Revisit SMB solutions with a focus on Gen Z entrepreneurs

Financial institutions may not have vital behavioral intel related to Generation Z when developing business and commercial banking products as well as marketing tactics.

But as these consumers evaluate their banking options, financial institution leaders can benefit from Gen Z as a demographic looking for flexible and tech-based solutions that also align with their life goals, including entrepreneurship.

As one of today’s youngest demographics, this group is considered the “do-it-yourself” generation, and they are independent, hard-working and pragmatic. Plus, they currently comprise roughly 27% of the U.S. population and within a few years will have an even bigger share of the demographic pie. They also are climbing professionally, have more money to bank with than a few years ago and greater need to access funds. The oldest members of Gen Z turned 27 in 2024.

Notably, only 17% of Gen Z have opened traditional bank accounts with a brick-and-mortar bank. Gen Z’s comfort level with mobile technology (91% receiving a smart phone before age 16) has impacted how these younger consumers approach many services, including banking

According to a recent research study conducted by The Center for Generational Kinetics (CGK), and commissioned by Alkami, Gen Z is significantly more likely than Gen X and Baby Boomers to prefer online-only banks as their primary or most important financial provider.

Additional Gen Z banking insights:

• 45 million will leverage digital banking solutions by 2025
• 35 million are projected to use buy now pay later platforms by 2026
• 80% use bank or credit union mobile applications to learn about products
• 57% turn to Instagram for financial information and advice
• 26% keep $500 or less in their checking account

With this in mind, financial institutions should be looking to a future where digital banking solutions cater not only to current account holders, but also appeal to populations that want digitization and relevant personalized product recommendations from their bank or credit union.

Can your bank or credit union deliver on digital for entrepreneurial Gen Z?

Demand for digitalization and personalization extends beyond personal banking channels, given Gen Z’s inclination toward entrepreneurship. Lured by the benefits of flexible schedules, creative growth and alignment with personal interests, 93% of Gen Z individuals have begun to explore entrepreneurship with 75% looking to start their own business. On average, Gen Z and Millennials have significantly more cryptocurrency accounts, small business loans, BNPL loans, other personal loans, credit builder loan accounts, auto loans, and mortgage loans with their primary financial provider compared to Gen X and baby boomers.

This should serve as a sign to financial institutions that business banking solutions geared toward Gen Z’s underbanked demographic should not be overlooked. In creating and promoting these products, banks and credit unions will also need to keep in mind the different experiences and priorities of a generation comfortable with digital technologies.

Factors attracting Gen Z to financial institutions

The days of consumers remaining with a single financial institution are fading fast. Nine percent of Gen Z is classified as underbanked, reflecting their level of comfort with alternative financial services.

In addition, these younger consumers are willing to move or diversify their financial assets across providers who offer the personalized experiences and value-added benefits most important to them rather than remain with a single provider in the name of brand loyalty. Only 40% of Gen Z consumers conduct all of their banking with a single institution, and 20% of Gen Z surveyed by the recent research conducted by CGK don’t think or are unsure if their primary financial provider will continue to be their most important financial provider in the next year, the highest of any generation tested.

Highly motivating factors to members of Gen Z

• Corporate culture and social responsibility – Some 90% of Gen Z investors believe Environmental, Social and Governance (ESG) is important when making investment decisions. Additionally, 17% of Gen Z consider ESG and ethical standards when choosing a financial institution, contrasted with just 7% of baby boomers.
• Digital banking solutions – Gen Z members who are completely satisfied with their digital banking user experience are significantly more likely than older generations to try, use, or engage with other digital banking products from that provider, and recommend the provider to friends and family. When it comes to the digital side of banking, Gen Z expects offerings with straightforward onboarding, a suite of available products, and high standards for security.
• Personalized and streamlined customer services – More than half would leave their financial institution if they experienced just one poor customer service interaction. The best account holder approaches are those that demonstrate a personal understanding of the individual’s needs and provide direct, succinct solutions.
• Gen Z individuals are more likely to trust a bank with their funds if the FI demonstrates transparency and honesty in their products and services.
• Digitally native solutions are also likely to be most attractive to this demographic, which expects brands to provide a mobile-first approach with cross-platform accessibility.
• Digital account opening and loan origination – Gen Z believe significantly more than older generations that digital account opening and loan origination will have the biggest overall impact on their digital banking experience.

Commercial banking can’t ignore exactly what Gen Z is asking for

To maximize market penetration with Gen Z entrepreneurs, financial institutions can start by evaluating how their current practices reflect ESG and other social responsibility values, as well as how easy it is to do business with the institution digitally. These aspects are highly likely to impact Gen Z decision-making when choosing a provider for their business and personal banking. Banks and credit unions should expect Gen Z consumers to be well-informed before making financial decisions and be motivated to align themselves with companies that both provide high quality digital experiences and serve their communities well. They view the companies they do business with as an extension of their own values and brand image right down to the banks that manage their funds.

From a technology standpoint, business banking should be made as accessible across channels as personal banking solutions, fulfilling Gen Z expectations for ease of use and access. These young entrepreneurs are looking for options that enable them to manage their accounts anytime and anywhere while saving time, expediting transactions, and reducing operational costs if they have a business. While financial institutions have made strides in omnichannel solutions for personal and retail banking, commercial banking must consider the impending wave of Gen Z entrepreneurs. While commercial solutions are gaining focus from financial institutions , fintechs that have placed an emphasis on digital banking solutions have seen the rate of customer growth increase.

All of this is a notable shift from a traditional business banking approach where financial institutions must look to address consumers’ personal and professional concerns through both banking values and products. Bank and credit union leaders must work to better understand industry trajectory as defined by Gen Z and build strategies to remain nimble and collaborative to meet the changing expectations.

Jeff Chen is Vice President, Product Management at Alkami.