Research from finance comparison site finder.com has revealed the reasons behind different generations remaining with their current banking providers. While there has been a consensus that younger people are more willing to switch banks, evidence suggests they are more sceptical. As a result, we reached out to fintechs to find out what more could be done.
Finder.com’s research revealed that only 14 per cent of UK adults have taken advantage of bank switching deals before. Furthermore, 18 per cent of Gen Z, 13 per cent of Millennials, and 12 per cent of Gen X haven’t switched due to the belief that switching banks is too time-consuming. Meanwhile, the key motivator behind staying with a bank for older generations (those aged 59 and above) was loyalty (54 per cent of the silent generation and 46 per cent of baby boomers).
The report also found other factors playing a role in younger generations not wanting to change banks. One in six Gen Zers and one in 10 Millenials said stress was the main cause for staying put. Younger generations are also more sceptical when it comes to losing direct debits and standing orders. Around 12 per cent of Gen Z cited this fear as a reason not to switch bank accounts, closely followed by nine per cent of Millennials.
Fintechs must play their role
Fintechs, at their core, are meant to make finance more accessible for everyone. Switching bank accounts comes under this umbrella and as a result, fintechs can do more. They are pivotal in the switching process as they can provide all the information a customer needs to feel like they are making the correct, informed decision.
Explaining further how fintechs can help, Brian McNutt, VP of product management at Backbase, the engagement banking platform, says: “Banks use a comprehensive onboarding process that delves into each individual’s financial health and goals. This data-driven approach allows them to create dynamic customer profiles, ensuring that recommendations are tailored to unique requirements.
“For instance, if saving money is a top priority for a younger user, the financial institution may suggest a high-yield savings account, while for an older user looking to manage high credit card balances, debt control tools may be recommended.”
Benefits of switching banks
Concerning the findings from finder.com, to help ensure younger generations feel confident changing, banks can offer to role over existing standing orders and direct debits in addition to a variety of other personalised benefits.
Elaborating further on these benefits, Bethany Hickey, a personal finance and banking expert with Finder.com said: “Fintechs aimed at younger generations will have to offer things that they can’t find with their local bank. No-fee bank accounts and $0 annual fee credit cards aren’t enough. To entice anyone to switch banks — which is a huge pain — you’ve really got to make it worth their time and offer features they can’t get anywhere else.
“There are a few fintechs, like Fizz and Cleo, that are really trying to offer unique perks for young people. Such as cashback rewards at places near college campuses, and things like debit-credit cards that build credit safely.”
Breaking down fears
While older generations remain with their banks due to loyalty, if the fears younger generations have can be challenged and resolved, they are likely going to be more open to switching banks. This is supported by research from the Bank Administration Insitute which found more than 60 per cent of Gen Z and Millennials would consider switching banks for better digital capabilities.
They are likely to look for things like financial health tools, easy access to credit and mobile accessibility.
Commenting on what young people are looking for, Eric Hazard, CEO of Vested Ventures, the fintech startup investors, said: “There are three main areas of focus for fintechs to build comfort with consumers in switching banks: a smooth user experience, personalisation, and security.
“User experience is important to ensure banking platforms are intuitive, secure, and operational across all age groups. Different age groups will look for different things from a bank. For older generations, this might mean incorporating more educational resources and customer support to assist with the digital transition. For younger users, a seamless, fast, and mobile-first approach is crucial.
“Which leads to the importance of personalisation. By leveraging data analytics, fintechs can offer customised financial advice, product recommendations, and support, making users feel valued and understood, irrespective of their age.
“Another key consideration is security. Consumers must be assured their sensitive financial data and information will be handled securely by a new institution. Fintechs should invest heavily in advanced encryption and authentication methods to protect user data. Clear communication around these security measures helps in building trust across all age groups.”