology solutions into their everyday operations. For instance, Compartamos has leveraged SAP technology to power their mobile banking system, which allows the bank to better meet the needs of customers and increase efficiencies. Banco Galicia replaced their core banking applications so customers can take advantage of an omnichannel experience – mobile and online banking tools while still offering 280 physical bank branches for customers to visit. In the United States, Bank of America is responding to the needs of younger generations by launching Erica, a mobile financial assistant that customers can interact with for their banking needs 24/7. Machine learning technology makes the digital assistant smarter the more you interact with it. It allows you to do a variety of tasks digitally such as view bills, schedule payments, transfer money between your accounts, find past transactions, lock or unlock debit cards, and send money to friends. Additionally, Apple announced Business Chat with Wells Fargo in March, allowing customers to bank via text. Building accessibility and ease into banking applications is a surefire way to increase customer loyalty – especially with Gen Z.
Creating a ‘branch of the future’ and leveraging Big Data
The shift toward more advanced mobile applications, video chats and social media engagement will ultimately benefit banks. While physical branch locations are important to Gen Z, banks must embrace the “branch of the future” mentality and offer a friendly, relaxed approach by leveraging technologies such as virtual reality and digital bank tellers.
The use of technology also allows banks to gather greater insights through data collection and analysis. Big Data can play an important role in personalizing the banking experience for Gen Z and ultimately help to retain customers. Through machine learning, banks can recognize customer patterns and proactively reach out based on their needs. For instance, if a customer clicks on a FAQ on how to apply for a credit card, the bank can proactively e-mail that customer with information on their credit card offerings and the process to sign up.
Leveraging customer data to provide more tailored service offerings is an important strategy for banks that are looking to build a strong relationship with Gen Z. In a world where younger generations have limited brand loyalty, it’s even more important for banks to marry traditional banking elements with digital offerings to keep them engaged and satisfied. Banks who use a digitally savvy and responsive approach to Gen Z will be set up for success.