Millennials and Generation Z are beginning to dominate the global workforce. Millennials, born during a time of great technological growth and development, are now entering their 40’s and are increasingly rising to the ranks of CEO and CFO, making them hugely influential in the selection of their business and treasury banking partners. Interestingly, the World Fintech Report 2020 recently reported that 48% of Millennials are likely to switch banks in the next 12 months, in pursuit of easier-to-use digital services. In many ways, this foreshadows the generational trend to come; with Generation Z now set to enter the workforce, innovative and integrated services will be the crux of how these digital natives choose their corporate banks. Meaning, banks who hesitate to innovate and provide technology-driven, digital financial services will be overlooked by this next generation.
New Wave of Entrepreneurs
The COVID-19 pandemic will alter the early careers, financial lives, and decisions of Generation Z professionals – just as the Global Financial Crisis of 2008 shaped the experiences and career paths of Millennials. According to a recent estimate, 54% percent of Gen-Zs plan to pursue entrepreneurship, while over 15% of people ages 18-24 have already actively engaged in starting a business in the US.
Many will go on to be the entrepreneurs of tomorrow, and the high-earning retail customers and large business customers of the banks. Technology companies have gotten ahead of this shift and have tailored their offerings to offer the value that has become apparent through this shift. Even consumer banking has made the transition to digital, with your banking portal accessible through an app on your phone.
Recognizing the opportunity this next generation holds will be vital for the longevity of banks. The impacts of the global pandemic will undoubtedly accelerate the rise of entrepreneurship, as entrants to the job market face the reality of a job market experiencing record levels of unemployment.
Digital Experiences Must Take Center Stage
Generation Z has grown accustomed to the convenience that has been made available by organizations like Uber, Amazon and Netflix, whose strategies are rooted in convenience for the consumer. This generation has also adapted to using quick and easy money transfers by way of apps such as Venmo, or e-transfers; physically going into a branch is not only a rarity, it is oftentimes proactively avoided. This mentality of working smarter, not harder, will drive the way Generation Z approaches work; and perceived success will be dependent on how seamlessly convenience and efficiency are experienced. Unfortunately, even today, financial institutions do not live up to these expectations and do not offer the tools their corporate and small and medium-sized enterprise (SME) clients need to modernize their processes.
What Should Banks Do
Banks must acknowledge that they are more than likely behind the 8-ball when it comes to providing the digitally-driven services that Generation Z small and medium sized enterprise and corporate clients will consider as table-stakes. Given today’s economic climate and the impacts we’re seeing manifest in the wake of COVID-19, there is no room for hesitation when it comes to answering the call for digital innovation. Once you decide this is a priority, you can start to come up with a plan.
Additionally, it is wise to think about how you can specialize around verticals. There are plenty of market examples out there of vertical-specific business-to-business banks.
The next logical step is to make sure you are using the right tool for the job. Some banking activities will still require clients to be physically present at the branch, whereas others will be better carried out remotely, using mobile banking or leveraging the technology we use every day (think, smart phones and watches). What is important here is to not waste time or money building every feature into every platform, but to make sure the right features work in the appropriate context.
It will be important in the early stages of planning to decide whether your financial institution will build your own integrations, or if it’s more efficient and cost-effective to partner with a third-party fintech. At FISPAN, our efforts are focused on helping banks provide their corporate clients with seamless, digitized treasury management workflows.
Generation Z has high expectations for digital experiences and financial institutions need to be ready to meet them head on.