Welcome back to our TechTrends series where we’re rounding up industry news from across sectors. This week, we’re taking a look at how Millennials and Generation Z’s expectations have made it essential for large banks to implement a digital transformation model that utilizes banking technology innovation.
Previously in TechTrends Week4, we concluded that in order to implement a successful digital transformation and IT modernization strategy, we all need to look at existing legacy systems, and understand what it takes to innovate without adding technical debt. Various industries are seeing the need to implement an API-first strategy to make this work. Many of these large organizations have created a unique perch in their respective industries where they have a large customer base with brand loyalty. However, resting on their laurels is no longer an option. The time has come for these large organizations to try and rapidly innovate, but they must do it without adding tech debt. From what we can tell, Millennials and Gen Z are demanding a change in how these businesses run, whether it’s demanding and innovative products or seamless customer service. Today, we expect everything instantly in a one-stop shop, wrapped in a seamless experience. The banking industry is witnessing these demands now, but as a large company, is it the best strategy to accept these digital banking trends as the future of banking, or do you see it as just a fad?
Let’s take a look at how Millennials and Gen Z are disrupting banking, strategies to attract them, and what one company has already tried to do:
How Millennials are disrupting personal finance
Millennials are disrupting many areas, and banking is one of them. In particular, personal finance is a place where banks are seeing a shift with this generation; they are saving more, earlier, than previous generations. They’ve been considered the “brokest generation” since they came of age during the Great Recession and now are dealing with student debt, climate change issues, and more. Three key areas this disruption-ready generation is changing personal finance are moving from in-person to online, big banks to big tech, and “the way it is” to “the way it could be”.
How to attract Generation Z in banking and payments
For banks and payment companies, it’s critical to understand what attracts Gen Z as they have not created brand loyalty ties yet, and will start expanding their number of financial products as they get older. As of now, most haven’t moved past a bank account, which makes this age bracket a prime target for future business. But knowing what they’re interested in is key: digital products that will continuously evolve with needs, keep adding value, are educational, and take into consideration social needs.
Goldman Sachs spent billions to not be the “bank of millionaires”
To become a more consumer inclusive and friendly brand for customers, Goldman Sachs has spent $1.3 billion on their Apple Card, Marcus, and other initiatives. As of July, they’d spent $275 million in 2019 on consumer-focused lines of business. Marcus, their digital-only challenger, was designed to counter the perception of big banks being “elitist,” and to help consumer pain points when it comes to traditional banking.
As you can see, Millennials and Generation Z want innovative, digital, and consumer-friendly products, that are easy to access and use, while also being educational and society-helping. These types of products benefit everyone, as consumers are keeping banks accountable for what they provide as a service. No longer can stick to a “traditional” model; consumers want something new and exciting that helps them be and do better. Marcus from Goldman Sachs is just one example of how Millennials and Gen Z have transformed the future of the banking industry. As more insurgents enter the industry with new innovative offerings, banks need to see what these consumers are prioritizing in their digital products. These generations are key for traditional banks to advance in the race of digital banking.
Are you a large bank looking to rapidly innovate while simultaneously modernizing IT? If so, check out our Digital Banking Success Report.