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Taking a multi-generational approach to digital banking

Sep 10, 2020 / Consumer Banking

While digital banking options are preferred by a growing number of individuals, how consumers do their banking is a matter of preference that changes across generations. For community banks and credit unions, taking a multi-generational approach may be the best bet for attracting and retaining more customers and members.

Bringing up Generation Z

As the first generation of true digital natives, Gen Z has never known a world not enabled by palm-sized technology. The American Psychological Association reports that money is already a major source of stress for the front end of Gen Z, with 81 percent of those over 18 afraid they will not have enough to live on.

Unfortunately, their fears may be amplified by a low level of financial literacy. When Gen Z has a problem, they look online for answers, so community banks and credit unions can first engage this youngest cohort with digital guidance on saving money and planning for a sound financial future.

Consider offering calculators to help them see how their savings will grow. Imagine the power of being able to determine how long it will take to save for a purchase at a specified interest rate, and then being automatically linked to the application process for such an account.

Millennials on their way

Many Millennials see the world through the specter of the Great Recession, with most coming of age in a stagnant job market and burdened by student loan debt. One in 4 carry credit card balances, according to an Aite Group survey.

Often stretched beyond their means, Millennials can benefit from financial guidance, particularly in the areas of rebalancing debt and saving for the future. The caveat is that they’re far more likely to trust robo-advisors and other digital sources than their Boomer parents, according to Facebook IQ. They’re also looking for a financial institution that proves it understands them via personal interactions.

To win over Millennials, community banks and credit unions should use digital advising as an entry point. This generation wants personalization as much as digitalization, so the ability to speak in person when they have questions or want advice is important. Millennial preferences underscore the need for fluid omnichannel interactions that allow individuals to move seamlessly between digital and physical worlds.

Generation X forgotten, but not for long

While Gen Z and Millennials – now the largest generations – represent long-term opportunities for financial institutions, Generation X will command nearly twice as much in total assets as Millennials by 2030, according to Deloitte. That is a $22 trillion opportunity to capitalize on.

Beyond wealth management, Gen Xers hold both checking and savings accounts with traditional institutions. But satisfaction is not always high – one in 10 say they would switch institutions to get a better interest rate.

In this environment, a community bank or credit union needs to demonstrate trust and value. Gen Xers are often balancing family needs against work commitments and demands of aging parents. They are often as technologically savvy as millennials and are turning to online channels to simplify daily financial tasks like making deposits, transferring funds and sending payments.

Baby Boomers catching up in digital

Baby Boomers are the nation’s wealthiest generation, accounting for two-thirds of all deposits in the U.S., according to American Banker. Given that financial clout, it is important that credit unions and community banks not leave them behind in digital initiatives.

Nearly three-quarters of Boomers go online at least once a week to handle banking transactions, but have little patience for websites that aren’t optimized for the device they’re using, according to Google. One in 6 will change financial services providers over a poor digital experience.

Considering the incredible buying power that Boomers possess, financial institutions need to think digital across a full range of products, too. They represent more than a quarter of all self-employed individuals, and they are the generation most likely to buy cars. Many Boomers still don’t trust digital, so make sure to partner with secure and well-known providers when seeking digital solutions to ensure the security of banking transactions.

For community banks and credit unions, engaging consumers in a digital world requires a broad approach, covering many attitudes and preferences. Understanding the generational clues of each cohort will be an asset in developing strategies that meet the needs of more customers and members.

Allan Brown is vice president and general manager at Malauzai Software, a Finastra company.

Is your organization ready for Gen Z? Find out with insights from BAI Banking Outlook research.

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