For banks and credit unions interested in attracting older, established customers, the path is straightforward. Successful formulas generally center on convenience,
Attracting the younger set, particularly those in Generation Z, may be a trickier proposition.
Younger people, including those in the up-and-coming Gen Z — born between 1997 and 2012 — rely more on recommendations from family and friends. Indeed, nearly half of the survey's Gen Z respondents, 46%, cited such recommendations as a crucial component in selecting a financial institution. Just 21% of baby boomer respondents, born between 1946 and 1964, said the same.
Another 22% of the survey's Gen Z respondents actively researched financial institutions before making their selection.
Two key factors, a sleek, easy-to-use app along with a fresh, socially conscious brand identity, can help banks convince a Gen Z consumer to settle on them or to recommend them to a friend, said Kris Kovacs, founder and president of the Raleigh, North Carolina-based Constellation Digital Partners.
"You want something that attracts young folks, you're going to have to do something that's clean, something where it's really easy to open accounts on," Kovacs said, citing the success of Chime and other options aimed at younger demographic sets. "All their friends say, 'Get a Chime account. It's super easy to do,' which is why they end up doing it."
Kovacs went so far as to suggest creating an app designed specifically to appeal to younger people, alongside others aimed at different market segments. "We've got to get to the point where we're delivering a business experience for business users," Kovacs said. "For someone who is later on in life focused on wealth management and wealth preservation, that's another app. Young people who are just learning about what personal finance means get a different app."
Financial institutions should be paying attention to what Binna Kim, CEO of Vested, a New York-based marketing and communications firm, termed the Netflix factor. "There's almost an innate understanding with younger generations that they are giving up access to their data in exchange for a highly personalized 'shopping' experience," Kim said. "The same way you log into Netflix and get highly tailored show recommendations based on what you seem to like, you're also going to expect that same level of customized content and service from your bank."
A strategy focused on offering deals works well for baby boomers and other older customers, who can be swayed by offers, especially when selecting a secondary financial product or institution, according to the American Banker survey. Younger consumers, not so much. Word-of-mouth recommendations continue to be critical.
"Rates only work if you have money," Kovacs said. "Young people don't have any money."
One factor that does influence Gen Z is brand, Kovacs said. "One of the things, in my opinion, that young people seek out are brands they recognize and trust. They're very brand driven."
For a growing number, that means alignment with causes they care about, said Chris Keller, chief marketing officer at the $3.3 billion-asset Empower Federal Credit Union in Syracuse, New York.
"We've seen an increase of interest in our
Credit unions scored well in behavioral and reputational attributes in the American Banker survey.
"Banks left a sour taste with consumers after the 2008 financial crisis. The liquidity-driven bank failures this year only further exacerbated that sentiment," said Brad Goodall, CEO at the global payments network Banked in San Francisco. "Gen Z and most millennials have only known a world where banks are at the forefront of economic distress, so winning that trust back is table stakes for success."
Along those lines, Kim and Kovacs advocated targeting outreach based on what Kim described as "a wide array of personas."
"You've got to have something [young people] can identify with, that they're going to see themselves as a part of to engage them," Kovacs said. Kovacs cited
At the same time, "what you deliver to them should be designed around those capabilities, desires, those specific needs that they have," Kovacs added. "If you do all of that work, then deliver your grandfather's mobile banking to them, you've missed the boat."
American Banker teamed with Monigle, a creative experience agency, to survey 5,500 bank customers in March 2023. The results were published earlier this month in a report, Humanizing the Bank Customer Experience 2023.
"Our research shows that winning and maintaining customer loyalty is always evolving," Janet King, vice president of Arizent Research, said in a press release. "Financial institutions can't afford to be complacent with investing in digital products and dedicated services that differentiate them from the competition."
