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What the Financial Industry Should Know About Gen Z and Millennial Banking Habits

Millennial and Gen Z Financial Habits Pose Unique Challenges to Banks

Millennials, born between 1981 and 1997, came of age during the 2008 financial crisis and, despite much debt, are hitting their income primes, buying homes and wielding their annual $600 billion purchasing power. Gen Z, born between 1997 and 2012, are learning how to manage their money early with the help of YouTube and Instagram. As tech-savvy generations with a complex financial past, present and future, the financial industry must catch up with Gen Z and millennial banking habits.

On July 1, 2019, millennials officially surpassed baby boomers as the largest living generation, numbering over 72 million people. The generation stands in line for the largest wealth transfer in history—an estimated $68 trillion is expected to pass from baby boomers to millennials. Gen Z will surpass them by 2034. Thus, effectively marketing to millennials and their younger counterparts is a big concern for banks and financial services organizations. When it comes to managing their money, the nation’s younger generations march to a different beat; one that has the financial services industry feeling out of step.

Trust is Most Important

It’s no surprise that after years of financial instability, student debt and a housing bubble, millennials have little trust in financial institutions and lenders. One Facebook study found that only 8% of millennials trust financial institutions, with the majority getting financial guidance from family, friends and online. Only a minority of millennial respondents said that they felt understood by their bank, and most would rather use online services.

Similarly, Gen Z, are also proving that they don’t need traditional banks as other Fintech and online platforms become the norm. Despite most being too young to own their own credit cards or bank accounts, they are still using their smartphones for banking (checking account balances, making a payment, etc.) at 50-80% the pace of millennials. A 2019 Morgan Stanley study found up to 80% of Gen-Z smartphone users are engaged in mobile banking. Think Venmo, where today’s youth send and receive money for everyday activities and expenses.

Betsy Gracek, Morgan Stanley U.S. Large Cap Bank Analyst, states in the study, “When these kids turn 18, the banks will have to fight to explain why these consumers should use them as their primary financial institution, not just as a back end.” Paying attention to Gen Z now is vital for banks to stay on their radar once they reach a more financially mature age.

What Do Millennials and Gen Z Need Financially?

Many Americans across all generations do not have a sufficient retirement savings plan. In fact, many Americans don’t have a retirement account at all. Millennials—and even older Gen Z—are looking for resources that can help them more confidently pay debt, save for a home or retirement and invest. Today, millennials are less likely to invest than Gen X or baby boomers, and traditional banks are not where they’re looking to for education.

Millennials currently are defined in part by being fiscally conservative. They are more likely to hold their assets in cash, bonds, money market funds and stable investments. The generation is both the most educated and the most in debt, with the average college graduate carrying $30k in student loans.

Meanwhile, Gen Z has grown up knowing little more than a world with financial instability. And, growing up with infinite access to financial information, whether on Google, YouTube or TikTok, has made them aware of their finances at an even earlier age.

The financial industry must find ways to compete with social media and online banking platforms to market the value of their long-term banking services and saving vehicles. Ultimately, millennials and their even more financially savvy successors are looking for tools to save and smartly manage their finances.

Impact of Gen Z and Millennial Banking Habits on Financial Service Firms

These trends are reason to worry for executives at financial services firms as millennial banking habits and Gen Z tech users lead to alternative banking and financial services providers like Apple, Google, Amazon, Venmo, etc.

Companies both large (e.g., Apple, Google) and small (e.g., Pepper, Simple, Varo) have already started to lead the way. They are opening up convenient online and mobile banking services that offer transparency and accessibility to younger generations.


[Editors’ Note: To learn more about this and related topics, you may want to attend the following webinars: Basic Concepts Applicable to All Borrowers & Lenders; What Kind of Loan? And Marketplace Lending/Fintech. This is an updated version of an article originally published on May 6, 2019.]

©All Rights Reserved. June, 2021.  DailyDACTM, LLC d/b/a/ Financial PoiseTM

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