Young people born between 1997 and 2012—often known as Gen Z—are rapidly moving toward digital- only and fintech banks, leaving many traditional retail banks struggling to keep up. High fees, outdated apps and slow service are pushing this generation away from old-school banking and toward smarter, more flexible digital options.
The banking landscape is shifting rapidly, driven largely by Generation Z. Raised on smartphones and instant access, this group switches banks quickly when experiences feel slow, expensive, or outdated, leaving traditional retail banks struggling to retain their loyalty.
Why Generation Z is different
Gen Z expects mobile-first banking, low or transparent fees and fast, frictionless service. Many legacy banks, still built for older generations, rely on branch visits, paperwork and slow processes, creating frustration for younger customers.
High fees and frustration push Gen Z away
High fees and cumbersome processes push Gen Z toward alternatives. Hidden costs, overdraft penalties, and slow account openings frustrate users, while apps that crash or lag add further friction.
What fintech and neo banks offer
Fintech and so-called neo banks have built exactly what Gen Z likes: simple, clean apps built for smartphones and instant account opening. It offers features like budgeting tools and savings spaces, drawing Gen Z customers away from traditional banks.
Fintechs are capturing Gen Z by offering speed, transparency and digital- first features
Figure 1. Traditional banks versus fintech for Gen
| Feature | Traditional Retail Banks | Fintech / Neo-Banks |
|---|---|---|
| Monthly fees | Often have monthly/maintenance fees | Often zero or very low fees |
| Account opening | Paperwork + branch visit | Fully online, minutes |
| Mobile experience | Often lagging behind | Designed for mobile first |
| Service speed | Can be slow, needs a branch visit | Instant or near-instant |
| Features and tools | Basic banking services | Extras: budgeting, spending insights, savings “pots” |
| Switching cost | High friction to change banks | Often easy, digital switch |
| Alignment with values | Not always obvious | Often pitched as ethical, sustainable and transparent |
Source: BankQuality
Implications for everyday households, small businesses and investors
Gen Z households expect banking to be fast, intuitive, and app-like. Workers relying on banks for salary accounts or savings prefer modern, mobile-first tools, including digital payroll and budgeting features.
Small business owners increasingly depend on seamless payments and loan services, shifting to fintech solutions if traditional banks remain outdated or costly. For investors, Gen Z’s migration away from legacy banks signals potential business risk.
How traditional banks can win back Gen Z
To remain relevant, traditional banks must offer instant, mobile-first onboarding, reduce or eliminate unnecessary fees, and maintain transparency and competitiveness. Retail banks are at a crossroads: without digital, value-driven services, Gen Z loyalty will continue to decline, while fintech and neo-banks attract this generation with seamless, modern experiences. Want to stay informed about how banks are changing and how you can pick the right financial partner? Visit BankQuality now.