Move over to millennials: Generation Z is eager to share the spotlight when it comes to shaping the consumer landscape. And it’s starting to impact the people in their lives, from the boss to the banker.
While many of the generations that came before them were happy to use one bank for all their needs and stick with their parent’s bank, young Americans are questioning this tradition.
A recent report from the Bank Administration Institute (BAI) found that less than half of Generation Z and millennials used the same financial institution as their parents in 2021. This is a significant drop from 61% of Generation Z and 54 % of millennials in 2020.
With a wide range of options for younger customers, catering to their specific values and needs, the big banks will need to catch up to stay relevant.
Not to be missed
Here are 3 money moves to boost your bank account this weekend
Mitt Romney says a tax on billionaires will trigger demand for these two goods – get in now before the super rich swarm
Want to earn big returns without the shaky stock market? Try the art
What interests young Americans
While Gen Z and millennials value low fees (31% and 36%, respectively) more than any other factor, they don’t prioritize it as much as previous generations.
Meanwhile, more than 60% of Gen Z and millennials would consider switching banks for better digital capabilities, such as mobile apps. Other factors include better rates and incentives and cash rewards.
Mark Riddle, director of research and content delivery at BAI, notes that Gen Z youth, who may not have income of their own, are less likely to worry about rates and less likely to own a credit card.
Younger generations were also much more likely to consider banking with a non-traditional player, such as Amazon, Google or PayPal.
Riddle adds that the rise of online banking means that young Americans are less loyal to one financial institution and often have accounts with multiple institutions, which means more competition for big bank players.
Banks that share your values
For Carissa Cabrera, a 28-year-old marine conservationist based in O’ahu, Hawaii, choosing the right shore is a matter of values.
“It’s extremely important to me that the company shares the same environmental values,” Cabrera says in an email. “At this point in my life, I don’t endorse brands or products that don’t include some form of sustainable and ethical practice.”
The main thing Cabrera considers in a financial institution is whether or not it is funding the fossil fuel industry.
The BAI reports that more than half of Gen Z and millennials would switch financial services organizations for a greater commitment to ESG and DEI. By comparison, only a third of Generation X and less than 20% of baby boomers say they would do the same.
ESG (environmental, social and governance) is a system for measuring a company’s commitment to improving society, while DEI (diversity, equity and inclusion) refers to measures that have the specific purpose of promoting inclusion for groups such as people of color and the LGBTQ+ community.
Cabrera currently uses the Bank of Hawaii for his business — an environmental media company called The Conservationist Collective — and a local credit union for his personal accounts.
He adds that members of The Conservationist Collective can also have accounts with institutions like Aspiration, a green banking alternative.
How to measure sustainability
Sustainable banking means different things to different people, notes Pete Hellwig, co-founder of Atmos Financial, a green alternative to online banking.
“When I say sustainable banking, I am referring to the act of using one’s money to support environmentally friendly or environmentally positive projects or assets,” he explains.
Atmos funds climate-positive infrastructure and offers customers rebate on sustainable brands.
Hellwig notes that the average client is in their 30s, but their clients range from 18 to 80 years old.
“I mean, [young people] They’re changing the world, right?” Riddle says. “It’s no longer acceptable for publicly traded companies not to address ESG or DEI. And the younger generation is just more attuned to… social justice.”
However, Riddle says it may be difficult for financial institutions to measure and prove these commitments.
You can check the certifications of a bank if you are looking for a socially responsible institution.
For example, Atmos is certified fossil-free and is a member of the Conservation Alliance. Amalgamated Bank is a Certified B firm, a designation that signifies high transparency and social and environmental performance, and is a member of the Global Alliance for Banking On Values.
Big banks have to adapt to keep up
Only a third of Gen Z completely agreed with the statement that their financial services organizations actually met their needs.
The biggest business challenge for bankers in 2022 is to improve the digital customer experience and win new customers, reports the BAI.
By 2024, customers expect 61% of their banking will be digital and 39% human-assisted.
Riddle points out that banks need to invest in multiple channels, for example they can’t prioritize digital alone and need to cater to all generations.
As for Cabrera, he says the younger generation has inherited a dying planet and it’s their responsibility to find solutions to the climate crisis.
“We know that if we don’t do something now, we will lose the ability to do anything.”
What to read next
Over 65% of Americans don’t look for better auto insurance, and that could cost you $500 a month
Black Friday has arrived early! Save on gifts now with these 20 Amazon deals you can’t miss
A TikToker Settled $17,000 In Credit Card Debt By Filling With Cash: Could It Work For You?
This article provides information only and should not be construed as advice. Comes without warranty of any kind.