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Community banks like yours are juggling a lot these days. You’re working hard to stay efficient and innovative while delivering the personal, relationship-driven service your customers love. But it’s a challenge to keep up with digital experiences offered by big banks without losing sight of your community-first mission.

Community banks like yours are juggling a lot these days. You’re working hard to stay efficient and innovative while delivering the personal, relationship-driven service your customers love. But it’s a challenge to keep up with digital experiences offered by big banks without losing sight of your community-first mission.

Community banks like yours are juggling a lot these days. You’re working hard to stay efficient and innovative while delivering the personal, relationship-driven service your customers love. But it’s a challenge to keep up with digital experiences offered by big banks without losing sight of your community-first mission.

As with every generation, Gen Z’s financial needs and approaches differ from their predecessors. Gen Z watched their parents struggle through the Great Recession and are now looking for opportunities that offer better job security. They also grew up with access to the internet and social media, where they learned about the mistakes made by older generations and had access to education on every subject, including finances. Still, there are areas where Gen Z struggles.

Who Is Gen Z?

Generation Z, or Gen Z for short, is the group of people born between 1997 to 2012. They are the first social generation to grow up with internet access and easily accessible digital technology from a young age. Gen Z adults range from age 18 to 25 and are just beginning their financial journey.

Financial Understanding

They’re just starting their journey toward financial independence, but Gen Z’s financial literacy is much higher than other generations at their age. Gen Z’s financial habits differ from other generations, as watching their parents struggle through the Great Recession has taught them the value of saving. Many of them save up to a third of their income.

Over half of Gen Z has also already made some kind of investment. Of those who have invested, 26% have put money into the stock market. Though many Gen Zers have made investments, only one in four of them claim they can confidently explain to someone how their investment works.

Investment Trends

Gen Z is still big on investing, despite a lack of financial confidence. More than half of Gen Zers have made an investment. Gen Z is especially interested in new financial investment technologies. One in ten Gen Z investors owns NFTs, while nearly a quarter of them have invested in both stocks and cryptocurrencies. However, although many are involved in the cryptocurrency market, Gen Zers say they know very little about cryptocurrency.

Gen Z investors with little knowledge often invest in cryptocurrency and NFTs because they hear that people are making money and feel confident about investing. But, without the proper knowledge, it’s easy to take on too much risk too quickly.

Social Sources of Financial Information

Social media has provided many learning opportunities for Gen Z, including financial literacy. Once a scarce asset, financial literacy was reserved only for those who could afford it. Thanks to digital media, it’s now available and easily accessible to everyone. YouTube, in particular, has become popular among Gen Z for money advice and financial education. TikTok and internet searches are also popular sources of financial information, as well as conversations with family and friends.

Because there’s so much financial data readily available, Gen Z must conduct additional research before taking investment and other financial advice. This includes background checks on their information sources.

Concerns

Even with the large amounts of readily available information, gaps remain in Gen Z’s financial literacy. Many Gen Zers have expressed concerns about taxes and claim they’re the No. 1 financial skill they want to learn. Other significant concerns include saving, borrowing, and debt management. Below is a more in-depth look at Gen Z’s personal finance concerns.

Tax Concerns

One possible reason for Gen Z’s interest in taxes is the widespread belief that they won’t have access to Social Security when they retire. Many believe they’ll see a time when Social Security no longer exists. Another reason for the tax interest may be the number of Gen Zers who want to start their own business, which can cause tax complications.

Debt Management

Millennials and Gen Z saw the most significant debt growth in 2020, making it another big concern. The most significant source of debt concern is student loans. Gen Z is among the most educated generations, which means larger student loan debt. Along with this, Gen Z saw the largest increase in personal loan and mortgage debt.

Investments

Though more than half of Gen Z members have already invested in the stock market, many don’t understand investing and managing risk well. Roughly 32% of Gen Z say their fear of losing money is holding them back from investing, while 22% who haven’t invested say they aren’t doing so because the market is untrustworthy.

Gen Z Financial Needs

Gen Z is generally more financially literate than previous generations at their age. However, many of them may be moving too fast and trying to do too much on their own. Access to so much information can cause a false sense of security because you can find anything you want about financial planning on the internet. Still, the internet can’t build a personal finance plan. The best thing to do is look at your financial needs, determine where you are now, and get help to create a strategy for where you plan to go.

Conclusion

Education is the best way for Gen Z to adjust habits and take control of their finances, but finding the right source can be difficult. Financial institutions are excellent sources of education for young investors. If you’re a financial institution looking for the best way to educate young investors, BMA can help. Contact us today to learn more about how we can help you provide better services and education for your customers.

Success in contemporary banking comes down to providing the best consumer experience. People’s banking expectations are higher today than they used to be due to the rapid expansion of consumer technology. Consumers today demand immediate, personalized access to their finances, making it critical for banks to utilize fintech technology to provide the best user experience possible

Effective bank-fintech collaboration is a mutually beneficial partnership that makes it possible to give customers cutting-edge technology for their financial services. Unfortunately, many banks see fintech as competition. This causes them to miss out on valuable opportunities to work together to benefit from joint innovation and growth.  This collaboration between fintech and banks will ultimately bolster their profits and earn customer loyalty.

