How Generation Z is changing digital banking (2024)

This guest post was written by Caleb Danziger, co-owner and editor of thebytebeat.com.

The banking industry has changed drastically over theyears. Just a few decades ago, you had to walk into a bank to handle allwithdrawals, deposits and account transfers. All banking was done in person —you didn’t have any other choice.

Today, however, most customers can handle most, if notall, of their finances online, leading to the rise of digital banking.

This new trend has proved a hit among younger generations,who would rather avoid physical channels of banking. Generation Z is one suchgroup of young people. Born roughly between 1997 and 2012, Gen Z has neverknown life without the internet. So, naturally, they often look to technologyto solve their problems. They expect digital solutions to be accurate,innovative and omnichannel — and finances are no exception.

Gen Z and Finances

People’s views on finances are often shaped by economicevents that occurred during their childhood. For Gen Z, that event was thefinancial crisis. The early 2000s were marked by a decline in economic activityand a rise in unemployment, which continued to climb even after the recessionended. The Great Recession, which began in December 2007 and ended in June2009, also resulted in the collapse of banks and the value of both stockmarkets and housing prices.

The effects of the recession were long-lasting. Manyimportant economic variables didn’t regain pre-recession levels until as lateas 2016. So, most of Gen Zers’ lives have been marked by the economic downturn— which, in turn, has made them more pragmatic and clear-eyed. As a result, thegeneration as a whole is hard-working, debt-averse and frugal, with somealready saving for retirement.

To budget better and save smarter, Gen Zers are banking their money. Roughly 71% have either had a bank account in the past or currently own an account or joint account. These teenagers and young adults are saving for both the near future and life after retirement. Doing so early on in their careers will create good saving habits that should lastthroughout their lifetimes.

However, most of this young generation’s members aren’t using traditional brick-and-mortar banking methods to save. Instead, they are turning to banking apps, mobile sites, automatic transfers, and online services to simplify the process and do most of the work for them.

Shaping New Banking Trends into the Digital

Banks have switched to a more digital approach to helpmembers better manage their finances and to accommodate Gen Z.

Today, most banks with physical branches also offer onlinebanking that enables customers to access their account information, transfermoney, deposit checks, pay bills and manage spending. Some financialinstitutions have even taken digital banking a step further by solely offeringonline services, eliminating the need for physical branches.

Gen Zers can then do all their banking from home, makingthe process simpler and convenient than ever.

As online banking becomes Gen Z’s primary interactionchannel, banks are working overtime to keep up-to-date with the latest digitaltechnology trends, investing their efforts and resources to remain relevant andcompetitive.

One way banks are implementing technological advancements is the incorporation of artificial intelligence (AI). About one-third of the work done at banks today can be automated. So, many banks use AI to collect data on customer habits and computerize customer service interactions.

Most financial institutions also have mobile-friendly platforms and apps to serve the younger generation. About 50% to 80% of smartphone-owning Gen Zers are already using mobile banking, so branches must work to keep their mobile interface simple and streamlined to provide the best services and customer experience. Mobile platforms also allow Gen Z to access their account no matter where they are, eliminating geographical barriers.

Companies such as banks are also increasingly adoptingimmersive technologies like augmented reality (AR) to provide a better digitalcustomer experience. This relatively new technology allows users to locate thenearest bank with their smartphone camera or see a visual representation of thebalance in their bank account. As AR technology advances, it’s poised to becomean even bigger part of banking among members of Gen Z.

TheFuture of Bankingin a Digital Age

Although no one knows precisely what the future of bankingholds, banks, customers and investors should expect more experimentation andshifts in strategy as technology continues to improve.

Undoubtedly, young adults will facilitate a more completetransition to digital banking as they gain a stronger voice and presence in theeconomy.

Understanding what makes Gen Z tick, therefore, iscritical for marketers and developers looking to cater to young customers andcreate services they’ll be eager to adopt. This will mean creating more thanjust a digital banking interface. Banks that want to attract and retain Gen Zwill have to think outside the box.

For instance, while 21% of Gen Z had a bank account by age 10, 48% are already using a payment appon their smartphone.So, banks shouldn’t keep a sole focus on creating banking apps, per se, since these are already considered the norm.

Instead, they should take extra steps to design other appsthat offer lifestyle banking and interpersonal money transfers to attract a newgeneration of potential customers. By creating practical and relevant services,they can hope to market their bank to young app users.

Attracting Gen Zers now while they are still young couldlead to fruitful relationships in the long run. Their value will increase asthey grow older, earn more money and expand their engagement with financialproducts and services.

So, investing in Gen Z is a smart idea for any financialinstitution looking to stay ahead of the competition and better serve Gen Z —and many other generations — for decades to come.

Last Updated on February 3, 2021.