Technology as the hero and the anti-hero in the quest of building products for Gen Z

We often think of technology as a driver for innovation in the financial industry. The word “technology” is in some ways synonymous with new and better. But not all technology pushes the envelope further for FIs. 

For one, there is the issue of legacy tech, which can be relied upon to be secure but is not necessarily geared toward flexibility or speed.

For another, there is the issue of a mismatch between the context and the tool: While Gen Z may want splashy new user interface features, their older counterparts may not be interested in these additions. And it is the latter group that is making FIs money right now. 

So, how are industry leaders navigating the technological landscape to meet the demands of their customers? 

To find out, we looked at the cross-section of the industry to see how different FIs are navigating the question of technology in different areas such as retail, SMBs, and payments. 

You can’t please everyone

Gen Z’s affinity for gamification is well-known. And many firms ranging from banks like Truist to fintechs like Greenlight, Robinhood and Chime have incorporated it to make their interfaces more sticky. The problem is that banks (especially non-TBTF ones) have to balance building CX for both their primary consumer segment, Boomers, and their future consumers, Gen Z. 

Given their love for gamification, Gen Z may want features that gamify or enable social-sharing of financial accomplishments. But older generations that aren’t as accustomed to these features may “consider their financial information very private and may be even taboo to discuss openly,” said Mikayla Smith, Lead Product Manager at Bangor Savings Bank. 

So for incumbents, introducing any new feature is a balancing act. “We need to consider how making changes to our financial digital offerings that could improve the sentiment for a younger audience may impact and even lessen the  experience for other demographics,” she said. 

Smith’s comments raise an important point: Not all new technological processes make sense for a bank. And in some cases, keeping the older infrastructure in place may even be a way to ensure security and stability. 

Legacy for safety, and software for speed

The average small business owner is sixty years old, according to Scott Beyer, Business Banking Product Lead at U.S. Bank. But many FIs are currently navigating a period of change as many of these businesses are now transitioning to younger generations, according to Beyer. 

For Beyer the legacy tech is a “building block” and not a roadblock. The older tech provides safety and security for the consumers’ data. But given that many of the incumbents are now competing with fintechs that can offer speed and flexibility, traditional FIs like U.S. Bank have been investing in data integration and layering software-led solutions on top of their underlying infrastructure to compete. 

The bank is also focusing on simplifying its product offerings, using reusable software components and, where it makes sense to do so, partnering with fintechs to increase the speed with which products are brought to SMB customers. The idea is to leave what isn’t broken alone. Especially if it can be augmented by less invasive approaches. 

Not everyone has followed this path. Some FIs have taken the leap and transformed away from legacy infrastructure. But it’s easier said than done. 

Legacy tech is hard to leave behind but not impossible

When it comes to overhauling old technology infrastructure, the size and scale of a firm can be a bit of a double edged sword. On the one hand, it’s good to have a large revenue pool to fund a push towards the cloud. On the other hand, there is a lot more technical debt to get rid of. 

It’s difficult but not unheard of. Sometime back, Capital One made a push towards the cloud, the move was successful but it also took them a decade to complete. In 2020, PayPal also moved towards the cloud, spurred on by the increase in digital commerce during the pandemic. 

As such, the old school fintech is already quite ahead in its journey away from legacy technology. 

Technology isn’t the only challenge when it comes to building Gen Z-ready products, though. 

PayPal and Venmo, like Bangor Savings Bank, have to resolve the same dissonance between the wants and expectations of Gen Z and older generations. For this, the company invests in market research, product testing, and focus groups, according to a PayPal spokesperson. 

Gen Z’s relationship with money is also different. Many of them have only just begun their financial journeys and hence they are more constrained than their older counterparts. PayPal deems this as a critical component to consider when building products for the generation.  

For fintechs that aren’t operating with as much technical debt as incumbents, tech holds a mostly uncomplicated, forward-looking outlook. For example, Rob Nardelli, Director of Commercial Banking at DailyPay adds that the company’s partnerships with Visa and The Clearing House allow it to “take advantage of faster forms of payments in the OCT (or push to Card) and RTP”, which are faster than “outdated” rails like wire, check and ACH. For him, technology is simply an enabler.