Gen Z sees the current banking system as 'expensive, slow and outdated'

Investing.com -- A huge number of Gen Z’s aged between 12 to 27 view traditional financial institutions with increasing dissatisfaction, labeling them as outdated and costly. 

As per a survey conducted by Coinbase (NASDAQ:COIN ), only 6% of Gen Z report being satisfied with the current banking system, flagging a critical shift in preferences. 

As for Millennials aged between 27 to 43 share similar sentiments, with a slightly higher satisfaction rate of 9%​. 

The consensus is clear and that is, younger generations find traditional financial services slow, expensive, and ill-suited to their needs.

“~30% believe the traditional system is costly and outdated, while around 20% find it confusing, slow, and exclusionary,” said analysts from Bernstein in a note.

The cost of using conventional financial services, particularly for cross-border transactions and other services that involve intermediaries, remains a concern. 

While older generations have largely adapted to these costs as the norm, Gen Z and Millennials, raised in the digital age, expect faster, cheaper solutions. 

They have grown frustrated with long processing times, especially in an era when instant digital services are readily available.

19% of Gen Z respondents view the current banking infrastructure as confusing, while 21% describe it as exclusionary, as per Bernstein. 

As tech-native users, this generation finds traditional bank offerings outdated, especially when compared to the decentralized financial (DeFi) platforms and blockchain-based solutions they increasingly favor.

In response to the perceived inefficiency of traditional banking, Gen Z is gravitating toward decentralized finance (DeFi) platforms and blockchain technologies. 

These alternatives offer the speed and transparency that traditional financial institutions lack. In particular, the adoption of stablecoins for payments, which enable cross-border transfers at a fraction of the cost and time required by banks, highlights the potential for crypto-driven innovation to meet Gen Z's needs. 

“27mn wallets are active every month doing stablecoin payments on-chain,” analysts at Bernstein said.

DeFi platforms allow users to interact with financial services such as lending, borrowing, and trading without intermediaries. This approach appeals to Gen Z’s desire for independence, control, and lower costs. DeFi users, including Gen Z investors, are attracted to high yields, ease of use, and decentralized governance. 

They are keen on managing finances on-chain, leveraging smart contracts and decentralized apps (dApps) to bypass slow, bureaucratic processes.

Crypto assets have quickly become the go-to investment vehicle for Gen Z. A substantial 48% of crypto owners are under 34 years old, and 55% of Gen Z in the U.S. report a preference for investing in cryptocurrencies. 

This shift away from traditional equities and mutual funds reflects Gen Z's desire for financial systems that are aligned with their digital-first lifestyles. 

Blockchain technology, with its promise of transparency, security, and low fees, offers a model for the future that resonates with younger generations.

Source: Investing.com