Martin Lindstrom

A new age of banking is upon us, but are banks still caught in an old mindset of what the customer wants?

If you ask an American 18-year-old to identify Paul Newman, they’ll probably tell you it’s a salad dressing company. Ask a European 18-year-old about Bjorn Borg and they’ll tell you it’s a popular Swedish underwear brand. Whether we’re baby boomers or millennials, we know the world has changed a lot over the past few decades. The difference is that the baby boomers will mostly claim it’s changed for the worse, while millennials will tell you that it’s about time.

So, what about banking and financial services — what do millennials think of banks?

Generation Z (Gen Z), those born since 1995, are not just the inevitable future inheritors of the economy – they’re already making their impact felt. In the US alone, they total 90 million people and represent a staggering $150bn in earning power.

Millennials don’t have the same reverence for banking institutions that the previous generations had, and banks aren’t naturally the first port of call when they are looking to access financial services. 

Gen Z has come to see the world through a lens defined by three characteristics:

  • Everything happens instantly. If the answer or information doesn’t appear within 30 seconds, they’ve already moved on;
  • Everything is possible. If one app doesn’t do the trick, another will;
  • Everything is easy. One scroll down; one click away.

Now try a little exercise. Simulate instant, possible and easy with a bank in mind and you’ll recognise a friction-filled customer journey. Of course, the entire industry doesn’t represent what I’m saying, but a large part does, and that’s the source of the problem.

Generational mismatch

We, the older generation, have projected our preferences onto Gen Zs, assuming they want what we want.

We don’t want to pay fees. In fact, many of us carefully avoid subscriptions, because we feel we may be trapped for life. We’ve learned to accept bare-bones, no-frills service, with most of the work left for us to do. It’s not so much that it’s our preference; rather, it’s become that way because that was the way the internet was introduced. If I can read my news free of charge online (as I’ve always got it free, more or less, on television), then why can’t I get all my services for free online?

But here’s the interesting insight. According to a recently published survey, baby boomers (aged 58 to 76 years) pay an average of $2 per month in routine service charges, ATM fees and overdraft fees, while Generation X (ages 42 to 57) pay $4 per month. Interestingly, millennials (ages 26 to 41) pay $16 and the youngest cohort, Gen Z (ages 18 to 25), pay an average of $19 per month.

So, while banks offer meagre services on the assumption that customers will balk at the fees, this doesn’t hold true for the younger clients who are the industry’s future. Many banks don’t seem to notice that a new door of opportunity has opened. The new customer wants everything to be possible, easy and instant — and they are willing to pay for it.

Our generation accepted limited services, but why should the next? Providing better service is something banks will certainly need to do — at a cost, of course.

Martin Lindstrom is an author and founder of Lindstrom Company, a business transformation group.

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