Gen Z Doesn’t Hate Financial Institutions. They Just Expect More From Them.

Gen Z isn’t leaving because they distrust financial institutions. They’re leaving because financial institutions aren’t meeting them where they are.

If you’ve sat through a financial services conference in the last five years, you’ve heard some version of the same warning: Gen Z is different. They grew up with smartphones. They don’t value branches. They’ll manage their money through an app built by a tech company and never walk through your door.

Some of that is true. Most of it is oversimplified. And treating it as inevitable is one of the more costly mistakes a community financial institution can make right now.

Gen Z, broadly defined as people born between 1997 and 2012, is now the largest generation in the U.S. workforce. The oldest among them are in their late twenties, building careers, taking on mortgages, starting families, and making the kinds of financial decisions that define decades-long banking relationships. This is not a generation to write off. It is the generation that will shape banking in the not-so-distant future.

What the Data Actually Says

The story that Gen Z is fleeing traditional banking institutions in favor of neobanks and fintech apps is more complicated than the headlines suggest.

A 2024 Morning Consult study found that 63% of Gen Z adults still hold their primary account at a traditional bank or credit union. A Cornerstone Advisors report found that while Gen Z consumers are more likely than older generations to have accounts at multiple institutions, they still look to a primary financial institution. Further, the majority of that group wants that institution to be a bank or credit union, not a fintech.

What they don’t want is a banking experience designed for someone else.

Gen Z grew up in a world where every service they used — streaming, shopping, food delivery — knew who they were, remembered their preferences, and got progressively better at anticipating their needs. They bring those expectations to banking. Not because they’re demanding, but because that’s the baseline their entire consumer experience has set.

When they walk into a branch or open a mobile app and encounter a generic experience that treats them like a new customer every time, they notice. And they remember.

The Relationship Myth

There’s a common assumption inside community banking that relationship-driven service is inherently appealing to younger customers. That is, if you just get them in the door and connect them with a knowledgeable banker, the relationship will take care of itself.

That assumption isn’t wrong. But it skips a step.

Gen Z consumers are not opposed to personal financial relationships. What they’re resistant to is effort that feels one-sided. They’ll invest in a relationship with a financial institution that demonstrates it knows them, listens to them, and adapts to their needs. They’re far less interested in maintaining loyalty to an institution that makes them start from scratch every time they have a question.

According to J.D. Power, satisfaction among Gen Z banking customers is significantly lower than among older generations. They aren’t harder to please, they just have expectations for digital experience and personalized service that are higher, and the gap between those expectations and what most institutions deliver is wider.

What Actually Moves the Needle

Community FIs that are successfully building relationships with younger customers aren’t doing it by adding a mobile app and calling the strategy complete. They’re rethinking the experience across the entire interaction arc.

They’re making it easy to open an account without coming in. They’re following up after account opening with relevant, personalized outreach. They’re giving customers multiple ways to connect, including text, video, and in-person, and letting the customer choose based on what works for them. They’re training their frontline staff to treat a digital inquiry with the same care they’d give a walk-in.

None of this is exotic. It’s just thoughtful. And for a generation that has spent its entire consumer life being ignored by financial services marketing that assumed someone else was the target, thoughtful stands out.

The Competitive Window Is Closing

Community banks and credit unions have a genuine advantage with Gen Z customers that they are in danger of squandering. Fintechs can move faster and design cleaner apps. Large national banks can spend more on marketing, but they cannot replicate the human dimension of community banking. In community banks and credit unions, a customer or member can walk in, talk to someone who knows their name, understands their situation, and actually has the authority to help them.

That advantage is real. But it only matters if the experience around it is good enough to keep younger customers from leaving before they ever see it.

Gen Z doesn’t hate financial institutions. They hate indifference. That’s a problem community FIs are actually equipped to solve, if they decide to.