Big banks for boomers – Why more and more young Americans are breaking up with their parents’ banks

news7f11/25/2022

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Big banks for boomers - Why more and more young Americans are breaking up with their parents' banks

Moving over millennials: Gen Z wants to share the spotlight when it comes to shaping the consumer landscape. And it started to have an impact on people in their lives from their boss to their bankers.

While generations before them were happy to use only one bank for all their needs and were loyal to their parents’ bank, young Americans are questioning that tradition.

Recently report from the Banking Institute (BAI) found that less than half of Generation Z and millennials will use the same financial institution as their parents by 2021. That’s a drop. significantly compared to 61% of Generation Z and 54% of millennials in 2020.

With so many options available to young customers — meeting their specific values and needs — the big banks will need to catch up to stay relevant.

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What America’s Young People Are Interested In

While Gen Z and millennials value low fees (31% and 36% respectively) more than any other factor, they don’t prioritize them as much as older generations.

Meanwhile, over 60% of Gen Z and millennials will consider switching banks for better digital capabilities, such as mobile apps. Other factors include better rates and cash incentives and rewards.

Mark Riddle, director of research and content delivery at BAI, notes that younger Generation Z, who may not have their own income, are less interested in interest rates and less likely to own credit cards. than.

Younger generations are also more likely to consider banking with a non-traditional competitor, such as Amazon, Google or PayPal.

Riddle adds that the rise of online banking means younger Americans are less loyal to one financial institution and more often have accounts with multiple institutions, which means increased competition. for the big bankers.

Banks that share your value

For Carissa Cabrera, a 28-year-old marine conservationist based in O’ahu, Hawaii, choosing the right bank leads to a question of value.

“It is extremely important to me that the company shares the same values of environmentalism,” Cabrera said in an email. “At this point in my life, I don’t endorse brands or products that don’t embrace some form of ethical and sustainable practice.”

The main thing Cabrera looks at in a financial institution is whether it funds the fossil fuel industry.

BAI reports that more than half of Generation Z and millennials will transform financial services institutions for greater commitment to ESG and DEI. By comparison, only a third of Gen Xers and less than 20% of baby boomers said they would.

ESG (environmental, social and governance) is a system for measuring a company’s commitment to social better, while DEI (diversity, equity and inclusion) refers to measures aimed at improving society. promote inclusion for groups such as people of color and the LGBTQ+ community.

Cabrera currently uses Bank of Hawaii for her business — an environmental media company called The Conservationist Collective — and a local credit union for her personal accounts.

She adds that members of The Conservationist Collective can also have accounts with organizations like Aspiration, a green banking alternative.

How to measure sustainability

Pete Hellwig, co-founder of Atmos Financial, an eco-friendly online banking alternative, notes that sustainable banking means different things to different people.

“When I say sustainable banking, I am referring to the act of using your money to support environmentally friendly or positive projects or assets,” he explains.

Atmos funds climate-positive infrastructure and reimburses customers for the purchase of sustainable brands.

Hellwig notes that the average customer is in their late 30s, but their clientele ranges from 18 to 80.

“I mean, [young people] changing the world, right?” Riddle said. “It is no longer acceptable for publicly traded companies to not settle ESG or DEI. And the younger generations are just more adapted to… social justice.”

However, Riddle says it can be difficult for financial institutions to measure and justify these commitments.

You can check your bank’s certification if you are looking for a socially responsible organization.

For example, Atmos is certified fossil-free and a member of the Conservation Alliance. Consolidated Bank is a Certified B corporation, a designation that shows high transparency and social and environmental activism, and is part of the Global Alliance for Value-Based Banking.

Big banks need to adapt to keep up

Only a third of Gen Z strongly agree with the statement that their financial services institutions are effectively meeting their needs.

According to the BAI report, the biggest business challenge for bankers in 2022 is to improve the digital experience of their customers and attract new customers.

By 2024, customers expect 61% of their banking business to be digital and 39% to be powered by people.

Riddle emphasized that banks need to invest in multiple channels — they can’t just prioritize digital, for example — but must cater to all generations.

As for Cabrera, she said that younger generations inherit a dying planet and they have a responsibility to find solutions to the climate crisis.

“We know that if we don’t do something now, we will lose the opportunity to do anything.”