Banks face the Gen Z digital challenge

- By Collaborative Media & Publishing
The current era of rapid technological innovation is carving a deep generational divide that will force banks to find new ways to connect with younger customers.

Pete Kooner, who leads Australasia for Zafin, a product and pricing software provider for banks, says Generation Z (born 1996-2010) and Millennials (born 1982-2004) have grown up surrounded by technology which has changed the way they connect to the world.

"Their bank branch is essentially an app on their phone – and they can delete it and quickly switch to another bank," he says.

New FinTechs, including digital neobanks that predominately communicate through apps, threaten to lure away the next generation. Younger customers also have strong relationships with big tech companies that are increasingly encroaching on the payments sector, according to research by Merchant Machine.

Chloe Combi, who interviewed more than 3000 teenagers for her book Generation Z: Their Voices, Their Lives, told the Sibos 2019 conference that this is the first generation to have a viable alternative to banks.

"They were children after the 2008 crash and they thought that their lives had kind of been blighted by this thing. So I think with Gen Z there's much more faith in tech than there is in a bank – perhaps unfairly, but that's the reality."
Coronavirus creates new digital imperative
Sharply rising house prices in the years before the coronavirus pandemic played a key role in forcing younger Australians to buy their first home much later in life, according to research by the Grattan Institute.

The current Covid crisis is making the situation worse. Youth unemployment rose to 16.1% in May, up from 11.6% in March, while more than 20% of Australian workers aged 15-24 are underemployed, according to Grattan.

Despite the sharp economic downturn, Kooner says the risks are too great for banks to slow down the digital transformation projects that will be required to reach a technology-driven younger generation.

"This generation is very tech savvy and a lot more comfortable giving out personal information than previous generations. It's a great opportunity for banks to accelerate their digital transformation programs so they can build that relationship with personalised offerings."

The digital banking experience has become even more important after a lengthy lockdown prevented many face-to-face branch interactions. However, multiple legacy IT systems remain a key challenge facing banks' attempts to personalise offers through digital channels.

They are increasingly turning to smaller, nimble FinTechs according to Kooner, or building similar capability in-house to speed up the process.
Open banking set to change the landscape
The launch of open banking – which gives consumers greater access and control over their data – is also set to change the landscape. The eventual introduction of ‘write’ access alongside 'read' access will enable customers to direct third parties using APIs to apply for and manage products and services on their behalf.

"It can take months to get the financial statements needed to change a home loan," Kooner says. "But with open banking an accredited FinTech could make that simple – click a button and that information can be provided to another bank who can approve the loan."

Open banking falls under the consumer data right (CDR) legislation, which will bring together an even wider array of personal data including from utilities and telcos. It's not hard to imagine trusted digital businesses with high engagement, such as ridesharing or delivery apps, using personal data under the CDR regime to offer new services based on customer spending patterns.

A recent report by KPMG and CBA (The Future of Digital Banking: Banking in 2030) predicts a move towards ‘platformication’, where banks allow customers to choose personalised services from a range of providers.

"Banks of the future will rely on their trusted brands to develop ‘lifestyle layers’ to compete in the platform space, orchestrating ecosystems of fintechs and other providers for consumers and small businesses," the report said. "If banks are not leveraging these capabilities, they face the risk of other brands stepping in."

However, not all strategies to reach Generation Z need to rely on new technology. Late last year, Barclays launched its free Money Mentors program, which provides a personalised 45-minute mentoring session to everyone, not just Barclays customers.

"As a bank with over 325 years of history, we've got the full suite of banking products that some of our competitors maybe don't," Barclays UK Digital Product Manager Joanna Harris said at Sibos 2019.

"We can offer mortgages, current accounts, investment savings – all of that. What we're working on is new ways to help Gen Z and younger customers to access that."

BPAY Group provides a range of services and APIs that can help businesses make life simpler for their customers. For more information visit

This article represents the views and opinions of the author and do not necessarily reflect the opinions of BPAY. Published by BPAY Pty Ltd.  BPAY payment products are offered by over 150 Financial Institutions. Contact your Financial Institution to see if it offers BPAY payment products and to get the terms and conditions. This is general advice – before using BPAY payment products please review the terms and conditions and consider whether BPAY payment products are appropriate for your personal circumstances.

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