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The Real Meaning of ‘PFI’ to Gen Z and Millennials

August 19, 2021
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By Lynne Cornelison and Karen Kislin

Gen Z and millennials are becoming more detached from the notion that their primary financial institution (PFI) is simply where their most active checking account resides. Understanding the factors these generations use in selecting a PFI will enable financial institutions to deepen relationships and loyalty with these younger consumers.

Measuring PFI designation among customers or members continues to be a significant key performance indicator (KPI) for many financial institutions, as it leads to deepening consumer relationships with additional products and services. Raddon research has seen huge shifts in consumer PFI designation migrating to major banks in the past couple of years, especially among millennials and Gen Z.

For community-based financial institutions to regain lost PFI ground, they must grasp that the traditional definition of PFI is significantly different from how millennials and Gen Z view it. Undergoing this paradigm shift will enable organizations to better position critical digital channels and deliver services better aligned with younger consumer expectations.

What’s in a Name?

The latest Raddon research on Gen Z (surveying only those 18 years and older) and millennials, Why Are Millennials and Gen Z Gravitating to the Big Banks?, asked consumers to describe their PFI. As shown in Figure 1, 39 percent of consumers said their PFI is where they have their most used checking account. That percentage has continued to drop over the past few years. In 2020, 47 percent of millennials said their PFI was where they had their most used checking account. In 2015, 77 percent said the same.

The second most cited description of a PFI is where Gen Z and millennials have their most used debit account (36 percent), and in third position is where they have their most used mobile app (33 percent). This suggests the definition of PFI is more aligned with engagement of cash flow and digital service channels.

As checking continues to decline as a leading indicator for PFI status, financial institutions need to reconsider how they name their product and service offerings. Relevant naming conventions will be top of mind for consumers when they want to satisfy their financial needs, particularly for younger consumers who may never have written a paper check. Naming your product something that aligns with how consumers describe their accounts will ultimately be more attractive and keep your organization in the forefront, especially as we see a greater emphasis on digital channels and debit card usage.

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Delivery Segmentation

As the research suggests that the paradigm of PFI status is more closely aligned with digital engagement, we developed four distinct delivery segments among younger consumers based on the number of digital, in-person or virtual transactions younger consumers conducted on average in each month.

  • Low usage is defined by one to two transactions per month for in-person, virtual and ATM, and one to four transactions per month for online and mobile
  • High usage is defined as three or more times per month for in-person, virtual and ATM, and five or more times per month for online and mobile

Based on the percentages shown in Figure 2, the Raddon data shows the majority of Gen Z and millennial accountholders are in the upper right quadrant, (Digital Preferred – high ATM, online or mobile usage), and they have shown significant growth over the past year (an increase from 27 to 36 percent).

We continue to see digital usage growing, but the data also supports the continued need for consumers heading into a branch to speak to someone about their financial needs or concerns (13 percent of Gen Z and millennials).

This duality of digital and in-person financial behavior continues to impress upon the financial institution that the accountholder experience is crucial in determining their PFI. Whether it’s the ease of use from online or mobile banking, or the available advisory services consumers can obtain in a branch, the experience they receive will be one of the most important drivers for younger consumers when determining their PFI and who they turn to for their financial needs.

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As seen below in Figure 3, while Gen Z and millennials generally have the same delivery preferences, differences do exist. Gen Z have a stronger preference for face-to-face (17 percent versus 12 percent) than their older counterpart, whereas millennials are more likely to favor a mixed preference approach (24 percent versus 20 percent) when using their financial institution. These differences reinforce the importance of consistency among channels. For example, when a consumer engages with their PFI through a digital channel and then pivots to in-person, the transition should be smooth. The consumer’s experience should flow as seamlessly as they can move between channels.

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Ease of Use

The ease of doing business with your financial institution continues to rise to the top of the list as one of the most important factors, particularly with younger consumers. Figure 4 below looks at the percentage of Gen Z and millennial mobile bankers who say a particular feature is extremely important in selecting a mobile banking app. Regardless of what financial institution they currently identify as their PFI, younger consumers feel strongest about the ease of using their mobile app. One of the top descriptors of a PFI for younger consumers is where they use mobile banking most frequently. Financial institutions should design their mobile apps to be as easy to use as possible to drive usage and increase their PFI status in this demographic.  

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Steps to Take

Today’s PFI is defined differently by younger consumers, and the sooner institutions understand this the sooner they can build a deeper connection with their Gen Z and millennial accountholders. Consider these tactics:

  • Choose product names that are relevant and accurately reflect how younger consumers use financial services
  • Embrace digital channels and focus on the experience you provide to deepen relationships
  • Make sure your mobile app is intuitive and easy to use
  • Provide a consistent experience across channels, making the transition from digital to in-person advisory services smooth and simple

Acting on these tactics will help you achieve PFI designation among more younger consumers and develop long-term, loyal relationships with them.