Sep 15, 2022

7 min

Gen Z and Bank Digital Transformation in 2022

Since 1990, with process computerization gaining speed, technology has been penetrating increasingly more aspects of our lives. The new generations, particularly Gen Z, grew up exploring the booming world of the digital age. Today, as adults and a new consumer group, they expect this world to evolve at an ever more vigorous pace. It is only natural that the needs of the generation that makes up almost 30% of the world's population should define the direction in which bank digital transformation is heading.

In our article, we will explore what members of Gen Z expect from their experiences with financial institutions and how these expectations affect digital transformation in the banking sector.

written by:

Alexander Arabey

Director of Business Development, Qulix Systems

digital transformation

Since 1990, with process computerization gaining speed, technology has been penetrating increasingly more aspects of our lives. The new generations, particularly Gen Z, grew up exploring the booming world of the digital age. Today, as adults and a new consumer group, they expect this world to evolve at an ever more vigorous pace. It is only natural that the needs of the generation that makes up almost 30% of the world's population should define the direction in which bank digital transformation is heading.

Exploring the Context of Banking Digital Transformation

Essentially, the new take of society on time and comfort made banks re-imagine the concept of the customer journey. Immediate and easy access to banking services via web and mobile channels instead of physical visits to financial organizations was highlighted as a primary focus for financial services providers, with self-service becoming key. Live chats and emails began to replace phone calls.

Shortly after, in 2020, the COVID-19 pandemic hit, and digital banking shifted from a matter of comfort to a matter of personal and public safety and well-being.

What Does Gen Z Expect from Financial Services Providers?

Gen Z had started coming into adulthood shortly before the pandemic hit. The financial uncertainty in the world at the time raised a major concern about how to manage money. According to TIAA Institute, Gen Z possesses the biggest willingness to gain financial literacy (52% of respondents, in comparison to 48% of Gen Y and 44% of Gen X). However, their financial literacy is also the lowest. According to the same study, "Among Gen X, Gen Y and Gen Z, the percentage of P-Fin Index questions answered correctly is 49%, 48% and 43%, respectively."

* The P-Fin Index is an annual survey conducted among U.S. adults that aims to define their level of knowledge and ability to make rational decisions finance-wise.

financial literacy

However, when in pursuit of education on finance, centennials want to find a source that will relate to their specific issues or needs, "with product and service recommendations relevant to their unique banking situation," discovered W1TTY, a neobank targeting Gen Z. This means that hyper-personalization is vital for this generation, as well the ability to trust the service provider. As the research shows, Gen Z is good at seeing what's behind the curtain and values ethics even more than a brand. They appreciate the quality of both the product and customer experience and need services to be up to their standards.

In 2022, Gen Zers are actively becoming participants in the economy. As more teenagers turn into young adults, Gen Z is going to be the biggest consumer group in modern history. Even today, Gen Z's influence on the consumer market is higher than their actual spending power because of the impact on their parents' purchases and various product trends. Those organizations in the banking industry that find their way to channel Gen Z's needs and join digital transformation will be the ones to really move forward.

What Does Digital Transformation in Banking Look Like in 2022?

Centennials grew up with Amazon and Netflix, with new experiences via book and film recommendations instantly available at their fingertips. Banks shouldn't be an exception: they too need to make sure that the user experience they provide is intuitive, seamless, and secure.

So, what to take into account when developing a banking digital transformation strategy in 2022?

digital transformation strategy

AI and ML for Greater Personalization and Security

With digital banking becoming the "it" of modernity, organizations in finance collect more and more personal data. It's great for predictive analytics, which allows for deeper customization and personalized offers.

ML models study the data received from users to define their behavioral patterns. With insights gained from big data, AI/ML models can predict future customer activity and detect fraudulent behaviors. E.g., they can help identify an anomaly, such processing of a big payment at the date and time unusual for a particular user. It's also possible to craft targeted product offerings that would work for a customer's needs. Benefits depending on where the customer shops more often or saving tips based on spending patterns could serve as examples.

Education and Time-Saving with Self-Services

Zendesk discovered that 69% of customers first try to find a solution to an issue on their own before they contact a professional. Self-services for such purposes include knowledge bases (they can become an essential tool for increasing financial literacy), FAQs, virtual assistants, chatbots, etc. The last two are powered by AI, creating room for the reduction of time and manpower needed to communicate with customers in person.

customer service for gen z in banking

Artificial intelligence by itself can also be used for educational purposes. E.g., UBank, Australia’s digital-only bank, created, a virtual home loan assistant under the name Mia. She can provide users with 24-hour AI-driven support.

According to 99firms, Gen Z spends 8+ hours a day online. So, automating customer interactions is a natural next step.

Fun fact: it was estimated by McKinsey & Company that AI has enough cards up its sleeve to open the gate for another $1 trillion for banks. Annually.

Super Apps for Super Transformation

Deloitte discovered that "24% of consumers feel overwhelmed with the number of devices and subscriptions they need to manage." However, with super apps coming into play, we might have a solution.

wanna know how to transform

Super apps are digital ecosystems that allow access to various services in just one app. Core offerings are messaging and financial operations. Super apps have been popular in Asia for quite some time (Alipay was launched in China in February 2004) but the Western world is getting there, too. According to Nasdaq, such fintechs as Revolut and Square are actively expanding their capabilities to provide a unified experience for consumers.

Super apps are something that Gen Z is definitely going to appreciate: the data that's being collected focuses on much more than just users' activities and interests. Nasdaq writes, "By taking those insights and putting them into the wider context of what they reveal about the customer, the super app has the potential to become the gateway to workflows that deliver what a customer wants to get done — rather than just a series of disconnected financial services."

gen z in banking

Wrapping Up the Conversation

Bank digital transformation is yet another modern process where the tone is set by those who reap its fruits. In 2022, with Gen Zers becoming key consumers of the banking industry, it's vital to listen to what they expect from financial services providers if you want to be chosen as the "go-to-bank". Gen Z's need for increasing financial literacy and hyper-personalization alongside their specific traits as a digital generation can be addressed with the usage of machine learning and AI-driven products and services. These new technologies will allow for customized experiences that the new generation is craving, create easy access to self-services, and unite all the apps vital for Gen Z's financial health under one roof.

To us, it feels like a dream coming true.

For a consultation on your project or to learn more about digital transformation in banking, please visit our website or get in touch with our Support Team.

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