When providing financial services to four different generations, don’t pretend to know the mindset of each.
Yes, younger consumers are more inclined toward mobile apps and all things digital, and older consumers remain fond of the branch and doing business on their desktop computers. But every generation has some unexpected characteristics that financial services leaders need to consider when digitally transforming their operations.
Although this research was completed in January, before the United States started to feel the impact of COVID-19, the insights help understand customer sentiment and expectations for digital banking during these unprecedented times. BAI surveyed 600 consumers, 150 from each of four generations of consumers—Gen Z, Millennials, Gen X and Baby Boomers—and turned up some surprising insights. For example, Gen Z and Baby Boomers, on opposite ends of the generational spectrum, are essentially on the same page when it comes to branch banking.
When asked if they prefer a primary financial services organization with access to branches and people—even if they don’t use them very often—53 percent of Gen Z and 54 percent of Boomers said yes. Gen Z, new to financial services, appreciate the face-to-face conversations and advice, and Boomers find traditional person-to-person encounters at their bank or credit union to their liking.
Forty percent of Gen Z say they like to resolve financial services problems over the phone with a rep. By an almost identical percentage, so do Boomers. And don’t assume Boomers are hostile to technology. Half of them—more than any other generation—say the ability to open accounts online would create a better digital banking experience for them.
Twenty-two percent of Boomers, versus 29 percent of Gen Z, say they use their primary financial services apps two to six times a week. Worth noting is that 52 percent of Gen Z use their primary financial services app every day, versus 17 percent of Boomers who say they’re daily users. While there is a significant gap between Boomers and the younger generations, it has been narrowing at a rapid pace and may close even further given that many channels used by the older generations are currently unavailable due to COVID-19.
More than three-quarters of Boomers say their primary financial services provider’s digital capabilities are meeting their needs. The generation reporting the highest level of satisfaction with their provider’s digital offerings are the Millennials at 91 percent. And if members of what’s now the largest generation in financial services are happy, then all’s good. Right?
Well, no, because 61 percent of Millennials say they would switch their primary financial services organization in favor of one that offered a better digital banking experience. Placing your entire digital transformation strategy on fickle Millennials could be risky business. They’re but an app away from leaving you. Same goes for Gen Z.
It makes more sense to find the sweet spots of every generation when digitally transforming your bank or credit union. Gen X, the now middle-aged consumers, often get overlooked by financial services strategists. Fortunately, BAI Banking Outlook research offers interesting insights into this generation as well.
More so than any other generation, Gen X is concerned about privacy issues, is skeptical of their primary provider’s security and would like it if they could pay a bill by simply taking a picture of it and sharing it with their financial services organization.
Gen X also likes to get their financial services provider’s product and service offerings via email (versus an app or direct mail). And they like to get their cash from an ATM (versus the branch or drive-up).
Millennials have some special tastes of their own. More so than any of the other generations, they believe it’s OK for their primary financial services organization to use artificial intelligence to improve the customer digital banking experience. Millennials are especially comfortable knowing that AI, which arouses the suspicions of some consumers, can serve up more personalized product and service offerings to meet their financial needs.
They prefer to learn about offerings via email, as opposed to learning about them from a text or an app, favored by Gen Z, or direct mail, which Boomers like best.
Millennials lead the league in their concern over one of digital banking’s biggest challenges—the inability to complete some transactions in a certain channel after starting them in a different one. They especially don’t like having to start the process all over again, a complaint expressed by every generation.
Financial services leaders were also surveyed. The good news is that their digital transformation priorities align well with consumers. For example, when these leaders were asked what services they were providing through their fintech partners, the top two responses were payments and funds transfer—leading priorities of Gen Z and Millennials.
The vast majority of financial services leaders say their organizations are investing in the right areas to drive their digital transformations. Forty-five percent estimate their organizations will be increasing their digital investments from 5 percent to 20 percent in 2020.
Looking at each segment, slightly more than half (52 percent) of the financial services leaders from organizations of less than $5 billion in assets are projected to make digital investments in that 5- to 20-percent range in 2020; 50 percent of the leaders in the largest segment, with more than $25 billion in assets, may be making digital investments in that range; and 35 percent of the financial services leaders in the $5 billion to $25 billion asset range are expected to boost digital investment by 5 to 20 percent in 2020.
But financial services leaders also worry that their organizations may be falling behind in the industry’s race toward digital transformation. That may explain why so many financial services organizations plan to either partner with or acquire fintechs to stay ahead of the technology curve. A big challenge facing banks and credit unions is overcoming the complexities of their legacy systems.
Meeting the technical challenges and making the right investments for a digital transformation will be critical to meeting the unique needs of four generations of financial services consumers. Always keep in mind they can be fickle about digital products and services, especially the younger ones.
Karl Dahlgren is a managing director at BAI.
BAI Banking Outlook video: Preparing for Gen Z
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