As banking habits continue to evolve, community banks have found themselves struggling increasingly in order to keep up with the growing demands of Gen Z. The Insider Intelligence report suggests that by the end of 2023, Gen Z will have about 33.7 million people using mobile banking and this is not stopping there, as the number is expected to go up at a fast pace of about 12.4% every year until the year 2026. This makes it essential now more than ever for community banks to understand and meet the demands of every generation, especially those belonging to Gen Z.
From understanding their demands on banking services and products to seeing how they impact the overall functioning of a bank–it is vital that both sides come together as seamlessly as possible for mutual benefit. This blog post aims to discuss what strategies can be utilized by community banks in order to service this economically powerful demographic group properly. The article will also break down some potential challenges that these institutions may face along the way.
Understanding the Gen Z Demands
Gen Z is a term for the young, tech-savvy and digitally tuned-in generation. They are shaping up to be a powerful consumer group in banking services. Forbes suggests Gen Z will make up about 40% of all global consumers by 2020.
This means that by 2025, there might be as many as 42.9 million Gen Zs using digital banking solutions worldwide. So what do banks need to know about this demographic? Well, their habits and preferences when it comes to banking are unique and crucially important.
A key demand of Gen Z is seamless digital experiences. They value online banking greatly, favoring self-service options they can access easily without delays or complications. Then there’s the mobile ability - this can’t be ignored either since, for Gen Zs these days, it’s all done on the go through phone apps.
And then we have socially responsible establishments which have become increasingly significant to them, too; ESG i.e., Environmental Social Governance initiatives hold sway with our environmentally conscious youngsters.
Adding onto their growing influence, EY reports that Gen Z will consist of around 27% of the total workforce by 2025. Due to this, it’s vital for banks to align their values according to the needs of the young generation – if they are to stay ahead in attracting Gen-Z customers efficiently and effectively.
Challenges Faced by Community Banks
Community banks face many challenges today. One of the biggest hurdles is limited resources and old technology. These banks can’t provide modern services well. The Federal Reserve Bank of St. Louis tells us that these banks are trying to save money while earning more non-interest income.
Outdated systems cause problems, too. They don’t let community banks keep up with fast-changing customer needs and market trends. In a report by the Federal Deposit Insurance Corporation (FDIC), we learned that community banks are working hard to fix loan issues, raise money, and reorganize their balance sheets.
The old ways of doing things get in the way of progress as well. Banks must update their systems and procedures to move forward smoothly. Another challenge, as highlighted by RADD, comes from tech-focused financial institutions offering advanced digital services for customers, making their daily banking experience enjoyable.
For small local/community-based financial institutions to stay competitive in this rapidly changing environment, they must address tough complications dealing with regulatory standards, hiring new employees/maturation of already existing employees, as well as tackle cyber safety battles head-on.
In summary, community banks need to spend on both modern technologies and talented personnel to stay in competition against technology-centered rival Fintech peers currently dominating the industry.
The Impact of Neglecting Gen Z Demands by Community Banks
Gen Z has clear demands for their banking experience. Data from a Bank Administration Institute (BAI) survey points out how crucial this is. The data shows that Gen Z prefers to handle banking tasks, like opening deposits, through mobile apps.
In fact, 37% prefer it. If you add the fact that almost 40% would leave a bank they see as not innovative enough, it becomes apparent how big a risk is being run by any bank ignoring these consumer desires.
This presents an issue of brand relevance for community banks. Brands tend to lose value when they fail to meet customer needs and interests vigorously. Gen Z customers care about online banking options and money-related issues such as settling debts and saving for college expenses – if community banks don’t cater specifically to them, then these young consumers might look elsewhere.
When we consider the role played by community banks in local economic growth and resilience, this potential neglect could have far-reaching effects beyond those directly within the financial industry.
These banks have been key players in US economies up until now, offering 97% of services rendered to banking clients nationwide. A decrease in their relevance due to an inability or unwillingness to win over Gen Z may spell trouble not just for these institutions but also for communities dependent on them.
Strategies for Community Banks to Meet Gen Z Demands
Understanding the needs and demands of Generation Z is a must for community banks. More and more, this young generation is shaping how businesses operate, especially in banking. As part of their strategy to meet these growing demands, community banks need to make some important investments.
One way they can do this is by upgrading their core banking systems. This upgrade will not simply be a touch-up but it should aim at enhancing digital capabilities to its full potential. Modernizing the bank’s infrastructure will allow Gen Z customers to have smooth digital experiences. Personalized services that cater specifically to them would also attract this new generation.
Investing in cloud-based solutions is another big step forward for community banks dealing with Gen Z consumer behaviors. Cloud technology makes things flexible and scalable when delivering digital services, which seems very appealing from the perspective of Gen Z consumers who are connected online most times of the day, always looking for easy access. Forbes revealed that 74% of them spend their free time in the digital world.
Intuitive mobile apps and websites are key. Gen Zers are not just comfortable performing financial tasks on their phones; they prefer it. Banks crafting authentic educational products specifically for this task and geared towards this group tend to fare better.
Next on the list is personalized service. Forbes states that for Gen Z, simplicity is king when it comes to self-service options, so a bank could consider things like chat bots or live agents over phone or video calls for assistance.
One cannot neglect round-the-clock support either, as it lines perfectly with a ‘digital-first’ approach favored by tech-friendly banking institutions and fintech apps alike, which have seen nearly half of all new account openings so far in 2023.
Collaborative Approaches for Community Banks to Meet Gen Z Demands
A smart way for community banks to cater to Gen Z needs is by joining forces with other similar enterprises and fintechs. Community banks play a key role here. They no longer just pay fintechs for services but think of them more as partners.
Together, they can work towards increasing revenues for both parties involved. This means they can pool resources, share ideas and develop new financial services together. Community banks can also revamp their branches not just physically but technologically as well – go online or mobile even! Use technology to build connections scaled down to personal levels.
Groups like the Office of the Comptroller of the Currency stress how teamwork can be crucial for small-scale bank success. Such teamwork can lead to online lending tech innovations and rate comparison tools among others. These are all products that excite Gen Z customers looking for quick and user-friendly banking solutions. The Office of the Comptroller of the Currency shares ways in which community banks can strike deals within their legal limits.
These collaborations can help community banks enhance service quality at reduced costs. They can achieve operational or financial efficiencies while saving up on capital-intensive products and services. In simple terms, it’s a win-win situation!
Conclusion
Ultimately, while there certainly are challenges fit for a robust discussion when it comes to equipping community banks with all relevant tools necessary in order to serve Gen Z’s financial needs – the payoffs from doing so could be significant regionally. Not only would such an initiative potentially boost customer loyalty over time, but it could also offer great possibilities such as better consumer insights or special offers built specifically around Gen Z needs and wants; among a range of features that might then subsequently find multiple applications amongst other generations, too.
For these reasons alone, investing resources into educating staff members and making that technological leap might positively impact customer experience. It seems like a small price worth paying for any community bank looking ahead toward success and sustainability!