IBM research highlights 'disconnect' between banks and Gen-Z

New research from IBM shows that large banks believe they understand the needs of Gen-Z account holders – but consumers themselves are not so sure

New research highlights a potential disconnect between banks and Gen-Z when it comes to understanding customer needs.

IBM commissioned Censuswide to survey 3,000 Gen-Z customers and 750 C-suite banking executives in the UK, Germany and Spain – three of Europe’s largest banking markets. It found that almost nine in 10 bankers (88%) believe they understand the needs of Gen-Z account holders, but their customers do not necessarily agree with them. Over a third (34%) of Gen-Z do not believe that traditional banks understand their needs, according to IBM’s research.

This is in spite of a vast majority of bankers (91%) understanding that Gen-Z will have a significant impact on their bottom line in the next five years.

More than half of bankers (53%) believe their legacy systems put them at a disadvantage compared to neobanks when it comes to adapting to Gen-Z, but 86% of those surveyed still believe they have the technical capabilities to meet the needs of this demographic.

The research shows that banks are scared of losing Gen-Z customers. 87% of bankers surveyed are concerned about Gen-Z customers being more willing to switch bank accounts compared to prior generations, with 86% worrying that higher expectations around ethics and environmental issues could push them away from traditional providers. However, the survey shows that the real picture is slightly less drastic: 48% of Gen-Zers say they would switch to a bank if it had better user experience, while less than two-thirds of Gen-Z (64%) would switch bank if their current provider fell short on ethics and environmental sustainability.

The survey also demonstrates that there are still upsides for traditional banks among Gen-Z: 55% of consumers trust traditional banks more than neobanks to resolve serious issues like fraud, compared to just 11% who trust neobanks more.

Banks ‘must welcome modernisation’ to appeal to Gen-Z

Prakash Pattni, MD for Financial Services Digital Transformation at IBM, tells FinTech Magazine: “Traditional banks in the UK and Europe are facing an uncertain future due to a growing disconnect with the Gen-Z demographic, and the pressure on banks to adapt has never been so intense. Younger consumers want swift and secure banking, and they tend to seek services that reflect their values and beliefs. As Gen-Z account holders live fully digital lives, much of the disconnect comes down to technology. Significantly, 89% of UK bankers believe they have the tech capabilities to meet their needs, but 38% of Gen Z aren’t so sure.

“While this can create a bleak picture for banks not willing to embrace digital transformation, they must welcome modernisation in order to meet the demands of younger customers. Gen-Z were born in the internet age, so technological innovations play a critical role in meeting their needs. This means that the onus is on banks to develop user-friendly apps that easily integrate with other platforms. Importantly, as payments are increasingly embedded in technology platforms, consumer interactions with banks are dwindling. This pushes banks to adapt by utilising technology and data to create more personalised experiences.

“On the flipside, the research also showed that traditional banks command greater trust amongst younger consumers, with 55% of Gen-Z trusting banks to resolve serious issues like fraud, compared to just 11% who trust neobanks. Cybercriminals are adapting and becoming more sophisticated, and trust and security will remain top of the consumer agenda. To succeed in the future, banks must continue to remain ahead of security and compliance challenges as regulatory oversight grows, and they must ensure customers’ personalised experiences are de-risked, providing a secure, tailored and sustainable option.”

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