Three Ways Community Banks Can Respond to Generational Digital Payments Needs

By Tina Giorgio

June 22, 2022

When it comes to payments, the generational divide has been shrinking. While Gen Z and Millennials still lead the way in digital payments adoption, Baby Boomers and Seniors (over 76) are increasing their digital payments prowess. Research from the Federal Reserve recently uncovered that 83 percent of consumers indicate they are using at least one mobile payment app or digital wallet at least occasionally, including 71 percent of those 55 and older.

Emerging Challenges

As customers of all ages gain comfort with digital solutions, they also are finding familiarity with Big Tech providers. Amazon, Google, Microsoft, and even social media providers like Facebook are either exploring or already offering payments services and competing for your customers’ transactions.

While customers place trust in their community banks, because they feel comfortable with Big Tech, a true competitive threat is beginning to take shape. When asked about their banking preferences, 30 percent of Gen Z, 46 percent of Millennials, 38 percent of Gen X, 11 percent of Baby Boomers, and 9 percent of Seniors said they would open an Amazon checking account if offered, according to a Cornerstone Advisors survey of 3,016 consumers.

Capitalizing on the Opportunity

Yet even with this Big Tech influence, community banks hold a strong position due to their longstanding customer relationships. To retain this competitive advantage around digital payments offerings banks should:

  1. Continue enhancing mobile app offerings. The Fed study also revealed that consumers of all ages use their primary financial institution’s mobile app most often. This means you have a captive audience who is turning to you to enable their digital payments. You can deepen engagement and solidify your app’s go-to status by augmenting current offerings. Consider exploring services like person-to-person payments; personalized payments trends reporting for financial insights and other offerings that are aligned with your bank’s strategic direction and customer base.
  2. Seek technology enhancements with fintech partners. According to Cornerstone Advisors, 15 percent of banks plan to pursue partnerships with fintech startups this year (up from only 5 percent in 2021) and another 43 percent are looking to gain more value from tech and vendor relationships. Because fintech collaboration enables community banks to expand their digital offerings in an efficient, cost-effective manner, they are becoming partners in an array of digital payment offerings. Fortunately, ICBA’s ThinkTECH Accelerator provides a way to quickly identify those fintechs catering to community bank needs.
  3. Explore instant payments as a new offering. Now’s the time to solidify your instant payments plan. Research shows that a majority of consumers (nearly 70 percent) expect their banks to offer faster payments. In addition, more than 70 percent of individuals ages 18-34 and 35-54 years-old, and 43 percent of individuals aged 55 and over are looking to move and receive funds instantly, 24x7x365. Adding this new payment type will help support all generations of customers into the future.

As you explore what’s next for your bank’s digital payments strategy, keep in mind the generational digital divide continues to narrow, and customers of all ages are looking for ways to make payments seamlessly, securely, and digitally. ICBA Bancard stands ready as your partner to help prioritize your digital payments journey.

Stay tuned for more information on our upcoming digital transformation roadmap and strategy workbook, and in the meantime, feel free to contact our team with any questions.