Preparing for Generation Alpha: How to Design Banking Experiences that Will Last a Century

When it comes to the future of banking, who decides where the future will lead?

If you answered the banks themselves, you might want to think again.

Following in the footsteps of Millenials and Gen Z, Generation Alpha is the newest generation that is carrying on the digital legacy of the two generations before it. Like these previous generations, Gen Alpha is focused on digital-native experiences that not only embrace technical innovation but can employ that innovation in increasingly meaningful and embedded ways.

Keeping up with the changing expectations of new generations is the key for your bank to build banking experiences that are evergreen. To meet the needs of Gen Alpha, it is vital to consider how this generation approaches financial technology and what financial priorities they possess.

Who is Generation Alpha?

Generation Alpha (or Gen Alpha for short) is the generation of people born in the early 2010s.

For several years now, the banking industry has been grappling with the expectations of Gen Z, the generation that directly precedes Gen Alpha. Gen Z presented the banking industry with many key challenges, with one of the most prominent being a greater expectation for digital banking solutions.

In many ways, Gen Z represented the initial shift to this digital-first approach to banking.

Born between the years 1997 to 2012, the older half of Gen Z are entering their adult lives and careers, making them an even more important demographic for banks to focus on.

Yet, just as banks began addressing the needs of Gen Z before they reached adulthood, so must they address the needs of Gen Alpha. In the coming years, we are likely to see companies that currently focus on building resilient digital infrastructures attract the newer generations with greater ease.

Gen Z & Millennials: The Financial Outlook of the Young Adult Generations

Comparing Gen Alpha to Gen Z and Millenials (early 1980s to late 1990s) can provide banks with helpful insights into what they can expect from these younger generations.

In the Deloitte Global 2022 Gen Z and Millenial Survey, the top concerns of both Gen Z and Millenials were evaluated. For both generations, the overall cost of living was the number one concern, with 29% of Gen Z and 36% of Millenials expressing anxiety over today’s cost of living.

From a financial standpoint, the survey reveals several key findings:

Do not feel financially secure

• 30% of Gen Z
• 29% of Millenials

Are not confident they will retire with financial comfort

• 26% of Gen Z
• 31% of Millenials

Live paycheck to paycheck and worry about their ability to pay for their expense

• 46% of Gen Z
• 47%of Millenials

The Deloitte report further states:

What this research ultimately reveals is the top concerns among the younger generations do not revolve around technological advancements but rather around personal financial security.

This is not to say that the younger generations are not expectant of advanced technologies — instead, it suggests that these generations already anticipate tech-based solutions to play a role in financial activities.

Moreover, banks need to consider the fact that Gen Z and Millenials are the generations that will be parenting and raising Gen Alpha — meaning the expectations of these parent generations will undoubtedly impact Gen Alpha’s banking behaviors and how those behaviors evolve.

The 3 Key Banking Expectations of Gen Alpha

While Gen Alpha is still in childhood, banks must start planning for this new customer pool now.

Based on current trends and insights — and keeping the current behaviors of Millenials and Gen Z in mind — we can predict three key factors that will greatly impact Gen Alpha’s banking expectations:

1. Banking Apps for Kids & Teens

As we touched upon briefly, Gen Alpha are the children of Gen Z and Millenials.

While Millenials witnessed the dawn of the digital era, Gen Z is widely considered to be the first truly digital-native generation. Both generations have shown a renewed interest in being more involved in the management of their finances — a behavior that these generations are sure to teach to Gen Alpha.

According to an Insider Intelligence report from September 2022, Millennial parents are “looking for ways to introduce financial and banking concepts to their children.” The report further highlights that banking apps designed for kids and teens are becoming the “main facilitators of this rite of passage.”

Key features of such apps often include:

• Parental controls (oversight, security, fund deposits, fund withdrawals, etc.).
• Educational finance tools (budgeting, planning a savings account, etc.).
• Gamification (for example, some apps have a built-in feature that allows parents to set tasks and goals that enable their child to earn money after completion).

This development is new in the banking space and not many financial institutions currently offer banking apps for kids and teens. However, the reality is that Millenials and Gen Z are seeking ways to get their children involved in finance from a younger age.

As a result, the banks and institutions that recognize this fact and begin developing kid-friendly banking apps now will give themselves a significant advantage over institutions that are waiting for the demand for such products to rise before beginning product development.

2. ESG (Environmental, Social, and Governance)

ESG (environment, social, governance) has been a hot topic of discussion in banking for quite some time.

While ESG concerns amongst banking executives largely center around compliance, it is also crucial to consider how the factors of environmental conservation, social issues, and governance impact the decisions and behaviors of customers as well.

In general, environmental concerns are a growing factor impacting the behaviors of all consumers, regardless of generation. For example, Deloitte reports that 40% of adults in the UK choose brands based on if a brand has environmentally friendly practices and values. A further 34% of UK adults stopped purchasing from brands entirely due to ethical or sustainability-related concerns.

Despite these environmental and ethical concerns sprouting across entire customer pools, the younger generations are undoubtedly leading to march forward toward meaningful change.

This is incredibly important to consider, as Gen Alpha will have the ability to learn about environmental and social issues with greater speed and a much larger volume of information and research than any other generation before them.

By the time Gen Alpha reaches adulthood, this generation will have nearly unlimited access to information and research about environmental and social issues. This is something banks and institutions must be highly aware of, as it can greatly impact both the profitability and reputation of their businesses.

3. Financial Literacy & Alternative Finance

Millennials and Gen Z have shown significant interest in improving their financial literacy — a priority that is sure to influence how these generations teach Gen Alpha about personal finance.

Recent survey data reveals that 93% of Gen Z and Gen Alpha teenagers believe that financial literacy is crucial for achieving life goals. A further 67% of these teens rank finances as a major topic of conversation with their parents in 2023.

As members of Gen Alpha become more familiar with financial literacy and begin developing their own financial portfolios, they are also highly likely to embrace alternative finance methods at a higher rate than the generations that came before them.

One great example of this can be seen in the video game industry, where game companies are capitalizing on the fact that younger generations without traditional bank accounts are spending money in-game. Since these younger generations cannot typically utilize standard payment methods like credit cards, many companies are beginning to offer alternatives like PayPal, Apple Pay, and even cryptocurrency.

This early exposure to alternative payment methods will have a tremendous impact on what payment methods Gen Alpha prefers as they move into adulthood, reiterating the need for financial institutions to offer both the alternative payment products these customers demand and to provide the proper educational resources that help the younger generations gain a better understanding of their financial decisions.

Final Thoughts: How Can Your Bank Prepare for the Rise of Gen Alpha?

As a financial provider, your business must have a clear strategy in place for designing banking experiences that can continuously impress and satisfy new generations of customers

Unlike the generations before them, Gen Alpha is not likely to be impressed by innovative technologies alone. Instead, your banking team must devise a plan to not only implement new technologies but also leverage those technologies in a way that is constantly providing value to customers.

At Exadel, we believe that meeting the challenge of Gen Alpha’s digital-native expectations comes down to finding the right strategic resourcing and technical support.

Along with helping to bring your bank’s digital transformation up to speed with competitors, our team at Exadel can also provide you with the resources and support needed for ongoing innovation.

From enabling your business to embrace open banking to assisting with the maintenance of key compliance requirements, a partnership with Exadel gives your bank the advantage it needs to stay ahead of modern finance and the digital change that comes with it.

Learn how Exadel can help you build better banking experiences today by contacting our team.