The news: Regional and community financial institutions (FIs) should focus on their digital experience to snag younger generations not yet sold on a bank, according to a study by Alkami.
The study included 1,500 US participants who have a bank account and use digital banking and was weighted according to the 2020 US Census for age, region, gender, and ethnicity.
By the numbers: The study reveals links between a quality digital customer experience and customer stickiness.
Only 27% of regional and community customers believe their relationship will grow with their institution over the next year, as opposed to 51% of neobank customers, and 53% of fintech customers.
- But 40% of current regional and community customers would be willing to try, use, or engage with more products if they had a satisfying digital banking experience.
Regional and community institutions have room to grow when it comes to new customer acquisition and competing with neobanks and fintechs.
- 45% of baby boomers and 38% of Gen Xers use regional and community FIs, versus 16% of Gen Zers and 18% of millennials.
- 40% of millennials and 38% of Gen Zers use neobanks, fintechs, and Big Tech compared with 6% of boomers and 21% of Gen Xers.
The digital experience: By focusing on developing a better digital experience, regional and community institutions can nab younger generations that haven’t found their primary financial institution.
- 25% of Gen Zers and 21% of millennials don't think or are unsure if they’ll be with their primary FI in one year.
- And these generations are quicker to make a change. Almost half (48%) of all Gen Zer and millennials have opened an account with a new financial provider due to a frustrating digital banking experience, the study found.
What to do? Our “US Gen Z Financial Behaviors” report found that the cohort desires opportunities to improve their financial literacy but fears traditional banking institutions misunderstand their needs.
- This gives neobanks and fintechs that lead with a digital approach an advantage, but younger customers will respond to FIs that are honest and transparent while offering a strong digital experience.
- With bank tech spending expected to increase steadily over the next few years, regional and community banks would be well-suited to focus on attracting these younger customers by developing exceptional digital channels: Regional banks, community banks, credit unions, and neobanks will make up 48.5% of total US bank tech spending in 2024.