A new survey suggests that younger customers have different needs when using a bank’s digital channels.

With banks and credit unions continuing to accelerate the adoption of digital banking tools, some customers might still be uncomfortable with the technology – even young adults.  

A recent survey by credit scoring company FICO found that Generation Z was more likely than other age groups to prefer non-digital channels when opening a financial account, with 29 percent of respondents ages 18-24 preferring a phone call or mail to open an account compared to 8 percent of respondents ages 65 and older. 

“The dichotomy of this idea is that the 18- to 24-year-olds might be very digitally savvy – they’ve grown up with a phone in their hand,” said Darryl Knopp, senior director of portfolio marketing at FICO. “But that’s not translating to financially savvy.” 

By understanding the intersection of digital literacy with financial literacy, banks and credit unions could provide tools, products and services that help them compete against financial technology companies while also minimizing risks associated with digital banking. 

Intuitive Journey 

Despite growing up with smartphones, only 49 percent of U.S. respondents ages 18-24 were comfortable downloading a financial institution’s app to open an account, the FICO study found, compared to 54 percent of those 65 and older. For respondents of all ages, half would abandon the digital onboarding process if they had to answer more than 10 questions. 

To address the discomfort and friction created by digital account openings, financial institutions should make the process more intuitive, Knopp said.  

“It’s more about how you do it – how you take them on that journey and why you’re taking them on that journey – than it is that you’re creating this perceived friction,” he said. 

That digital journey should include not just questions but explanations about why the consumer needs to answer the questions, Knopp said. If financial institutions can demonstrate why information is valuable, he said, consumers might learn about the process and be more willing to continue with the steps, affecting both financial and digital literacy. 

Financial institutions also should see that having a good process protects the institution as well, with fraudsters likely willing to endure friction.  

“Good customers won’t go through bad processes,” Knopp said. 

He said that rather than treating the account opening process the same for all applicants, financial institutions could use artificial intelligence to flag customers who should go through additional verification steps before moving ahead with the process. 

 Rather than thinking of younger adults as having short attention spans, Knopp said, financial institutions should instead recognize that they only have a brief opportunity to impress the younger generation.  

“They are digitally savvy,” Knopp said. “If you can’t impress them in that channel, they’re going to go somewhere else.” 

Financial Literacy 

Knopp said that financial literacy and financial wellness also have a role in helping young adults become comfortable with digital banking tools and processes.  

“People haven’t changed; 18- to 24-year-olds have had the same amount of financial literacy, unfortunately, probably for the last three or four decades,” Knopp said. 

This has started to change, he added, with the financial industry starting to focus more on financial education. He said banks and credit unions should look to social media sites like Instagram and TikTok, using videos to help educate people about financial accounts.  

Online videos have helped Greylock Federal Credit Union educate customers about financial tools and products, just one of several layers the credit union uses to address financial literacy, said Cindy Shogry-Raimer, vice president and director of community development at Greylock Federal Credit Union. 

Community banks and credit unions have a long history of providing financial education resources, and Greylock offers teachers in its field of membership of grades three through 12 with access to the online financial literacy program Banzai. The credit union also has 27 financial counselors, Shogry-Raimer said, and teachers can request an in-person or virtual meeting with students to go over the concepts in the program. 

Diane McLaughlin

For all members, Greylock offers financial wellness classes that include digital tools, products, services and concepts such as budgeting, loans and building credit. As a designated community development financial institution, the credit union also offers individual coaching sessions, reaching people of different cultures and age groups. 

With fewer visits to branches during the pandemic, Greylock has used social media and other channels to communicate with members about financial literacy and wellness. 

The messages include ongoing concerns about fraud, Shogry-Raimer said, and the importance of digital tools in protecting members. 

“Our young people are tech savvy, but they’re not really good with the security-process aspects, because it’s just so natural to them to use the devices,” Shogry-Raimer said. “We want to make sure that they have the tools to protect themselves so that they’re not becoming victims right out of the gate.”