The Young and Impatient: Digital-Native Generations Want Instant Payments From Banks

Generation Z and Generation Alpha are critical for financial institutions’ long-term viability. They’re the ones with decades of financial journeys ahead of them.

As young people open their first accounts, apply for mortgages, set up college funds and start businesses, financial institutions must strive to gain loyalty and wallet share from these long-lived relationships and keep funds flowing within their own ecosystems.

As Elena Casal, chief client officer of The Clearing House (TCH), told PYMNTS, in order to gain that loyalty, instant payments must be part of the continuum of services offered by those banks. The conversation was part of the “What’s Next in Payments” series, focused on the “The Alphabet Strategy” for capturing Gen Z and Gen Alpha. These demographics are different from other banking clientele, Casal said.

“They’re digital first,” she told PYMNTS, “and they also have a philosophy of ‘Let’s do something now, or let’s not do it.’ There’s not a case for ‘later.’”

Translating that mentality into the payments realm, she said, means “The time is ‘now’ to transact.” Younger individuals are looking for instant gratification, and the confirmation that a payment-related activity has been completed, so that they can move on to the next task or event. Instant payments, she added, allows transactions to be finalized in the middle of an activity — whether paying for a meal or closing the books of a small business at the end of the month.

Tracking the Money Movement

Casal said the instant payments are accelerating with the proliferation of digital wallets, whether they are closed loop or peer to peer. “We’re seeing a lot of money movement,” she told PYMNTS, “between the wallets and the bank accounts. Money is being stored at the bank account for further growth … into economies of scale.”

Wallets are removing friction from the money movement process, she added, and TCH has seen marked growth — more than 83 million transactions in the past year alone — tied to digital wallet payouts back to the bank account.

The instant payouts, she said, offer a new way for financial planning and management, because once the funds are housed in the bank account, “people look at it immediately in terms of how to budget their ‘digital checkbook’ across different apps with real-time visibility into their balances … and that’s really powerful.”

Moving to the Business Realm

That same visibility and control is, and will be, expected by Gen Z and Gen Alpha customers as they move fully into their own careers, especially as they act as consultants, sole proprietors or gig economy workers. Being able to move money 24/7, she said, “brings an end-to-end experience that these generations will use … to ‘level up’ financial accounting and planning.”

Looking ahead, with instant payments at the center of it all, Casal maintained that banks can cross-sell a broad range of offerings to these younger clients as time goes on, spanning financial planning and education, with personalized lending offers and savings and investment accounts.

The overarching mindset, she said, is, “I want you financial institution to solve it for me,” and interlink those activities and offers, “because I don’t want to go to 10 different apps.”

As she told PYMNTS, “This generation is comfortable with evolving technologies … and all of us [in financial services] can leverage that to be our best selves.”