To achieve long-term growth, community banks need to focus on attracting millennials and Gen Z, the two fastest‑growing demographics with significant economic influence.
Over the last two decades, a trend of mergers and evolving customer preferences have radically altered the community banking sector in the U.S. While regional banks have expanded by 50% over the past two decades, the number of community banks has halved, declining from nearly 7,500 in 2004 to roughly 4,000 in 2023.
To achieve long-term growth, community banks need to focus on attracting millennials and Gen Z, the two fastest-growing demographics with significant economic influence. Their combined spending power is estimated at $360 billion and will continue to rise as more Gen Zers enter the workforce.
However, community banks face tough competition from digital-first banks that appeal to these younger consumers through convenient mobile access. In 2023, nearly half of all new checking accounts were opened with larger, digital-focused competitors. By leveraging personalization in relationships and focusing on digital innovation, community banks can attract and retain younger customers who increasingly value both digital convenience and personalized service.
Understanding the Challenge
Understanding the challenge of attracting younger consumers to traditional banks requires recognizing their preference for digital-first approaches. Millennials and Gen Zers increasingly gravitate toward digital banking solutions, expecting convenient, seamless interactions and instant access to a variety of financial tools. This trend has led many banks to enhance their mobile banking capabilities, with many now integrating features like credit monitoring and budgeting within their apps.
Banks embracing advanced personalization strategies are seeing positive results. For instance, 77% of institutions personalizing services through data analytics and machine learning have achieved positive customer growth and retention. This approach both spurs customer acquisition among millennials and Gen Zers and also boosts cross-selling, as these customers are more likely to engage with services tailored to their specific financial needs.
Adapting to these consumer preferences is critical for banks aiming to remain competitive. By prioritizing personalized, digital-first experiences, community banks can better capture the attention and loyalty of younger consumers who expect more from their banking interactions than just on-site transactions.
The Importance of Technology
To grow their customer bases in this evolving environment, community banks must prioritize modernizing their branches and using technology to enhance customer service. Digital tools enable banks to offer personalized experiences and relationships at scales not previously possible before.
Advanced tools, like AI and data analytics, can tailor services to individual preferences, making every interaction meaningful. By integrating these technologies, community banks can build personal connections to ensure each customer receives timely, relevant support across all channels — whether online, on mobile or in-branch.
Community Banks and the Omnichannel Experience
An omnichannel experience in banking ensures that customers can interact seamlessly with their bank across multiple platforms, including:
- Mobile apps
- Websites
- Social media
- In-person branches
For younger consumers — particularly millennials and Gen Zers — the omnichannel experience is a baseline expectation. These tech-savvy generations often prefer mobile and digital interactions but still value the option to speak to a live representative when necessary.
The Role of APIs
Behind tech-driven personalization and omnichannel user experiences is a simple but powerful bit of programming technology — application programming interfaces (APIs). APIs work by allowing different software systems to communicate and share data through a set of predefined rules, thereby enabling seamless data exchange and integration between different platforms. Here’s how it works in banking:
- Personalization: APIs enable banks to access and leverage customer data from multiple sources, including mobile apps, CRM systems and external fintech partners. Through APIs, banks can integrate with services like credit scoring, financial advice and spending analysis platforms to create a tailored experience for each customer. For instance, an API could allow a bank’s app to pull transaction data in real time, analyze spending patterns and then offer personalized budgeting advice, or recommend products that correspond with the customer’s financial behavior.
- Efficiency: APIs streamline processes by connecting disparate systems. For example, APIs can automate loan processing by integrating with external credit bureaus and internal risk management systems. This reduces the time required for credit checks and decision-making, as APIs enable data to flow automatically between systems.
- Open Banking and API-Driven Ecosystems: In the practice of open banking, APIs allow third-party developers to build applications that communicate with a bank’s services. For instance, through open APIs, banks can securely share customer account information with approved fintech apps, without actually exposing any sensitive customer data to human users.
Grow Your Bank’s Customer Base with FileInvite
FileInvite helps community banks modernize, stay competitive and meet customer demands, all within a manageable budget. Equipped with tools to attract and retain millennials and Gen Zers, FileInvite enhances satisfaction and simplifies compliance. The following are a few tools that make FileInvite a valuable resource:
- Automated Document Requests: FileInvite saves time by automating document requests and reminders, allowing staff to focus on customer service and relationship building.
- Secure Client Portal: A secure, user-friendly portal lets customers upload and manage documents easily from any device, enhancing their overall experience.
- Compliance and Audit Trails: FileInvite ensures compliance by generating detailed audit trails, simplifying regulatory reviews and helping banks meet industry standards.
- Seamless Integration with APIs: FileInvite’s robust API enables seamless integration with existing banking systems, CRMs and other platforms, streamlining workflows and ensuring secure, efficient data exchange across your organization.