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Why teenagers are dictating your banking habits

MainStreet logo MainStreet 10/16/2015 Brian O'Connell

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The conventional wisdom says that technology, especially mobile services and secure debit cards, are driving younger Americans' financial habits.

In reality, it may be the other way around, as Generation Z's high-volume use of both technologies is changing the way all consumers use digital tools to handle their banking needs.

As TD Bank puts it in a brand new report on bank checking trends, "mobile banking and debit cards may play an increasingly significant role in our lives, if Generation Z has anything to say about it."

In the study, entitled the TD Bank Checking Experience Index, 74% of young (and we mean 'young") consumers aged 17 to 20 surveyed say their debit card was "essential" to their financial habits, compared to 56% of adults. Similarly, 41% in the same age group say their bank's mobile apps were essential, compared to 22% of other consumers.

Despite the age gap, younger financial consumers and older ones may have more in common than you think. Jared Franklin, a 28-year-old financial credit product manager at Blispay.com, has spent most of his young career working on credit products, including time spent at companies like Bill Me Later and PayPal. "I spend a lot of time thinking about and talking to people of various age groups about how they interact with their banking products," Franklin says. "My general consensus is that most people across a wide range of age groups actually have similar desires; they just don't realize it."

Consumers on the older end of that spectrum are used to the status quo, so they don't quite realize they actually prefer what banking tools younger generations are using.

"They're used to handling things face to face in a bank, or having to pick up the phone and dial a customer service number to get anything accomplished," Franklin adds. "But watch them use Facebook. They get hooked to the speed at which information is shared. Watch them get their first iPhone and learn how to interact with apps for email, texts, and the news. They get hooked on having everything available at all times at their finger tips very quickly."

"So, when it comes to banking, the same desires exist across all age groups," Franklin adds. "The older generations just don't quite realize it until they try it."

There's more common ground on banking needs among consumers of all ages, as younger banking customers want many of the same services older consumers want. "Generation Z consumers want a bank where any transaction or request can be performed via phone, and they want to speak to a bank employee by clicking on a button," notes Harrine Freeman, founder of H.E. Freeman Enterprises, in Bethesda, Md. "They also want personalized services for customers versus being treated like just another customer."

Speed matters, too, especially to younger banking consumers. "They want faster processing times and less steps to perform transactions such as transferring money," Freeman adds. "The quicker the better - Generation Z wants to do everything from a snapshot or click of a button."

That drive for expediency is the way that younger banking consumers are forcing the industry to change - and bringing new players into the market to force banks to change.

"Generation Z is more willing to trust new, innovative banking apps that seamlessly integrate their financial life into their personal life, which is obviously played out almost entirely on smartphones these days," says Mandi Woodruff, Yahoo.com finance correspondent. "This is a generation that is least likely to be saving and it's interesting to see how startups are trying to change that. Look at apps like Qapital which turn saving into a mobile-centric game - users can trigger their accounts to save money every time they use a certain hashtag or post something on Facebook. Or Acorns, which makes investing approachable to young people and accessible -- you don't need thousands of dollars to start an account."

In driving industry change, Gen Z consumers are leaving some of the old-school banking habits aside, and that may not be a good thing. "The idea of diligently putting away a little money each week in a basic bank account seems unsexy to young people, especially since they have such a hard time denying their need for the instant gratification of things," Woodruff adds.

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