Banks Fight for Generation Z Customers Who Shun Brand Loyalty

Jamie Schmidt has opened more than a dozen bank accounts in the past year, taking advantage of a new-customer promotion each time. So far, the 20-year-old Belfast university student has netted around £2,800 ($3,774) in sign-up bonuses and switching incentives.

“Brand loyalty will get you absolutely nowhere in terms of banking,” said Schmidt, who promotes his strategies on TikTok. A recent video on an account-switching offer from TSB Bank drew more than 300,000 views.

Not that long ago, it would have been much harder for deal-seekers like Schmidt to move their money around so frequently. But a decade of regulations designed to foster competition and technological advances have combined to create a boon for Gen Z and other digital natives — and a headache for financial firms.

Among people in the UK who use digital finance products, a quarter of Gen Z’s teens and twentysomethings now have multiple current accounts (known as “checking” in the US), though they only use one regularly, according to a new survey conducted by Intuit Credit Karma for Bloomberg News. Ahead of their older siblings and parents, they’re the most likely to use separate apps for all their financial needs, rather than consolidate with one provider.

The banks are partially suffering from their own successes. They’ve made it wildly easy to open accounts and offered rewards for doing so. Historically, the cost of luring new customers was more than offset by the opportunities to sell other financial products during a long relationship. Now, banks old and new are working harder than ever to woo a cohort of customers that’s learned loyalty doesn’t always pay.

Last year, Nationwide Building Society began offering £220 in cash and food delivery credits to university students who opened a current account. To promote the initiative, the 140-year-old lender went beyond traditional advertising and took over a fried chicken shop in Shoreditch for a day, bringing on social media stars GK Barry and Harry Pinero to hand out free food, cash prizes and finance tips.

More than 10,000 student accounts were opened during the promotion’s launch period, a 270% increase on the prior year. In its annual financial report at the end of May, Nationwide said it had captured more than a quarter of new student account openings that year.

The trick now is to convince these new customers to use the account they opened. Customers tend to hold ten times more in deposits on average at their primary bank, and generate eight times more fee revenue, according to data collated by financial advisory firm Curinos.

“One of the dynamics that we’re seeing in banking more broadly, but particularly with Gen Z, is the move toward multibanking,” said Stephen Noakes, Nationwide’s director for retail. In addition to the sign-up perks, Nationwide has a £100 annual incentive for customers who bank with them regularly.

Students and other young adults are reaping the fruits of a policy that changed when many were still in primary school. In 2013, the UK’s Current Account Switching Service went live, guaranteeing an easy, rapid move from one bank to another. Importantly, the service included the transfer of any stored direct deposit or bill-paying information, eliminating a key barrier.

Ever since, customers have become more transitory. Almost 1.2mn people used the government service to switch their accounts in 2024, according to industry standards group Pay.UK, the second year in a row the number surpassed 1mn. The top feature they sought in switching was improved online or mobile banking, it said.

This is where digital-first financial services firms, including brokerage and crypto apps, have raised expectations. Digital natives have no tolerance for clunky apps or slow load-times, said Martin Sokk, chief executive officer of London-based stock trading app Lightyear. They’re used to “all the modern apps, which are extremely simple and well taught.”

In response to requests from its Gen Z users, the company added a suite of AI-powered market tools in July that feed users custom data about what’s going on in the market or why a stock might be rising or falling. “That’s in many ways the future,” Sokk said. “You’ll be able to make solutions work for you, you’re not going to interact with the actual infrastructure behind it.”

Referral incentives have also become an effective way to attract Gen Z. Half cite friend and family recommendations as a source of discovery for financial apps, the most of any cohort.

At digital bank Monzo, users who refer a friend can receive £10 for doing so. Recent offers from Revolut, Europe’s largest digital-only bank with 60mn registered customers, have dangled up to £200 for referrals.

Some firms have resigned themselves to the fact that Gen Z might be hard to keep on a single, financial super-app. “We’ve made a deliberate choice to have a many-app strategy,” said Mark Greenberg, global head of consumer at cryptocurrency exchange Kraken. “Apps that try to do everything for everyone are very hard to use.” To that end, Kraken now runs six apps, including Krak, a new payments app for both crypto and traditional currencies, and Inky, a lighter trading platform compared to the flagship Kraken app.

Starling Bank, founded the year after the government’s account switching service went into effect, lets users shop for financial products offered by other companies, which they can then connect to their Starling account.

Like their legacy competition, new digital banks have begun to offer kids accounts — a tacit acknowledgment that some of their first customers are now old enough to have kids of their own, and that brand loyalty is cemented early.

Revolut offers sub-accounts for kids that parents can control and monitor. It’s also trying to keep those kids as they get older, said Carlo Spada, Revolut’s head of youth products. In July, the firm launched an account for 16- to 17-year-olds that allows them to get direct deposit and hold foreign currency, and gives them access to budgeting and savings tools. The company’s investing and crypto trading tools are off-limits until they turn 18.

This life cycle approach has intuitive appeal. Faced with so many options, Gen Z is “mercurial with their loyalty,” said Mia McGrath, a 24-year-old Londoner who shares finance tips for young people on TikTok.

For her part, McGrath opened an account at Chase, the digital-only bank offered in the UK by New York’s JPMorgan Chase & Co, to take advantage of a 1% cash back offer on nearly all debit card purchases. When Chase reduced the rewards in April, McGrath shifted her spending to her account at NatWest, where she’s banked since childhood.