From Digital-First to Digital-Only: How Today’s Financial Institutions Can Prepare for Gen Z’s Expectations

Over the next 25 years, it’s estimated that over $68 trillion in wealth will move from baby boomers and Gen X to their millennial and Gen Z children and grandchildren. To set themselves up for success amidst this shift, today’s banks and credit unions must recognize the importance of the changing expectations of Gen Z customers. Although digital banking has made much progress over the last decade, meeting expectations for the next generation of banking customers will take proper planning, investing, and prioritization.

The good news for financial institutions? Servicing these younger customers — who have already proven themselves enterprising and innovative — provides plenty of opportunity for organic growth. Today’s diverse fintech infrastructure has expanded, and partnerships abound in areas from user experience to payments to fraud detection. Financial institutions of all sizes can take advantage of these partnership opportunities to move nimbly and begin winning over the next generation.

Meet Gen Z’s Mobile-Only Needs

Gen Zers aren’t just mobile-first, they’re mobile-only. According to IBM, 75% of Gen Zers choose smart phones as their device of choice over other screens, and that’s not limited to recreational activities. A similar percentage — 71% of Gen Zers — say that they use their smartphones most often for financial activity.

Recognizing the mobile-only needs of Gen Z can be a challenge for banks and credit unions. First on the digital agenda should be building out comprehensive mobile services for all banking capabilities, not just critical ones like bill pay or check deposit. A 2023 study by Chase found that Gen Zers are more likely than their older counterparts to use mobile banking for budgeting, checking credit scores, creating savings plans, and more. As financial institutions build out these mobile features, they must also maintain security and ensure they have a layered risk mitigation and security strategy, including multi-factor authentication, biometrics, and other modern fraud-prevention mechanisms.

As Gen Z’s personal finances rapidly come of age, community banks and credit unions must position themselves to best service this segment by making their services and products:

  1. Fast

When considering how quickly banking services are delivered, it’s clear that Gen Z wants things faster than fast. First on the checklist is real-time payments. One misconception, though, is that it’s enough to simply offer an integration with a P2P payments provider. On the contrary, there’s no one-size-fits-all approach. To stay relevant, FIs should work towards not only faster, but more intelligent P2P payments. For example, instead of simply integrating with a name-brand P2P provider, investing in an API-based platform can be a more flexible option. This way, users can stay directly within their mobile banking app to transfer money to friends, family, or even between their own accounts at the same or different financial institutions.

Given the recent launch of FedNow, sending and requesting payments in real-time will also become increasingly important. The younger generation increasingly expects to move its money faster, while relying on their financial institution to maintain security for transactions in real-time. Although still in its early stages, the FedNow service allows financial institutions a direct integration for sending and receiving instant payments. This may require financial institutions to develop and integrate new systems and processes, but the FedNow infrastructure allows financial institutions to retain control of the user experience.

  1. Reliable

According to a Leanplum study, receiving too many or irrelevant push notifications is the top reason people delete mobile apps. Although fast notifications are important, too often, they’re not fast enough and run the risk of becoming irrelevant or even bothersome to users. For example, showing days-old notifications about deposits hitting accounts can erode trust not only in the app, but in the institution itself.

Another study shows that more than half of Gen Zers would consider switching financial institutions due to a poor customer service experience. A significant misconception is that going digital-only means abandoning human customer service completely in favor of digital assistance. Although Gen Z largely favors self-service options, that’s not to say that the human touch is obsolete. Offering integrations like one-click video call options can provide Gen Z with immediate service should they have a problem. Today’s technology offerings will help financial institutions better transition from older generations’ inclination for in-person support to the digital interactions Gen Z members prefer.

  1. Educational

According to Experian, 60% of Gen Zers say they still financially depend on their parents for financial support. The problem? Almost a third of them don’t necessarily agree with the way their parents manage their money. Banks and credit unions have an opportunity to step in and help fill the financial literacy gap. Integrating budgeting, forecasting, and cash management tools is a great way to start, as is helping account holders break down complex personal finance topics in fun, easy, and informative ways.

For example, integrating visualizations that show the power of compounding interest can help young people understand the power of saving. Banks and credit unions can consider partnerships with fintechs that aim to improve financial literacy through unconventional strategies like gamification. The need for family banking is also growing — for activities like easily sending money between family members, managing chores, and putting spending controls in place.

  1. Experiential

It’s no surprise that Gen Z banking users want a functional, safe, and secure digital banking experience. Historically, financial institutions have focused on function over design, leaving the user experience as an afterthought. When it comes to Gen Zers, who are familiar with sleek, user-friendly apps like Venmo and Uber, this can no longer be the case. Rather than building out piecemeal features, financial institutions should take a design-centric approach, grounding themselves in user testing, integrating accessibility, launching gamification where appropriate, and integrating an element of fun. The best approach may be to change user design and experience with an eye towards being better, not just different.

  1. Flexible

The COVID-19 pandemic and the surge in remote work have brought about significant changes in the employment landscape, especially for the newly entering Gen Z workforce. This transformation carries particular significance for smaller community banks and credit unions. Historically, community financial institutions may not have been compelled to offer options catering to the needs of international or remote workers. With Gen Z professionals embracing travel and remote work in large numbers, there is an increased demand for transparency around foreign transaction fees and a greater desire to access data about users’ travel activities to translate into actionable insights.

There’s also a growing need for features that facilitate the division and sharing of payments, as well as ways to seamlessly merge small business and personal accounts. Gen Z wants the convenience of accessing all their financial information in one place, mainly through mobile platforms. To stay competitive and meet the evolving needs of this generation, financial institutions should consider providing flexible banking solutions that accommodate these modern work and lifestyle trends.

Move Swiftly to Capture the Next Generation

The time for financial institutions to begin updating their offerings to attract Gen Z customers is now: a recent study shows that 25% of Gen Zers are planning to open a bank account in the next six months. Capturing these customers now, at the beginning of their financial journey, is the first step in forming lasting relationships that can provide ample cross-sell opportunities down the road. Financial institutions that prioritize mobile-oriented platforms with fast, flexible, and educational features will be best primed for success in the lucrative Gen Z market.

  • Jennifer Dimenna

    Jennifer Dimenna is the Senior Vice President of Product at Apiture, a digital banking provider based in Wilmington, NC. For the past 20+ years, she has led teams of product managers, business analysts, and user experience designers to design and build innovative digital banking solutions. She started her career with a degree in Technical Communication at Georgia Tech and continues to live in Atlanta.