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Banks must turn to digital and mobile to capture the hearts of Gen Z

What we’re thinking: At least 4 million Gen Z consumers will open a new bank account each year through 2026, and mobile banking adoption is set to explode at a compound annual growth rate (CAGR) of 12.4% through the same year.

Here’s what the industry needs to know about how to reel in Gen Z while competing with fintechs and Big Tech, according to our Gen Z and Banking report:

Banking should be mobile.

  • We predict that the average Gen Zer will get a mobile phone at age 12, with adoption reaching 96.9% by 2026.
  • We also forecast that 42.9 million Gen Zers—with $360 billion in disposable income and growing, according to Gen Z Planet—will use mobile banking by 2025.

Gen Z spends their time on social media.

  • They’re accustomed to personalized, on-demand content through social media platforms, including digital video.
  • Consequently, banks need to make sure their digital capabilities are up to snuff. More than half (55.7%) of Gen Zers prioritize mobile banking as a top factor when choosing a bank.

Continuously improving tech means competition is fierce.

  • Big tech is looming. Gen Z trusts Apple just as much as their primary financial institution for their banking needs.
  • Payment apps threaten to take the place of banks: Many, like Apple Pay and Venmo, offer checking-account-like features right in the app.
  • The share of Gen Z digital-only bank account holders will grow 29.5% compounded annually from 2023 through 2026, which means neobanks have a real chance to win out.
  • Digital gaming is also knocking. Gamers will tap into digital wallets and transactions in games like Roblox and Minecraft.

But digital doesn’t mean financially literate.

  • Roughly 85% of Gen Zers say there are hurdles to financial success, per Bank of America. Very few feel able to build an emergency fund, save for retirement, or invest.
  • This is where banks can seize the opportunity: They have the resources to personalize financial advice for Gen Z. They have the products and services young customers need, and many are implementing powerful, customizable solutions like AI-powered investment recommendations.

Gen Z accesses credit in new and old ways.

  • More than 35 million Gen Zers will use buy now, pay later (BNPL) by 2026. Banks that partner with BNPL companies can get an in with this generation.
  • But Gen Z also uses traditional credit. Gen Zers have an average of $2,589 in credit card debt. This is not quite on par with millennials, but it provides a runway for banks to grow their portfolios with this generation.
  • Banks should focus on giving Gen Z a financial foundation to access other forms of credit, like mortgages: Many Gen Zers believe they will never own a home because they can’t save for a down payment.

Continue reading: To learn more about how Gen Z uses social media to access financial information—and what banks should do to make sure they are discoverable on these platforms—check out our Gen Z and Banking report.

This article originally appeared in Insider Intelligence’s Banking Innovation Briefing—a daily recap of top stories reshaping the banking industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.