Banking in the Age of Gen Z: Navigating New Trends | Common Cents Podcast

High Tech Meets High Touch: Credit Unions are embracing omnichannel banking.

Traditional banking is changing fast, thanks to online retail, social media, and inflation. Members now want seamless, personalized experiences like they get from online retailers.

Credit unions are adapting to meet these expectations. A MeridianLink survey shows that 43% of financial institutions are focusing on seamless omnichannel experiences, with 64% expecting less in-person banking.

So let’s talk “omnichannel.” It might sound like a buzzword, but it’s actually key to meeting today’s demand for convenience and accessibility. Its importance took off with the rise of e-commerce in the 2010s and got an even bigger boost during the pandemic. What started as a way to differentiate in-store from online shopping has evolved into creating a seamless experience across every touchpoint. Now, consumers expect the same smooth integration and convenience from their credit unions, making this approach essential for FIs.

Credit unions need to blend digital platforms with human interactions. Automated tools are convenient, but human connection is essential for complex issues. An Accenture study found over 60% of consumers visit branches for complicated problems.

Here’s an example: Let’s say a member wants to consolidate his debt. Through his credit union’s online platform, he learns about debt consolidation loans and schedules a virtual consultation. A representative helps him find the best loan terms, mixing digital convenience with personalized advice.

Finding that perfect blend of digital and human touchpoints boosts member engagement and satisfaction and drives growth. Credit unions that adapt by seamlessly integrating physical and digital banking are better equipped for the future.

Gen Z: Are you ready for how different their banking behaviors are?

A new YouGov report titled “Generational Wealth 2024” highlights some stark generational divides in financial attitudes and behaviors. Gen Z, in particular, is embracing risk, digital solutions, and even considering abandoning traditional banks for fintech or cryptocurrency, which poses a major challenge to the banking industry. Statistically, they’re more confident than any other generation about achieving generational wealth, but they’re also the least financially secure of any generation.

Key Insights:

1. Risk Tolerance: 54% of Gen Z are comfortable taking financial risks, versus 16% of Baby Boomers.
2. Digital Banking: 36% of Gen Z are willing to replace their bank accounts with cryptocurrency.
3. Traditional Banks’ Resilience: Banks like Bank of America, Chase, and Capital One still attract all age groups, though fintech companies like Cash App and Chime are gaining ground.
4. Financial Literacy Gap: While Gen Z shows high risk tolerance, they also report higher confusion about financial matters, indicating a need for better financial education.

Banking Strategy Implications:

• Education & Advisory: Banks must offer targeted education and advisory services to help Gen Z navigate financial risks.
• Digital Integration: Combining digital convenience with traditional banking reliability can bridge the gap between old and new banking models.
• Innovative Products: Developing specialized products like entrepreneurial loans or goal-oriented savings accounts can cater to Gen Z’s unique needs.
• Collaboration with Fintech: Partnering with or acquiring fintech companies could help traditional banks stay competitive.

To sum it up, Gen Z’s financial behaviors signal a need for FIs to rethink their strategies to stay relevant.

Banking’s New Era is embracing automation

Alexander Pope’s famous quote, “To err is human,” underscores a challenge facing the banking sector: human error. Traditional banking processes, reliant on manual operations, are prone to mistakes, leading to inefficiencies, higher costs, and subpar customer service.

Current Challenges:

• Compliance Risks: Manual compliance tasks are error-prone and time-consuming, increasing the risk of fines and reputational damage.
• Customer Experience: Manual processes can lead to service delays and inaccuracies, potentially driving customer dissatisfaction and attrition.
• Scalability Issues: Outdated methods struggle to meet growing customer demands and adapt to peak times, hampering institutional growth and responsiveness.

Automation Benefits:

• Efficiency Gains: Automation speeds up transaction processing, account openings, and customer service, allowing staff to focus on strategic tasks.
• Cost Reductions: By cutting down on manual labor and minimizing errors, automation lowers operational costs and helps avoid expensive regulatory fines.
• Enhanced Satisfaction: Faster service, fewer errors, and 24/7 availability improve customer experience and accessibility.
• Compliance Streamlining: Automated systems ensure adherence to regulations, reduce the risk of human error, and simplify compliance reporting.

Implementation Considerations:

Adopting automation involves navigating integration challenges, training staff, and evaluating long-term ROI. Despite these hurdles, the shift from manual to automated processes promises significant improvements for financial institutions.

So, while Alexander Pope may have said “to err is human,” here’s an alternative, to quote from Kinective’s very own Michael Ball: “To automate is divine.”

And that’s a wrap for today. Thanks for listening!

Common Cents is brought to you by Kinective, the leading provider of connectivity, workflow, and analytics software for the banking sector. Check us out at kinective.io and connect to the future of banking.

Until then, we’ll catch you on the next episode. It’s Common Cents!