The Future of Banking is Personal
New research from Q2 reveals surprising similarities in banking preferences across generations while highlighting opportunities for financial institutions to create more personalized experiences. By leveraging data and emerging technologies, banks and credit unions can build deeper relationships with customers of all ages.
By Jim Marous, Co-Publisher of The Financial Brand, CEO of the Digital Banking Report, and host of the Banking Transformed podcast
While much attention has been paid to the unique preferences of younger consumers like Gen Z, Q2’s research, conducted in partnership with Harris Poll, found more similarities than differences across age groups regarding banking. A few key findings:
- 74% of consumers across all generations want more personalized experiences from their financial institutions.
- 66% are comfortable with their bank or credit union using their data to provide personalized experiences.
- 70% are okay with using AI for fraud detection.
- 48% log into their mobile banking app or website daily.
As Jaime Dominguez, Principal Product Manager at Q2, noted in an interview for the Banking Transformed podcast, "One of the things that this report highlighted is the fact that everybody – not just Gen Zs, but every generation is looking for personalized experiences."
This desire for personalization spans both digital and in-person channels. While digital banking adoption has accelerated, the report found that many consumers still value face-to-face interactions for certain activities. For example, 65% of Gen Z respondents said they prefer to open a new account in person, compared to 58% for older generations.
Dominguez suggests this preference may stem from the complex terminology and decisions in opening a first account. "Opening the account through a financial institution is difficult for many. Number one, we still use terminologies people do not understand, especially the Gen Z segment."
He adds that many young consumers bring their parents when opening their first accounts because "they didn’t understand it." This highlights an opportunity for banks to simplify the account opening process and provide more guidance, whether in person or digitally.
Listen to the interview of Q2’s Jaime Dominguez:
Trust Remains High, But Expectations Are Evolving
The Q2 research found that consumers across generations have a high level of trust in their primary financial institution. This creates an opportunity for banks and credit unions to deepen relationships – if they can meet evolving customer expectations.
According to Dominguez, "Almost everyone believes in their financial institution. But I don’t think we’re taking that trust to the next level. What we need to do is to get to know the customer on a personal level."
He argues that financial institutions need to leverage data and technology to create more personalized, meaningful engagements with customers, especially in digital channels where most interactions now occur. "We’ve got to take trust and begin to deliver on a much tighter engagement and a much more personalized engagement with the account holders that I have," says Dominguez.
The research shows that consumers are open to their banks using data and AI to improve their experiences. But financial institutions aren’t yet fully capitalizing on this opportunity. For instance, only 22% of consumers felt their bank regularly anticipated their needs.
Dig Deeper: How Data and AI is Transforming the Future of Banking
Trust Remains High, But Expectations Are Evolving
Financial institutions need to use their data more effectively to deliver the personalized experiences consumers want. Dominguez sees this as a great opportunity for banks. "The biggest opportunity boils down to using data the right way. We have the data, but the industry is not utilizing it in the ways that they need to create better experiences."
He outlines critical ways banks can leverage data and technology:
- Create customer segments and personas based on transaction data, demographics, life stage, etc.
- Use these segments to deliver personalized content, product recommendations, and financial guidance through digital channels.
- Ask customers simple questions during mobile/online banking sessions to gather more insights and refine personalization.
- Utilize AI for fraud detection and process automation and to surface relevant insights for customers and employees.
- Simplify complex processes like account opening using data to pre-fill forms and provide tailored guidance.
Dominguez gives an example of how Q2 is helping banks improve digital onboarding. "One of the things we incorporated as part of our Q2 Engage solution suite is something called ‘Getting-Started’, where the moment that the customer opens the account, the Getting-Started component pops up and lists all the different things that they need to do to create a tighter engagement."
This guided experience can help banks establish stronger relationships from day one, especially with younger customers who may be new to banking.
The Generational Wealth Transfer Opportunity
While younger consumers, like Gen Z, may not have significant assets today, Q2’s research highlights a massive wealth transfer on the horizon. An estimated $72 trillion in assets will be passed down to younger generations in the next 20 years.
This creates urgency for banks to establish strong relationships with younger customers now. Dominguez outlines three key strategies:
- Make banking as frictionless as possible: "Because you want them to be able to do business with you."
- Offer small business banking capabilities: "Gen Zs and millennials as well have been not just large generations, but the most entrepreneurial. Offer them the things they need to be able to run what they need based on where they are at that moment."
- Use data to personalize: "Use data, but use it in a way that makes it easy for the financial institution to personalize experiences and engage with them where it matters to them the most."
By focusing on these areas, banks can position themselves to retain assets as they are passed down and grow relationships over time.
Learn More: 3 Keys to Better Personalization of Banking Services
The Role of AI in Enhancing Banking Experiences
Artificial intelligence is set to play an increasingly important role in helping banks deliver personalized experiences at scale. While consumers are most comfortable with AI for fraud detection today, Dominguez sees its potential expanding. "I think there’s going to be so many ways that AI will ultimately assist across the organization."
"For example, call centers utilizing AI can begin to analyze information about different calls to help the financial institution’s back-office answer questions correctly."
He also points to AI’s potential to streamline internal processes, allowing employees to focus more on building relationships and providing personalized service.
As AI capabilities evolve, banks must consider implementing the technology to enhance rather than replace human interactions. The goal should be to use AI to surface insights and automate routine tasks so employees can have more meaningful customer conversations.
Read More:
- Increased Digital Banking Interactions Require Greater Personalization
- Now is the Time for Intelligent Digital Banking Experiences
- Digital Transformation Requires More Than Technology Upgrades
Balancing Digital and Human Touch
While digital banking adoption continues accelerating, Q2’s research shows that many consumers still value human interactions for certain activities. This is especially true for more complex transactions or consultative services.
The key for banks is finding the right balance between digital convenience and the human touch. Dominguez suggests using data to determine when and how to inject human interactions into primarily digital journeys.
"We have to be able to start putting content in front of the customer that makes sense based on where they are at a specific moment in time. For example, when they log into their financial institution, they want to see the same thing their son sees when he logs into the financial institution. The key is to tailor digital experiences and proactively offer human assistance at the right moments, allowing banks to create more engaging and valuable customer journeys."
Looking Ahead: Keys to Success
As banking continues to evolve, financial institutions that can deliver highly personalized experiences across channels will be best positioned for success. Based on Q2’s research and Dominguez’s insights, here are a few key focus areas:
- Leverage data to truly understand customers and anticipate their needs.
- Simplify complex processes and terminology, especially for younger consumers.
- Find the right balance of digital convenience and human touch.
- Use AI to enhance rather than replace human interactions.
- Offer small business capabilities to serve entrepreneurial younger generations.
- Create seamless omnichannel experiences that allow customers to bank how and when they want.
By focusing on these areas, banks and credit unions can build deeper, more valuable relationships with customers of all ages. Dominguez concludes: "The key is for a financial institution to create primacy. I must take the trust already in place and deliver a much tighter and more personalized engagement with my account holders."
Financial institutions that rise to this challenge will be well-positioned to grow and retain relationships through the massive generational wealth transfer on the horizon and beyond.
Justin Estes is an award-winning writer, strategist, and financial marketing expert with expertise in banking, investments, and fintech. His clients include the NYSE, Franklin Templeton, Credit Karma, Citi and, UBS, and his work has appeared in Forbes, Barrons and ThinkAdvisor as well as The Financial Brand.
For a longer version of this conversation, listen to "Desire for Data-Driven Personalization Unites Demographic Segments", a podcast with Jim Marous, available here. This Q&A has been edited and condensed for clarity.
