(north bay business journal) The Business Journal asked a couple of top officials at area banks how to educate and serve this emerging group of consumers. Ann Hudson is the senior vice president of retail banking at Exchange Bank.
The Santa Rosa-based bank was founded in 1890 and has 18 branches in Sonoma County as well as an SBA lending office in Roseville and Marin.
What are your institution’s experiences with Gen Zers banking habits? There’s some American Banker research that finds if you combine those who have an account with a bank or credit union, plus those who have a joint account with their parents, it’s as much 67 percent. How about what you have seen?
Our younger customers generally start their banking relationship with us with a savings account. They are introduced to Exchange Bank by their parents who bank with us or know about our strong commitment to the community.
As they begin to earn paychecks and head off to college, our younger customers open checking accounts. We offer several accounts specially designed for our high school and college-age customers. They access those accounts online and transact business utilizing our debit cards, mobile applications and with PopMoney (our peer to peer payment application).
They easily adopt to technology and prefer to use it for their day to day transactions. We plan to continue to evolve those services to keep pace with new technologies that allow for all of our customers to easily transact business with the bank, like voice banking and mobile account opening.
And can you relate any experiences you have had with this group relative to their view on debt, (some data suggests they seek to avoid it) and how it compares with Boomers or Gen X?
We do not have any specific data on the way this group of customers feels about debt. Our employees who provide financial education in the schools tell us Gen Z’ers are wary of debt. This wariness is most likely a response to having witnessed the impact of the recession on their families and the awareness of the burden caused by student loan debt.
If some other data is true about this group of 14- to 22-year-olds, they also have jobs – (about three-fourths in one survey) — do they have a different attitude than other, older groups, about saving that money?
They indicate they are more likely to save for large purposes, rather than incur debt. The sharing economy and the rise of companies like Über and emergence of ridesharing applications could delay or negate the need for large purchases for a young person like a first car.
What ways does a financial institution find effective to attract this group to your firm, or to educate them? Or both? Is that message different than has been for those who are older, say 25 to 35 year olds?
We know Gen Zers are interested in financial education and tools that will help them achieve their financial goals, including how to save and invest. Exchange Bank offers financial education in schools.
Do you see opportunity to create financial instruments that are tailored to their habits? Walmart and American Express offer accounts tailored to teens – others have products like debit cards aimed that that market. What kinds of products make sense and what cautions should be considered?
One interesting company that has entered the marketplace is Acorns; they have a mobile application that rounds up your debit or credit purchases to the nearest dollar, investing those pennies into diversified portfolios. Financial institutions will benefit from learning from these companies and figuring how to integrate beneficial services into their product offerings.
Research suggests that they might be more inclined to develop a banking relationship with larger institutions. That your experience?
At Exchange Bank, we are constantly looking into the marketplace to explore what services we need to offer and how to make our services beneficial to our customer base.
As they get older and more connected to their community, do you think they will drift back to more local or area financial institutions and why?
We believe that Gen Zers are community minded and as they grow older will continue to bank with us and understand the positive impact local businesses and banks have on their communities.
Lastly, do you see that these users, among all generations, are less likely to feel the need to bank at a physical locations? In fact, do they even think they need traditional instruments, like checking accounts? So are there apps you might consider or are considering tailoring to fulfill their needs? What might they look like?
The bank branch will continue to evolve, people still choose banks based upon location to where they live or work. Gen Zers will continue to utilize the bank branch for more complex financial needs and to seek advice. We do believe basic transactions will be completed via digital channels and Gen Zers will look for banks that provide those services.
We don’t believe the checking account is dead, but we do think it has evolved into a transaction account. Less and less checks are being written and electronic payments continue to grow, with peer-to-peer payments becoming a dominant way for us to transfer money and pay for expenses.