July 13 2020

Millennials & Generation Z: How Financial Institutions Can Reach a Younger Audience

How financial institutions can target Millennials & Generation ZThe secret to future-proofing your financial institution is to attract a younger audience. Compared to their predecessors, millennials and members of Generation Z are less financially secure, more digitally oriented and more prone to shop around for better deals, service and technology. Their priorities are different than those of their parents, and while earning their trust may be challenging, it’s the ticket to winning—and keeping—their business for years to come.

Who Are They?

Born between the early 1980s and mid-1990s, millennials prioritize technology and convenience. More than 60% are saddled with debt, according to Forbes, and many are concerned about their financial health. Thirty-four percent are unhappy with their finances, and only 8% believe they’re equipped to navigate a major financial event. According to a PwC report published by the Wall Street Journal, roughly a quarter of millennials surveyed had overdrawn their checking accounts or made early withdrawals from their retirement savings.

Generation Z represents teens and young adults, the oldest of whom are graduating from college and joining the workforce. While many have yet to solidify their financial habits, members of Generation Z tend to be practical, frugal and hardworking. According to a Raddon Research Insights study cited by American Banker, two-thirds of Generation Z members already have bank accounts, despite their young age. And many are already thinking about saving for retirement and minimizing debt.

Not surprisingly, both generations rely heavily on digital solutions. They’re often averse to fees and likely to switch financial institutions in search of better deals, rates or offers. Millennials and members of Generation Z are budget conscious and burdened by debt—to the point that 60% define financial success as being debt-free, according to Merrill Lynch.

How Do They Bank?

When it comes to banking, convenience is key. Both generations are tech savvy and expect digital solutions to be fast, easy and effective. According to Gallup, 92% of millennials are likely to bank online, while 79% are likely to use mobile banking. Mobile solutions are primarily used to transfer funds between accounts, check transaction histories and complete person-to-person money transfers, according to Mobile Payments Today.

Millennials have a low tolerance for finnicky technology and are less loyal to their banks and credit unions than prior generations. This presents an interesting challenge to financial institutions. According to Kasasa, 65% of millennials would be open to changing financial institutions in search of a superior mobile experience, while 83% would switch to a bank or credit union that offered more appealing rewards.

While digital banking is a priority for both generations, interestingly enough, millennials are more apt to take an online-only approach than members of Generation Z. CivicScience hypothesizes this may have to do with Gen Z’s general lack of funds, financial anxiety and conservative approach to managing money. According to CivicScience, consumers who feel “bad” about the state of their finances are far more likely to visit branches than those who don’t—and Generation Z fits the bill. Online and mobile banking is no less important to members of Generation Z, however, who grew up with cell phones and social media.

For this reason, both generations are prime candidates for online-only banks. These institutions tend to offer faster, more streamlined solutions, built-in budgeting and money management tools and more favorable interest rates due to lower overhead costs. Together, these factors give consumers more control over their finances—something that’s important to both generations. However, the lack of a physical presence presents some competitive advantages for institutions that offer a combination of online convenience and personalized in-branch service.

What Are Their Financial Priorities?

Millennials and Gen Z-ers want to feel nurtured and guided by way of personalized experiences. Both are apprehensive about their financial health and futures—while millennials experienced the fallout of the 2008 recession, Generation Z witnessed it. Debt is a major concern and financial literacy is generally low among both groups. They aim to manage their money autonomously but may lack the tools to do so.

Omnichannel alignment is imperative when it comes to engaging younger consumers. Millennials and Gen Z-ers appreciate options and don’t want to be pigeonholed into using a certain channel. These consumers expect and demand consistent experiences with the same level of service across platforms.

To appeal to these generations, financial institutions must offer state-of-the-art digital solutions, competitive rates and fees and personalized service. Because branch visits are fewer and farther between, in-person transactions carry more weight. And since both generations are open to changing financial institutions, it becomes that much more important to make a positive impression and ensure lasting brand favorability.

How Can Financial Institutions Appeal to Them?

Above all else, millennials and members of Generation Z want banking solutions that are fast, easy and convenient. Mobile banking is essential and must be high-performing. According to Mobile Payments Today, 38% of millennials surveyed abandoned a mobile transaction that took too long. When it comes to the younger generations, the latest technology is expected, so simply offering it isn’t enough. Online and mobile banking experiences must be seamless, reliable and consistent. When selecting vendors, it’s important to weigh options carefully and prioritize this decision.

But convenience isn’t the only priority for these generations. Millennials and Gen Z-ers want help and support in navigating major financial decisions, solving problems and planning for the future. Institutions should leverage mobile notifications, free credit score reporting and clear communication to proactively address their concerns. Make it fast and easy for customers and members to report problems and get help. These consumers appreciate transparency and partnership, and while most don’t see their current banks or credit unions as financial guides, they crave that support—whether they know it or not.

Millennials and members of Generation Z seek memorable experiences that are both personal and engaging. From gamification to free in-branch coffee, incentives can be highly effective. In the digital space, leverage sophisticated personalization strategies backed by data and artificial intelligence. Segment and understand your audiences, then define the customer journey for each. Interactive tools and educational resources will go a long with this audience, so it’s important to focus on building your financial literacy library.

Because these generations prioritize low rates and fees, consider forgiving a few penalties. More and more millennials are turning to fintech companies and online-only banks with no-fee solutions, so overlooking a service charge here and there can go a long way toward building relationships.

To support millennials and Generation Z on their path to financial wellness, offer advanced digital solutions, educational resources and competitive rates and fees. Cultivate personalized experiences and maintain an open line of communication to provide support and build confidence. ZAG can help you develop digital solutions that cater to those needs. Contact us to get started.

  • Banks
  • Credit Unions
  • Website

posted by
Ari Mason
Ari Mason

ZAG Interactive is a full-service digital agency in Glastonbury, CT, offering website design, development, marketing and digital strategy to clients nationwide. See current job openings.
Related Article
Supporting Digital-First Banking Models with the Right Website Strategy