Engagement Is Key to Attracting Gen Z, Millennials to Financial Institutions

Millennials have been joined by adult members of “Generation Z” in boosting the importance of digital-first consumers who are driving growth for financial institutions, according to a new white paper from Ondot Systems.

The acceleration of digital-first banking has so far favored larger banks, but smaller banks and credit unions must pay attention to the generations currently entering the consumer base, the report said. The white paper defines Generation Z adults as those from  18-24, and Millennials as ranging from 25 to 39.

“Many smaller banks and credit unions tell us they are dealing with a graying customer base, and struggling to renew their membership,” said Chris Harris, head of marketing at Ondot. “Even for growing financial institutions, this is a critical generation that will define winners and losers in banking for the next two decades or more.”

Ondot Systems, a provider of digital card services platforms to the financial industry, announced the white paper on Thursday, Aug. 6.

The key to understanding “digital natives” as customers is to keep in mind that online experiences must be seamless, or they are likely to abandon a platform, the white paper said.

For instance, Generation Z, which fueled the “meteoric” rise of the TikTok app, are “rapidly redefining social engagement” and expect highly-engaging user experiences.

“Millennials and Gen Zers will be dominant segments in banking for years to come, making it essential for financial institutions to get the digital experience right to compete and win,” Ondot’s researchers wrote.

Millennials number over 83 million in the United States, and 97% use mobile banking with 79% doing most financial tasks online or on mobile apps. Together with the growing cohort Generation Z adults–who are even more likely to engage with finance online or on apps–Ondot said, “they will be dominant segments in banking for years to come.”

“Digital native generations are shaping the future of banking,” the white paper said. “And rightfully so, given they represent tremendous current and future value. Spending power of millennials is estimated at over $3 trillion and Gen Z is $143 billion.”

Ondot’s to-do list for financial institutions looking to increase their share of a massive market that performs the lion’s share of banking tasks online or on mobile apps is to pay attention first  to onboarding; second to help consumers with self-service, and third to empower cardholders to make and control payments.