How to retain ‘Generation Bank Switcher’

Shifting customer attitudes have placed increasing pressure on financial institutions nationwide in recent years, as it has grown more difficult to retain their newest, elusive consumer target: Gen Z.

Dubbed “Generation Bank Switcher,” many Gen Z customers frequently switch financial institutions in a perpetual search for greater convenience, better interest rates and more favorable terms. Also known as “Zoomers,” Gen Z is comprised of individuals born between the mid-1990s and early 2010s. With the oldest Zoomers now in their late 20s, traditional in-person banking doesn’t always appeal to this digital-first generation.

Many banks, credit unions and other financial institutions already target Gen Z. Nearly half (48%) of leaders at financial institutions nationwide identified Gen Z as a priority customer base in a recent survey. About one in five respondents (19%) said they plan to develop strategies to target Gen Z within the next 12 months.

The changing preferences of Gen Z customers make it more difficult to convert them into long-term, loyal customers. As financial institutions look to attract and retain this fickle customer base, strengthening digital banking services and leveraging robust data and analytics to better understand customer relationships are key.

Meeting the digital-first expectations of Gen Z

Unlike previous generations, Gen Z grew up in a world where technology was omnipresent and digital experiences were the norm. This environment fundamentally shaped their expectations and preferences for banking services. Gen Z is more likely to use mobile devices for all aspects of their lives, including managing their money. Roughly 89% of Gen Z customers use mobile banking, compared to 39% of Baby Boomers, according to research by MX.

While financial institutions have implemented digital solutions for more than a decade, the rise of Gen Z as a core customer target makes the need to grow these services more urgent than ever. Insider Intelligence predicts that at least 4 million Zoomers will open new bank accounts each year over the next few years.

Financial institutions must look for ways to enhance and expand banking apps that allow customers to check account balances, make payments, transfer funds, open accounts, or apply for loans. Gen Z customers have specific priorities for their digital experiences, including:

• Data Protection: Gen Z cares about working with trustworthy institutions. According to an IBM survey, 55% of Gen Z banking customers trust traditional banks more than fintech alternatives (11%) when it comes to combatting serious issues like fraud. Zoomers understand the risks of sharing sensitive information and are looking for institutions that offer secure services that minimize those risks.
• Personalized Experiences: Nearly three-quarters of Zoomers (72%) expect a personalized experience, from email or text notifications to tailored financial advice, according to Alogent. Banks can adapt by expanding customer-centric services, such as in-app functionality to connect customers directly with financial advisors.

• Innovative Solutions: Gen Z appreciates innovative solutions to common banking challenges, which require the effective use of institutional and third-party customer data. By analyzing data to gain a deeper understanding of customer behaviors and preferences, banks can zero in on what products and services they should focus on.

The importance of data in serving Gen Z

Many financial institutions are already evolving to meet the needs of young adult customers. Nearly 4 in 10 finance leaders (39%) said their institutions changed their approach to technology for financial planning and analysis in response to Gen Z considerations, such as investing in robust relationship profitability analytics. Thirty percent of respondents said they plan to invest in technology to better serve this customer base soon.

Having access to reliable customer data is critical to understanding what Gen Z customers need and want. Furthermore, financial institution leaders need the ability to analyze data on customer behaviors and preferences to understand the risks and opportunities of targeting Zoomers. Institutions should develop capabilities to measure and project profitability associated with specific customer groups, and to pinpoint under-performing or at-risk relationships. They also need tools that allow them to accurately price products and services to attract and retain Gen Z customers, to balance customer needs with expected contributions.

Strong data governance is essential for the success of digital banking services, as well as for understanding and meeting the needs of Gen Z. Institutions must ensure the accessibility, reliability, integrity, and security of the digital solutions they offer, while also safeguarding customer data and leveraging that data to better serve customers. By analyzing digital interactions, financial institutions can offer more tailored products to their customers.

Staying agile to serve an agile generation

As more Zoomers transition to adulthood and become prospective customers, financial institutions must adapt their strategies to a customer base that is not averse to changing banks in search of superior services. In response, banks will need to diversify their digital offerings and implement processes that allow them to continuously adapt to evolving customer needs and preferences. With sound, data-driven strategies, financial institutions can be more agile and set themselves up for success in retaining the newest generation of banking customers.

Eric Wheeler is Senior Director of Product at Strata Decision Technology.