With Gen Z — that generation born after the mid-1990s — beginning to earn their first paychecks, the establishment banking industry is rushing to sign them up and capture their loyalty before they decide to go with a fintech startup.
“Financial marketers must reach out to this generation right now or their window of opportunity may slam shut forever,” cautions The Financial Brand’s Executive Editor Steve Cocheo.
The dire warning is based on a report from Raddon Research which says 8-in-10 Gen Zers are “open to and excited by nontraditional financial services” or “love digital banking channels” and prefer avoiding in-person banking, even if they consider traditional banks necessary.
It’s especially urgent for credit unions and community banks to move quickly and decisively, because they’re still playing catch-up for the business of millennials who gravitated to the nation’s biggest banks. Credit unions are doing better, but community banks, according to research cited by The Financial Brand, are struggling to capture younger banking customers.
Geography, which used to be the primary influencer on where a customer chose to bank, has a far less important role since the advent of digital banking. When you need cash, ATMs are ubiquitous.
It seems a reasonable case to make that the banking industry as a whole, and smaller banks in particular, needs to develop products and offerings geared to the Gen Z market.
But a Forbes article says, “Don’t believe it.”
“Warnings like this are reminiscent of those from 10 to 15 years ago regarding millennials. Roll the clock forward to today, and three megabanks — Bank of America, Chase, and Wells Fargo — have 44% market share of millennials. And they were hardly the ones ‘decoding’ millennials before it was “too late.”
So who should banks be pursuing with vigor? Baby boomers, writes Ron Shevlin, managing director of fintech research at Cornerstone Advisors.
He doesn’t suggest ignoring Gen Z, just that banks gave at least equal time to older customers. Three trends make boomers different from the generations that preceded them:
- They are working longer and many are taking part-time jobs in retirement to keep busy and supplement their income.
- Family dynamics are changing how money is handled and debt is incurred. Many boomers have taken over the financial affairs of their aging parents.
- Healthcare is becoming a greater concern due to rising costs and worries about incapacitating illnesses and the need for long-term care.
Concludes Shevlin: “The oldest boomers are just in their mid-70s. The challenges listed here are more prevalent among consumers in the late 70s and early 80s, however. This means there is a window for new product and service development. With the youngest boomers in their late-50s, it also means that the life cycle for these new products and services could run for the next 30 years.”
Photo by Eduardo Soares on Unsplash
