05 Jan 2024

| By

Sreedhar Tatavarthi

Most small banks and credit unions are unprepared to seize the Gen Z opportunity

This article is part of our series  Gen Z Banking Trends, where we uncover the ins and outs of Gen Z banking preferences.

The Untapped Potential of Gen Z for Banks and Credit Unions

The quest for new depositors is a crucial priority for banks and credit unions everywhere, as these institutions engage in a competitive race to expand their deposit base. This pursuit is increasingly urgent as Gen Z enters the market for banking services. Indeed, research indicates that 25% of Gen Zers are planning to open a new bank account in the next six months (compared with 10% of the general population).

Gen Z holds enormous potential for the banking industry, with an estimated 4 million Gen Z individuals expected to open accounts annually through 2026. However, the current banking landscape shows a significant gap in catering to this demographic.

Only 47% of Gen Z reports having a traditional bank account, compared to over 70% of Baby Boomers and Millennials. This disparity highlights a substantial opportunity for banks to tap into an underbanked segment.

With Gen Z poised to constitute a quarter of the workforce by 2025 and projected to wield a formidable $33 trillion in purchasing power by 2030, they represent an unprecedented opportunity for growth in the banking sector.  

The Preparedness Gap in Small Banks and Credit Unions

Despite the obvious potential, evidence suggests that many small banks and credit unions are ill-prepared to attract and serve the Gen Z demographic. A defining characteristic of Gen Z is their deep engagement with digital technology; they spend an average of eight hours a day on their phones and have an attention span of about eight seconds.

This digital inclination underscores the paramount importance of a robust mobile banking experience, an area where, unfortunately, many small banks fall short.

Our recent research any analysis reveals a concerning trend: none of the websites of the top 150 small banks and credit unions in Michigan achieved a passing score on features considered essential for attracting Gen Z. This includes aspects such as user-friendly mobile interfaces, self-serviceability, personalization and financial education.

On a related note, only 4% of Gen Zconsumers are members of credit unions, indicating a significant disconnect between what this demographic seeks and what is currently offered by these financial institutions a related note,

Conclusion and Look Ahead

The evidence is compelling: Gen Z represents a massive growth opportunity for small banks and credit unions. However, these institutions are not currently positioned to seize the brass ring. To win Gen Z’s business before their competitors do, they must quickly adapt and evolve, aligning their services and customer engagement strategies with the unique digital preferences and behaviors of the demographic.

In our upcoming blog, we will delve deeper into the specific factors that influence Gen Z's choice of a banking institution. Understanding these preferences is crucial for small banks and credit unions to bridge the gap and harness the immense potential that Gen Z offers for the growth and sustainability of their operations.

Are digital hurdles slowing your deposit growth? Symphonize helps banking institutions elevate their digital customer experience to match Gen Z's expectations. Click here to book a quick 30-min discovery call and let's tackle it together!

About the Author

Sreedhar Tatavarthi

Sreedhar Tatavarthi is an accomplished IT executive with a robust 20-year career, predominantly in the banking sector. He specializes in leveraging technology to revolutionize banking experiences, particularly for Gen Z customers. His work encompasses digital transformation, enhancing customer service, and implementing strategic tech initiatives to foster growth and innovation in the banking industry.

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