What are the opportunities for banks and lenders within the “all generations” space?

Only 25 years ago, people lined up in physical banks, wrote checks, and were kept waiting during slow manual bank processes. Within the last five years, loan originations have transitioned from pages of paperwork to digital, real-time applications and approvals. With technology changing so quickly, it’s understandable why banks often feel like they're playing a never-ending game of catchup with competing fintech offerings and new customer expectations.

Retaining customers and winning over new ones now requires leveraging data and diversifying products to cater to shifting customer preferences. American Banker’s 2024 research revealed that consumers are actively seeking and utilizing innovative payment and investment options, demonstrating their preference for varied ways to manage their finances. 

As banks strive to remain relevant and respond to evolving tastes, customers explore alternative external options. Over a quarter of customers have ventured beyond their banks to use newer payment offerings, such as BNPL services, from fintech leaders. This disconnect creates a fragmented financial journey for customers and a loss of customer ownership and loan revenues for banks.

Financial institutions must keep their eyes on the ball and proactively and agilely accommodate shifts in customer preferences in order to attract new customers as well as retain existing bank customers.

Personalizing banking experiences for every generation

Each generation interacts differently with its bank — from Gen Z preferring mobile-first banking and millennials valuing digital convenience to Gen X appreciating a variety of hybrid options and boomers relying more on traditional banking, but increasingly adopting digital tools. 

Many studies have shown Gen Z's influence on the financial industry, such as the rise in popularity of services like BNPL. However, it’s not only the younger generation that wants offerings tailored to their needs, habits, and preferences. The Q2-Harris Poll Report found that 74% of consumers across all generations want more personalized experiences from their financial institutions. 

The preference for personalized, real-time, digitized experiences has gradually integrated into every aspect of customers’ lives — from social media algorithms feeding users personalized suggestions to Netflix and Spotify analyzing customer behavior to build curated libraries for its users’ every mood. Customers expect these individualized experiences in banks’ offerings now, too. They want tailored investment recommendations, pre-approved loan offers with personalized interest rates and terms, and exclusive offers that are relevant to them.

To cater to every generation and provide personalized products and offerings, banks must leverage the power of AI, machine learning, and data-driven analytics. These tools enable hyper-personalized banking experiences by predicting customer needs and tailoring offerings accordingly. 

For example, AI can detect unusual spending habits and alert banks and customers in real time to suspicious activity, providing a much-needed layer of security for all generations, particularly with online banking fraud rising. AI-powered chatbots can also offer personalized financial advice, helping younger customers build credit or assisting older users with retirement planning.

While attitudes to technology may differ, one thing that banks must keep consistent is delivering a seamless and personalized experience across all touchpoints — whether digital, mobile, or in-branch — ensuring all generations can access personalized products.

Fulfill the demand for real-time, contextual experiences across all channels

Not only do customers now expect personalized financial offerings, they expect them to be embedded within the context of their lives. This is known as embedded lending or ‘contextual finance.’ Banks must bear in mind that a loan is a means to an end — a customer’s primary goal isn’t accessing a loan but rather to use it to pay for a medical procedure, buy a kitchen, or complete an educational course.

To meet customers at their exact time and place of need, banks need to diversify into new customer acquisition channels. In 2022, only 10% of customers considered the branch the most important access point to their bank. This is likely due to much of the younger generation expecting everything to be brought within their realm of existence; they tend not to venture into bank branches and favor embedded experiences. In fact, the rise of embedded finance means customers no longer even need to access their bank’s website for certain services, such as loans. For instance, customers buying equipment from an online store can pay using a financing option embedded in the checkout, and small businesses in need of finance can access it at their place of need. 

According to American Banker’s 2024 research, the surge in BNPL program usage continues to mount, climbing from 49% in 2022 to 58% in 2024. Furthermore, there’s a clear rise in preference for digital payment methods, with four in 10 bank customers using a mobile wallet at least a few times monthly, up from 38% in 2023 and 30% in 2022. In addition, digital cards, peer-to-peer payment accounts, and payments via text, QR code, or social media apps all demonstrate usage uptakes.

Again, banks must ensure they are offering contextual experiences to all generations. Financial institutions can provide hybrid experiences — such as in-app scheduling for in-branch consultations — for baby boomers or those who still prefer physical banking. To cater to the middle-to-younger generations, banks need to bring their products and services out of the four walls of the branch and embed them into their lives. 

Balancing technology enhancements with core strengths

While reaching all generations may seem like a tall order, banks are uniquely positioned to make this ideal a reality. Combining their traditional strengths — trust, regulatory adherence, financial expertise, and ability to assess creditworthiness and risk — with innovative technology, they can strengthen their position in the increasingly competitive financial space, as well as grow their customer acquisition and loan revenue streams.

What many banks are missing is the ability and agility to reach customers where they are in real time, leverage customer data, and create personalized credit offerings. APIs offer a crucial bridge, enabling banks to wrap legacy cores with an "innovation layer" and leverage real-time capabilities. API-driven technology can enable them to create a unified ecosystem of in-house capabilities and third-party services. 

However, a recent McKinsey survey found that some banks are still struggling to implement this much-needed tech. One IT head noted, “Some organizations continue to not understand what APIs are and how the business can benefit from them.” It’s clear that the key lies in combining core strengths and legacy systems with API-driven technology components, shortening a bank’s path to innovation, success, and the ability to service all generations. 

Accessing lending opportunities in the all-generation space demands real-time access to customers and their data to respond quickly to shifting customer preferences. It will take strategic partnerships to effectively, efficiently, and timeously diversify product offerings, prioritize financial accessibility, and accelerate modernization efforts. By navigating and meeting the needs of their customers strategically and responsibly, banks can position themselves as trusted, flexible, forward-thinking lenders for the customers of today and tomorrow.