How Millennials and Gen Z Are Changing Banking
Over the past several decades, there have been some major shifts in the banking industry as the world has moved into the digital sphere. Consumer demands and rapid technological advancements have led to financial institutions adopting new practices to retain relevance and cater to a more user-friendly experience for their consumers.
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Today, financial institutions no longer need “brick and mortar” buildings, and contactless payment options are regularly used. Gone are the days of writing a few checks a week as digital features such as crypto trading are taking prevalence.
While nearly every generation is advocating for the latest technology or business practices to be in effect, a major push for change is coming from millennials and Gen Z. According to a recent survey conducted by GOBankingRates, nearly 30% of Americans ages 25-34 use online banks, a higher percentage than any other age group — and banking is shifting from a physical structure to a much more flexible virtual format.
Gen Z and Millennials Are Banking Online
It likely comes as no surprise that Americans who have been growing up in the digital age are opting to use online banks. According to our survey results, 21% of Americans use online banks — that includes 20% of people 18-24 years old and 30% of people 25-34.
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Americans over 65 appear less comfortable with the digital sphere: 81% do not bank with a virtual financial institution.
Gen Zers and millennials are moving toward online platforms to conduct their banking in order to find better rates.
“To many Gen Z and millennials, the goal is to find a bank with the best benefits, not the best building,” said Jay Zigmont, Ph.D., CFP and founder of Childfree Wealth. “Online banks tend to offer better tech and often better rates. For example, if you compare local savings rates versus high-yield savings accounts, it is not even a competition. There are now even services, such as MaxMyInterest, that will move money from one HYSA [high-yield savings account] to another depending on current rates (and to stay under FDIC guidelines).”
They Are Also Using Mobile Banking Apps
With these generations used to accomplishing most of their day-to-day tasks via mobile apps, it likely comes as no surprise that they are running to these platforms for financial management as well. Our survey displayed that 66% of Americans ages 18-24 and 68% of the 25-34 age group are using mobile apps to take care of their banking needs.
These also are the least likely groups to conduct banking in person. While 42% of Americans ages 55-64 prefer to bank in person, a mere 14% ages 18-34 do.
Gen Z and Millennials Don’t Need Their Banks Nearby
Gen Zers and millennials aren’t taking their checks to the bank or going in person to set up new savings accounts; they are instead cashing checks online and establishing savings accounts with a few clicks on bank websites.
When we asked Americans which feature or perk is most important to them when opening an account with a new institution, we found that Gen Z and millennials care less about having their banks nearby (just 8% to 10% valued location most). They are most interested in low fees, good rates and sign-up bonuses.
Younger Generations Aren’t Afraid of ‘Challenger Banks’
Neobanks are sometimes referred to as “challenger banks” and are part of an app-only banking system that is not connected to other branches in the way traditional financial institutions are. Typically, neobanks are owned by fintech firms that offer other financial software, such as checking and savings accounts. Some popular neobanks include Current, Upgrade, Chime and Dave.
While neobanks are not yet a widely used banking option among Gen Z and millennials, these generations are considering using the app-only platforms more than any other. About 53% of Americans 18-24 and 49% of those 25-34 considered neobanking in the past year. About 56% of older millennials (late 30s, early 40s) also considered this type of banking.
They Don’t Mind Having Multiple Banks
Gen Zers and millennials are more likely than any other generation to be working several jobs, bouncing between the real world and the virtual world constantly. So an extra level of juggling is practically expected for these generations, and having accounts across several banks is nothing out of the ordinary for these groups.
Our survey displayed that 54% of Americans 18-24 and 58% ages 25-34 are open to having different types of accounts across multiple banks. Additionally, 62% of those 35-44 who fall into the older millennial and younger Gen X category are willing to balance money across several banks.
Those over 65 are not as willing to place money in more than one bank. Just 42% said they would do it.
They Aren’t Using Money Market Accounts or Certificates of Deposit
Certificates of deposit (CDs) and money market accounts are likely accounts Gen Z has never heard of and millennials rarely use. A CD is a time-fixed deposit that features a set interest rate. A money market account is a deposit account that pays interest depending on interest rates in the current economy.
The survey revealed that a mere 7% of Americans 18-24 and 12% 25-34 currently have money market accounts. When looking at Americans over 65, on the other hand, 20% have money market accounts. The generation gap for CDs is similar, with less than 10% of Gen Z and millennials invested and 16% of retirement-age people using them.
They Aren’t Writing Checks
With apps like Venmo and PayPal making peer-to-peer money exchanges as effortless as ever, the need to write checks is significantly decreasing. GOBankingRate’s survey revealed that 43% of Gen Zers and 50% of millennials have not written checks in the past year.
While some Americans over 55 are still writing a few checks a month, the need for checkbooks and paper money has significantly decreased in today’s digital world.
They Are Trusting Banks’ Crypto Capabilities
Younger generations are also more trusting when it comes to banks’ crypto capabilities. According to our survey, it was very important to millennials and Gen Z that their banks be affiliated with crypto platforms.
While a mere 6% of Americans over 65 found it essential for their bank to be affiliated with crypto, over a quarter of Gen Z and millennials thought it was at least somewhat important — around 10% of Gen Z thought it was very important and 16% of millennials thought it was very important.
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This article originally appeared on GOBankingRates.com: How Millennials and Gen Z Are Changing Banking
