The banking revolution: How millennials and Gen Z are driving change

Millennials and Gen Z are reshaping the way banks engage with their customers and this is good news for all consumers, companies and investors. The tech-savvy and mobile native demographic force is driving enormous change in financial institutions, in all areas ranging from technology adoption to consumer behaviour.

Research by Morgan Stanley points out that millennials are the most extensive drivers of net new loan demand and will continue to hold this spot for the next few decades. While many in Gen Z are still in the ‘kids’ bracket, they too will age into the key 25-40 age group in the coming years, the prime spending years. These two generations -- with their unique spending and saving habits and global outlook -- are poised to drive the future of banking.

As more of their customers are drawn from this ‘always online’ group, modern-day banks need to adopt a digital-first model that streamlines customer service and automates processes. To do so, they must accelerate digital transformation, leading to more innovative and customized fintech products and on-the-go transactions. 

Here are a few things that banks, and other financial institutes should keep in mind to attract more customers from this group. 

Provide experiences, not products 

Millennials and Gen Z, having grown up exposed to an unprecedented amount of online advertising, have developed a strong sense of scepticism towards the same. To capture their attention, banks should shift their focus to offering experiences, entertainment and personalized interactions instead of merely pushing their products.

To create an engaging and informative user experience, banks can deploy chatbots as well as differentiated offerings such as EMI calculators, live advisory assistance, financial planning tools and online community chat forums. Also, video or multimedia content that furthers financial literacy will be more successful in attracting young customers than a conventional advertisement. 

Build an emotional connection 

Even though they spend most of their time in the virtual world, millennials and Gen Z have shown a desire for building deeper emotional connections. Banks can leverage this want by enabling real-life human interactions through audio, video chat features in mobile banking solutions. This can reduce the transactional nature of meetings, foster meaningful professional relationships, and ensure greater customer loyalty.

Focus on hyper-personalized messaging

One of the biggest deal-clinchers for millennials and Gen Z customers is a personal touch. They want a unique and customized financial experience that makes them feel valued and seen. So, hyper-personalized messaging with tailored content is a big differentiator that will hold their interest.

Financial organizations should invest in gathering, analyzing and interpreting data around Gen Z and Millennials’ preferences, behaviour and changing needs. They should then use these insights to craft meaningful touchpoints and personalized product recommendations.

Support their financial goals

A majority of Millennials and Gen Z are stressed about their financial future, coupling a lack of financial literacy with high educational debt, lower savings and rising expenses. They want a banking partner who understands their unique concerns and lifestyle and suggests solutions accordingly. For banks to be seen as the partner of choice by these demographics, banks need to offer practical solutions that will help these customers achieve their goals. An example of this is an in-app investment feature that educates customers about shares, mutual funds and bonds and provides ‘how-to’ content on the first steps in investing wisely. 

Leverage cutting edge technology integrating fintech trends

Banks must also step up their tech game when catering to a generational demographic that brings about digital trends rather than following them. Banks need to proactively implement latest fintech trends and technological advancements such as blockchain technology, Robotic Process Automation (RPA), Microservices-based architecture, cryptocurrency and so on. Banks can also focus on immersive, feature-rich platforms that will convince these customers about their financial partner's tech capability and customer obsession.

 Along with trying out exciting new technology, banks also need to ensure their basic foundations are strong. An example here would be creating a seamless mobile banking experience for customers. According to the Digital Banking Attitudes Study by Chase, nearly 98% of the millennials and 99% of Gen Z use mobile banking apps to carry out routine banking tasks. To ensure that these customers have a smooth journey, banks should provide an easy-to-use, engaging app that can be used by customers independently for as many transactions as possible, without the need to contact a branch or call a helpline

Ensure transparency, inspire trust

A recent Salesforce survey shows that only 50% of Millennials and 42% of Gen Z trust a company, with trustworthiness ranked as the most crucial area in which brands needed improvements, as per consumers. Besides, 57% of Millennials and 59% of Gen Z are concerned about how companies treat their consumer data.

While the survey covered all sectors, it is indicative of the young consumer’s deep-seated need to associate with credible, ethical partners. Similarly, for Millenials and Gen Z, the image of a bank and its business policies are as important as the actual service it delivers. Thus, a modern bank needs to ensure it has a culture of transparency, follows strong data privacy policies, contributes to causes outside of its work bubble and overall, showcases itself as an institution with integrity and honesty. 

This new shift in consumer behaviour and expectation is going to keep evolving rapidly, and Millennials and Gen Z are going to create new challenges for the Fintech industry. These customers require banks to craft a unique approach -- one that combines technical expertise and latest know-how with old school values like trust and honesty. By embracing new digital technologies and establishing a strong rapport with their young consumers, banks can easily survive in the competitive landscape and thrive in this digital-first era. IDFC FIRST Bank is leading the way for the new era of banking with its digital presence. You can check out the IDFC First bank website or download the banking app today!

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