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Winning Gen Z as customers as an established bank

Find out what services young bank customers want and how you can position yourself as an attractive alternative to new banks

Laura Smettem

Laura Smettem,
Senior Field Marketing Manager UKI and The Nordics

Established retail banks are under pressure from two sides. On one hand, customers, especially the younger ones, are demanding more digital offerings from their banks. On the other hand, many neobanks are maturing into serious main banks that offer exactly the digital experience that these young consumers want.

Generation Z (born between 1996 and 2009), also referred to as ‘Gen Z’, are the powerful new generation of consumers emerging. In order to retain tomorrow’s customers, banks need to act today. Currently, this target group may seem uninteresting. Most of them are still at the beginning of their professional life and have no income.. For these reasons, they rarely need or ask for other financial products and offerings.

But of course this is short-sighted. Soon this generation will also earn an income, apply for loans and qualify for credit cards. Recruiting them later down the line will be much more difficult than retaining or convincing them now. But most importantly, in the long run this can also win the next generation as bank customers – because children often get their first account opened by their parents, at a bank that the parents are loyal to

According to Morgan Stanley, by the year 2034, Gen Z will comprise the largest generation ever in the U.S., peaking at 78 million. The time to act is now.

What do young bank customers want?

In order to become, be or remain attractive to Gen Z, established institutions must accelerate their digital transformation in order to be able to respond to the wishes of young banking customers. So far, however, Gen Z doesn’t believe that established financial institutions can actually do this. According to a survey by IBM, 50% of respondents from this generation believe that traditional banks don’t have the right technology to compete with more modern or younger competitors.

Moreover, Gen Z thinks differently than the generations before them. They’re less brand loyal and more likely to change banks if they don’t get the service they want. They also attach great importance to a wide range of digital services. For example, a GfK study commissioned by Backbase shows that young bank customers in particular want a digital financial manager. According to the survey, the majority of young respondents would also welcome the management of subscriptions directly in online banking.

From simple and fast onboarding to video telephony for personal advice and the smooth conclusion of further financial products online, Gen Z expects seamless digital experiences, as they already get every day from the big, internationally successful tech companies. Established financial institutions that ignore these customer wishes will find it difficult to maintain and increase their market share in Gen Z in the future. Time is short. According to the EY Global Consumer Banking Study, 33% of the Germans surveyed from Gen Z already have a business relationship with a neobank and just under 20% name a neobank as their principal bank.

How can Backbase help?

No established retail bank can raise its digital capabilities and digital offering to the level of a neobank overnight. But there are different approaches to driving digitalisation forward. And some of them are faster than others. Our engagement banking platform is designed to do just that. It helps banks to significantly advance their digitalisation without restrictions in a short time and thus position themselves as an attractive alternative to neobanks. Among other things, the Backbase engagement banking platform provides turnkey banking apps and ensures a shorter time-to-market for new services. We help you become the bank that future generations will love.