Why Younger People Are Switching Banks
When it comes to banking it used to be that customers would use one establishment for all their needs. But, with times changing and Millennials and Gen Z valuing different things from their parents that trend is rapidly coming to an end. According to the Bank Administration Institute (BAI) less than half of Gen Z and Millennials were using the same banks as their parents in 2021. That is a significant drop compared to 2020’s numbers where 61% of Gen Z and 54% of Millennials chose the same banks.
But with the younger generations becoming much more aware of their banking and wealth options, along with generational values shifting, big banks will have to make significant changes to stay relevant and keep their customers happy.
What The Younger Generations Value
While both Gen Z (31%) and Millennials (36%) value low fees with banks it does not seem to be their main concern and they are not prioritizing that as much as the older generations. Instead, both younger generations are opting to switch to banks with better mobile apps and digital capabilities. Both generations noted that other factors that play a role in switching included cash incentives, rewards programs, and better rates.
Mark Riddle, the director of research and content delivery at the BAI, stated that younger Gen Zers, who typically do not have an income of their own, are less likely to own a credit card and are less likely to care about rates. Riddle added that with the rise in online banking options seems to have caused younger generations to be less loyal to one financial institution. Instead, they often have multiple accounts with multiple institutions. This leads to increased competition between banking players.
The younger generations are also much more likely to use non-traditional banking players such as PayPal, Amazon, or Google.
Choosing Banks That Share Your Values
For many young Americans choosing the right bank comes down to the bank’s values.
Carissa Cabrera, a 28-year-old marine conservationist based in O’ahu, Hawai, “It’s extremely important to me that the company shares the same values in environmentalism,” Cabrera wrote in an email. She added, “At this point in my life, I don’t support brands or products that don’t include some form of sustainable and ethical practice.” Cabrera also noted that the main thing she considers in a financial institution is whether or not it is funding the fossil fuel industry.
According to the BAI over half of Gen Z and Millennials would rather switch financial institutions for a higher commitment to environmental, social, and governance (ESG) and diversity, equity, and inclusion (DEI). ESG and DEI refer to measures that are specifically meant to promote inclusion for groups such as the LGBTQ+ community and people of color. For comparison, only a third of Gen X and less than 20% of Boomers say that they would do the same.
Big Banks Must Adapt Or Fall Behind
The biggest business challenge for bankers is to improve their customer’s digital experience and acquire new customers, reports the BAI. Only a third of Gen Z completely agreed that their financial service and organizations were meeting their needs effectively. By 2024, customers expect 61% of their banking business to be digital and 39% human-assisted. Riddle notes that banks need to invest in multiple channels— not just digital— to cater to all generations.
However, for younger Americans like Cabrera, they have become aware that they have inherited a dying planet and must make a change to do something about the current climate crisis. “We know that if we don’t do something now, we will lose the chance to do anything at all,” Cabrera says.