Learn how community banks can expand their reach by targeting Millennials and Gen Z. Focus on digital solutions and personalized experiences for lasting growth.
Over the last two decades, a trend of mergers and evolving customer preferences have radically altered the community banking sector in the U.S. While regional banks have expanded by 50% over the past two decades, the number of community banks has halved, declining from nearly 7500 in 2004 to roughly 4000 in 2023.
To achieve long-term growth, community banks need to focus on attracting Millennials and Gen Z, the two fastest-growing demographics with significant economic influence. Their combined spending power is estimated at $360 billion and will continue to rise as more Gen Zers enter the workforce.
However, community banks face tough competition from digital-first banks that appeal to these younger consumers through convenient mobile access. In 2023, nearly half of all new checking accounts were opened with larger, digital-focused competitors. By leveraging personalization in relationships and focusing on digital innovation, community banks can attract and retain younger customers who increasingly value both digital convenience and personalized service.
Understanding the challenge of attracting younger consumers to traditional banks requires recognizing their preference for digital-first approaches. Millennials and Gen Zers increasingly gravitate toward digital banking solutions, expecting convenient, seamless interactions, and instant access to a variety of financial tools. This trend has led many banks to enhance their mobile banking capabilities, with many now integrating features like credit monitoring and budgeting within their apps. According to recent studies, 69% of younger banking customers now express interest in daily monitoring tools.
Banks embracing advanced personalization strategies are seeing positive results. For instance, 77% of institutions personalizing services through data analytics and machine learning have achieved positive customer growth and retention. This approach both spurs customer acquisition among Millennials and Gen Zers and also boosts cross-selling, as these customers are more likely to engage with services tailored to their specific financial needs.
Adapting to these consumer preferences is critical for banks aiming to remain competitive. By prioritizing personalized, digital-first experiences, community banks can better capture the attention and loyalty of younger consumers who expect more from their banking interactions than just on-site transactions.
To grow their customer bases in this evolving environment, community banks must prioritize modernizing their branches and using technology to enhance customer service. Digital tools enable banks to offer personalized experiences and relationships at scales not previously possible before.
Advanced tools like AI and data analytics can tailor services to individual preferences, making every interaction meaningful. By integrating these technologies, community banks can build personal connections to ensure each customer receives timely, relevant support across all channels, whether online, on mobile, or in-branch.
This kind of technology-driven personalization offers substantial returns. Research indicates that a personalized user experience can yield five to eight times the return on investment (ROI) on marketing spend. This enhanced engagement drives customer loyalty and encourages growth, as satisfied customers are more likely to use additional products and services. For community banks, adopting these innovations allows them to establish a unique value proposition that resonates with younger customer preferences.
An omnichannel experience in banking ensures that customers can interact seamlessly with their bank across multiple platforms, including:
This approach allows customers to start a banking interaction on one platform and continue on another without interruption. For younger consumers — particularly Millennials and Gen Zers — the omnichannel experience is a baseline expectation. These tech-savvy generations often prefer mobile and digital interactions but still value the option to speak to a live representative when necessary.
According to recent findings, 66% of Millennials and Gen Zers want the freedom to choose the channel of interaction with their banks at any moment, without having to continue previous interactions on the same platform. This preference underscores why banks must integrate their services across various channels, allowing customers to switch seamlessly between them.
For these consumers, the appeal lies in the convenience and personalization omnichannel banking offers. Being able to complete transactions or seek assistance through mobile apps, online platforms, or in person allows customers to complete their banking tasks without scheduling their days around them.
Behind tech-driven personalization and omnichannel user experiences is a simple but powerful bit of programming technology — application programming interfaces (APIs). APIs work by allowing different software systems to communicate and share data through a set of predefined rules, thereby enabling seamless data exchange and integration between different platforms. Here’s how it works in banking:
APIs allow banks to access and leverage customer data from various sources, including:
Through APIs, banks can integrate with services like credit scoring, financial advice, and spending analysis platforms to create a tailored experience for each customer. For instance, an API could allow a bank’s app to pull transaction data in real time, analyze spending patterns, and then offer personalized budgeting advice or recommend products that correspond with the customer’s financial behavior.
APIs streamline processes by connecting disparate systems. For example, APIs can automate loan processing by integrating with external credit bureaus and internal risk management systems. This reduces the time required for credit checks and decision-making, as APIs enable data to flow automatically between systems. APIs also facilitate faster, more secure transactions by enabling direct connections with payment networks, minimizing processing times compared to traditional batch processing methods.
In the practice of open banking, APIs allow third-party developers to build applications to communicate with a bank’s services. For instance, through open APIs, banks can securely share customer account information with approved fintech apps, without actually exposing any sensitive customer data to human users. This allows customers to manage multiple financial products from a single platform. Interoperability in this context supports features like instant transfers and cross-platform notifications, enhancing the overall customer experience by integrating diverse banking services into a cohesive ecosystem.
Community banks face significant challenges in balancing the need for innovation with the realities of change management. Rapid technological advancements can be risky investments, especially for institutions with limited resources compared to larger banks. Indeed, 84% of digital transformation initiatives fail to meet their target outcomes.
To address these challenges, community banks must develop realistic strategies and choose the right technology partners to meet their unique needs. The document collection platform FileInvite provides several critical features for achieving up-to-date technological capabilities on a community bank budget.
FileInvite automates the process of requesting documents from customers. Community banks can save time by automatically sending out requests and reminders, reducing manual follow-ups, and enabling staff to focus on customer service and building relationships.
FileInvite offers a secure client portal where customers can easily upload and manage their documents. This portal enhances the customer experience by providing a straightforward and secure way to share sensitive information from any device.
FileInvite helps community banks maintain compliance by generating detailed audit trails. These trails record every interaction, providing banks with the documentation needed for regulatory reviews and audits, ensuring they meet industry standards.
The kind of ongoing digital transformation outlined here as a strategy for growth can be daunting for smaller, community-based organizations already behind the curve. FileInvite offers an unrivaled single-point solution for these challenges in an intuitive and efficient interface.
To learn more and receive a personalized demo, contact FileInvite today.
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