How brick-and-mortar banks can attract the next generation

Younger generations are leaving traditional banking fast. According to BAI, 37% of Gen Zers prefer to open deposit accounts via a mobile app, compared to just 24% of Gen X and 4% of Boomers. Banking execs shouldn’t take these stats to mean Gen Z is uninterested in financial wellness or sound lending strategies — they’re just opting for digital-only spaces to house, spend and interact with their money.

It’s no surprise that the customer-centric, mobile-first approach has become a selling point for younger customers. The question is: How can traditional banks level up to provide the same seamless experience and service, if not better, than nonbanks?

Nailing mobile UX is critical: If a consumer puts a down payment on a new home, chances are they will want to visit their bank’s closest branch to discuss financing options. But if they’re paying off credit card debt or searching for ways to improve their credit score, they’ll probably want to do so via mobile or online.

Financial institutions must heed these emergent expectations and provide an intuitive, user-friendly app experience. Although design is a crucial component of an app’s user experience, the work doesn’t end there. Brick-and-mortar banks should also consider what their customers want to accomplish digitally and use that information to provide a comprehensive financial experience. For example, if they often search for loan info, it’s wise to provide that information natively to keep consumers from straying to other sources of information or, worse, a different bank.

The pandemic significantly altered consumer behavior and made a comprehensive mobile banking solution more important than ever. A recent survey found that nearly 100% of Gen Zers use their digital banking app for various tasks — from checking their credit score to depositing physical checks. And 98% of millennials reported the same, with 54% of consumers agreeing the pandemic influenced their behavior.

Prioritize personalization: The benefits of providing consumers with an all-in-one financial ecosystem are diverse and extend beyond aesthetic advantage. Customers that receive a cohesive financial experience symbiotically offer a wealth of information. For instance, when a bank or credit union integrates with a credit-score solution, the institution gains a deeper understanding of its customers’ ever-updating financial journey — just as the customer is empowered with better information about their finances.

Collecting this information opens the door to personalized outreach and advertising. That’s good news because more than 80% of Gen Z consumers prefer personalized ads. By assessing financial vitals like credit score and borrowing history, mobile banking apps can provide pre-qualified consumers with refinancing opportunities and personalized financial wellness tips. This allows consumers to consolidate their debt and ensures that their finances converge around one bank.

Educate, educate, educate: Mobility and ease of use can only take a financial institution so far. The key to really attracting the youngest generation to your solution is providing thorough financial education.

When presented with a financial literacy test, Gen Zers answered just 43% of questions correctly. Millennials fared only slightly better at 48%. These stats are concerning because they suggest that an institution’s appeal and design might not be enough to entice younger generations. To solve this problem, brick-and-mortar banks must provide a comprehensive financial awareness campaign for their consumers. Promoting information about debt awareness and long-term credit history is a good start.

Further, brick-and-mortar banks can encourage young consumers to practice good habits for managing credit by raising awareness about the factors that impact their score, especially in a higher interest-rate environment. For example, if household debts have adjustable interest rates, the payment amounts will increase. These rising costs may make it harder for a consumer to make a timely payment, which will decrease their credit score. Leading institutions will weave this messaging into their financial awareness campaigns.

But education shouldn’t be synonymous with stuffy or boring, especially when it comes to Gen Z. The trick to proper education is expressing why a topic — in this case, financials — is exciting, and doing so from an early age. If Gen Zers understand the impact their current financials could have on their long-term financial planning, they’re far more likely to make smart money moves. And hopefully, that includes visiting a brick-and-mortar location every once and a while.

JB Orecchia is president and CEO of SavvyMoney.