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The digital age has infiltrated every part of day-to-day life, from smartfridges in the morning that track our eating habits, to smartwatches that track sleep cycles at night, and these devices are without a doubt used more by Gen Z than any other generation.

In recent years, there has been a push to incorporate digitalisation in payments, which has become more and more visible, with the increasing number of fintechs competing against traditional banks.

Thomas Byrne, Head of Product EMEA at nCino, spoke to Payment Expert about what traditional banks can do to up their digital game to prepare and accommodate for Gen Z customers. 

Byrne explained that companies in all walks of life have started to push towards “gamification experiences”, such as confetti displaying after a purchase is made online, to symbolise hitting a target.

He revealed: “I think banks have not traditionally been good at that type of stuff that sort of wants to engage people and makes them happy to be on the platform and keeps them their time intensive.”

This ability to stimulate users when using services, is one of the main driving forces behind the success of fintechs such as Revolut. However, if this change can be made, traditional banks have a wealth of data to use to their advantage, which Byrne believes is an aspect traditional banks take for granted.

“I think banks sit on a tremendous amount of data. If you think about the home buying journey, for example, typically, when you’re going for a mortgage, you’re also needing home insurance. And banks have tended to treat these services as a standalone island without integrations into these types of things.”

This is a concept that companies such as RyanAir have mastered. Byrne explained: “if you’re buying a flight, they try to sell you everything in the world that is connected to try and help you out.” This idea is centred around customer experience.

Taking you back to the examples above, fridges and watches each have one main responsibility, to keep food cool and to tell the time. However, companies have branched off from single responsibilities to improve the customer experience, and this is what traditional banks must do in order to maintain customer retention and ultimately loyalty.

This evolution isn’t easy, Byrne said: “Most people, if they have worked, especially at some of the high street banks, the main thing that they’ll tell you about  is the legacy architecture that they have.”

It is this ‘legacy’ architecture that runs critical functions, which makes it difficult to integrate new modern technology. A “main pain-point”, that nCino knows too well, as a software fintech, with around 1,800 customers, all of which are financial institutions.

But not all payment firms are in the same boat, modern fintechs that have burst onto the scene in the past decade are firing on all cylinders and are truly standing out from their traditional counterparts, offering fresh and exciting services.

“Your Starlings and Monzos are doing it really well, not being hampered by that legacy technology gives them such a big head start. They don’t have the scale and the customer base, but their digital experiences are starting from a blank sheet of paper, allowing them to do some really exciting things,” added Byrne.

So what are these modern firms doing to attract younger uses?

Byrne said: “They (fintechs) have a big emphasis on travel, which tends to appeal to the younger generation. But it’s also the user experience, the ease that it takes to sign up with a Monzo, for example. You can do pretty much everything on your phone without ever having to go into a branch”.

It is understanding the trends that appeal to Gen Z and applying them to services not just ‘repeating your brand’, as Byrne said. But hope is not lost for traditional banks, with Byrne elaborating on a strategic move that can earn the trust back with younger demographics.

He shared: “Banks can actually try and create Greenfield versions of their business, that sort of the new technology stack that allows them to get to not just the younger generation, but to get to people digitally to give them a fighting chance against these new entrants to the market.”

When discussing how banks are going to win the fight against fintechs for Gen Z’s attention, it is easy to forget the older generation, who recently seem to be an afterthought in the payments landscape, with more and more branches closing down.

There is also the risk that if traditional banks focus too much on attracting younger customers, they could alienate their older demographic.

Byrne said: “We have a responsibility to make sure that these types of new services are still available in branches via more traditional methods of banking.

“It wouldn’t surprise me if you start to see banks start to come out and deliberately profile the over 65s and try to appeal to that niche, with certain products and services in the way that they go to market.”

“A risk that grows ever larger, as the trends in services between the older generation become more and more different.

One of these trends is crypto, an investment opportunity that traditional banks have distanced themselves from, as Byrne added, “We have traditionally associated investment opportunities as going into stocks and shares.”

However, traditional banks could work alongside firms to break into investment opportunities for the younger generation, which Byrne described as an “untapped market”.

This also connects back to the user experience. If banks could digitally create a hub that connects every slice of a person’s financial life together they would become the smartwatch or smart fridge that people desperately need, which is an idea that the Bank of America has just executed.

“I think we’re going to start to see the blending of not just banking on one side and investing in another, but more personal financial management,” Byrne added. 

“Not sort of siloed by traditional banking products and traditional banking departments, but blended into one experience to understand a person’s financial picture to see what options there are.”

In closing, Byrne concluded: “Most banks in the UK have got themselves to a level of digital maturity now, where every bank is able to deliver you a digital experience and every bank is able to structure that data. 

“So, I think over the next three years, the winners are going to be the ones that can harness that data the best and naturally the ones that can create the best experiences through digital interfaces. These are going to be the banks that win and disproportionately win with Gen Z as a result.”