Banking for the next generation

Woman banking by mobile device

Attracting Gen Z depositors requires personalized marketing


With every new generational cohort that comes along, financial institutions make some adjustments in their product offerings and marketing methods to capture the new audience. In the end, the institutions have always assumed that, eventually, every generation would settle down to pursuing the usual financial goals – buying a house, buying one or more cars, saving for their children’s education, planning for retirement and leaving some kind of financial legacy.

It was the circle of financial life for everyone, and bankers were ready to meet those perennial needs.

Enter Gen Z.

These young people, sometimes referred to as “Zoomers” and born from the year 1997 to 2012, really are different in their experience and outlook. The 21st century soil they’ve grown up in has conditioned their thinking about what is possible and desirable financially and materially. Financial institutions will have to understand them and their needs more fully to make a difference in their financial lives.


Growing up with rapid change

Gen Z kids were born into a world of social, economic and technological upheaval. They lived through post-9/11 and the maturing of the internet. They endured the COVID-19 pandemic, with some of them having to complete and graduate from high school or college online (hence, “Zoomers”).

Through all of this, they functioned as the first generation of digital natives, witnessing and embracing a host of innovations: the iPhone, eCommerce, the social media explosion, cloud computing, fintech startups and, last but not least, AI.

In response, this generation not only lives with rapid change, but practices it. They are more willing than their predecessors to switch jobs, move for an opportunity or switch financial institutions. They sense they must be nimble to survive.


Current financial uncertainty

Today, Gen Z faces a burden of substantial student loan debt, higher inflation rates and rising housing prices. In fact, the combination of higher rates and prices has put home ownership out of reach for many. They are asking how financial institutions can help them better navigate their way through their financial lives.


Technology bias

In recent research from Raddon, a Fiserv company, 63% of all generational segments say the top six banks in the U.S. are their primary financial institutions. Among the younger generational segments, the number is actually higher.

Why are younger consumers gravitating to big banks? Because they perceive that, to get the best and latest technology, they need to go to a larger institution.

Mobile access is at the center of their experience, and it weighs heavily. Of course, there’s often little difference between the mobile banking functionality of a large bank and that offered by a community-based institution. But the big banks have done a good job of marketing their services. It’s less a focus on products than on the experience of technology. They’re really answering the question, “How will mobile banking make my life easier?”

In Raddon research, we found a confirmation of this technology bias. We asked people from all generational cohorts about which service attributes of a financial institution were important to them. In the group as a whole, mobile banking wasn’t even one of the top five attributes. But it was the very top attribute for younger consumers.

What’s interesting is that number two on the list for this generation was “friendly, helpful employees.” So, the idea of having high tech and high touch is critical. Community banks have to be good at both. The third top attribute valued by Gen Z was also interesting: “provides quick and proper solutions.”


Importance of services in selecting a primary financial institution

Mobile access is at the center of younger generations’ banking experience.


Today’s twenty-somethings want technology and simplicity. They’re more likely to spread their accounts across multiple institutions. They might have a checking account, but then link it to an external payment app. The consumer’s ecosystem becomes more complex, but also more simplified, because it’s easier to move money around among various entities.

It’s risky for community banks and credit unions to rationalize this, to think it’s nothing new. They had the same challenges 15 to 20 years ago with millennials, these institutions reason, and eventually, these consumers started to come around. But given the generational change that’s occurring, that’s a big mistake. It’s a different competitive environment, and just expecting the same level of organic growth is dangerous.

The task for community institutions is to evolve so they can use technology and the resulting data more effectively. 


Marketing to Gen Z

One of the most significant changes required to reach the new generation will be a new approach to marketing. Traditional marketing through mass media simply will not work. Today, young consumers must be met where they are, which translates into three marketing priorities.

1. Emphasize solutions versus products

The number one focus should be on the problems you’re trying to solve, as opposed to selling a product. Financial institutions have to be able to communicate to that young, individual consumer very specifically about what matters to them.


Receptivity to goal savings (CD) accounts

Focus on the problem solved, not the product you’re selling.


A great example is certificates of deposit, the notion of saving for the future and getting a better rate of interest by locking money up in a low-risk instrument for a period of time. Raddon research reveals that a CD (referred to as a “Goal Savings” account in our survey) is a vehicle that makes a lot of sense to millennials and Gen Z consumers. Why? Because this generation knows that interest rates, housing prices and car prices are going up, and they’ve got a small mountain of student loan debt. It’s not really selling a CD; it’s a way to save for a future need or a future event.

2. Use the right channels

Second, financial institutions have to use social media more effectively.

In a 2022 survey by Morning Consult, 54% of Gen Zs said they spent at least four hours a day on social media. The result is that they have an attention span of only about eight seconds. That’s why platforms like TikTok, where fun, short, creative videos are posted, are so popular.

Using such platforms, “financial influencers” can communicate any kind of financial advice they wish, in short, engaging content. Regardless of whether they’re actually financial experts or not, they’re going to get the attention of people whose algorithms tilt toward curating financial information.

In our research, we found that 35% of Gen Zs turn to social media platforms such as YouTube, Instagram, TikTok and Snapchat for financial information. That’s about triple the number that turn to their financial institution.


Where Gen Z turns for personal financial information

Family is the main source of financial information for Gen Z, but 35% also turn to social media.

Most of these young people are looking for information on savings and budgeting; they want to be able to save for a down payment on a house. Community financial institutions should consider producing interesting, short-form, relatable content that showcases what their institution offers, paired with explanations about why it matters. It might capture the attention of a large audience and help young consumers tremendously.

And there’s another channel you may not have thought of.

In the same survey, 56% of Gen Zs said they turn to their parents and family for financial information. You can market to this younger generation through their parents by talking to the parents first. Then they’ll be able to make financial recommendations to their kids.

3. Get personal

The third priority is having a customized, one-on-one conversation with the Gen Z customer. Data will help you get there. Intelligently using data you already have can help differentiate you from competitors. You can deliver more relevant, more targeted marketing messages and also help improve the customer experience.

For example, one of the bright spots in the younger demographics is that financial institutions actually have greater checking penetration with them. Institutions need to start utilizing the data they generate from those checking accounts. You can understand what an accountholder’s needs are simply by looking at who they’re transacting with and making payments to. Highly sophisticated data analytics solutions are available that can make this possible.


Looking for a friend

The younger generation is looking for someone who will help them succeed, someone who will be a partner and guide to help them make appropriate financial decisions. Community banks and credit unions need to communicate a clear message: “We have the same types of tools as a big bank does to make your life easier. We’re here for you. We want to help you achieve your financial goals.”