With fintech and banking partnerships being the way of the future in terms of financial products and services, here are a few tips for ensuring a successful integration.

#1: Identify Prospective Partners With Similar Goals

Choosing the right partner will be a key determining factor in whether or not you achieve your goals. Fintech banking partnerships require finding a company with resources, knowledge, experience, and values aligned with what you need so you can successfully expand your fintech financial services and revenue together. Suppose you are a fintech company wanting to provide faster payments as part of your product services. In that case, you’ll need to partner with a bank with a comparable mission that can partner with you as a payment processor through their network of debit cards.

Banks looking for a fintech partner (or vice versa) should know what they want to achieve with their new partner before making anything official. Knowing your goals for the partnership will make it easier to narrow down the right company and give you more control over the relationship. Make a list of what you hope to achieve with your new partner and identify some potential companies to work with. In some cases, you may need to assess the holes in your operations and then discover ways that a fintech partnership could fill those holes. After you obtain a Mutual Non-Disclosure Agreement, be transparent about the challenges you’re facing so your fintech partner can get the full picture and understand how they can help.

#2: Prepare for the Partnership

When you’ve narrowed down the options of the fintech you want to use, check the company’s scalability and pricing to ensure it can help you grow. Do your full due diligence and risk assessment on your top prospects and be meticulous when learning about their operations, business model, and offerings so you can make an informed and smart decision.

Due diligence is vital when your fintech partner is getting access to sensitive customer data and other bank information. As part of the due diligence aspect, make sure you review the company’s security policies, incident management processes, financial statements, and gather reports of known problems, so you don’t take on any unnecessary risks.

#3: Create a Business Plan Addressing Regulatory Requirements

As with any other aspect of your business, you need a plan for adding new fintech financial services or expanding your financial products. Work together with your fintech partner to develop products and services that are intuitive, functional, and beneficial to the bank and its clients. The plan should follow a traditional business plan format with an executive summary, a company description for both entities, comprehensive market analysis, financial projections, and any legal, state-specific licensing, regulatory, or operational requirements. Having a detailed description of how you’ll meet the requirements before rolling out the new product or services is vital.

#4: Listen to the Way Customers and Employees Respond

Most bank-fintech partnerships are initiated to improve the overall customer experience. For this reason, it’s critical to pay attention to how your consumers receive your partnership-provided offerings. You may need to adapt your products based on customer input and make adjustments until you perfect the product or service you intend to deliver. In the end, it’s usually worth the time and resources that you invest to have these products successful, which results in loyal customers and continued growth at the bank.

Equally important as listening to customers is listening to your employees. Fintech partnerships may appear threatening but should take the opportunity to educate your bankers on the ways fintech can make things easier, quicker, and less stressful. Make it clear that fintech is not meant to replace them but to assist them in serving their customers better by providing unrivaled efficiency. You may end up earning the same loyalty from your employees that you do from customers when you provide them with the tools needed to work smarter and faster.

A Real-Life Example of a Successful Bank-Fintech Partnership

A large Multi-National Bank and Zelle collaboration are among the best bank-fintech partnership examples. The Bank spotted an opportunity when the use of cash began to decline. They decided to expand their digital payment services by making it easy to send, request, and receive payments through the app called Zelle.

Zelle is an app that allows you to transfer money directly from your bank account to the accounts of your friends and family. Unlike Venmo, it doesn’t require a third-party platform to exchange the funds. When the partnership with the Bank began at the start of 2020, over $27 billion flowed through Zelle from Bank customers from over 100 million transactions. The Bank couldn’t have accomplished this feat without Zelle, and they both profited from the uptick in digital transactions.

Fintech partnerships aren’t going away, and it’s going to become more difficult to compete in the finance industry without their collaboration. Now is the time to start integrating with fintech’s that can help you grow and expand.

Contact BMA Banking Systems for More Advice

BMA Banking Systems is dedicated to providing integration of fintech’s to banks and credit unions grow through customized software solutions for every financial institution. Contact us today for further tips in creating a successful banking-fintech partnership by reaching out to our experts today.  Please visit us at www.bmabankingsystems.com or call 801-505-0714.

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Most consumers and businesses have used ACH payments before, whether for recurring payments or bulk transactions. However, while many people have used these payments, they may not know what the payments actually are. BMA is here to help you learn more about ACH payments, how they work, and why you should use them.

What Is the Automated Clearing House?

The Automated Clearing House (ACH) is a network of electronic fund transfers run by the National Automated Clearing House Association (NACHA). This system, handled in the form of payments, relates to various transactions, including:

• Business-to-business
• Consumer bills
• Direct deposit
• Payroll
• Tax payments
• Tax refunds
• And more

The ACH system has been in place since the 1970s and is only used within the United States banking network.

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How Does ACH Work?

The ACH network acts as a central hub of financial institutions that move financial transactions between bank accounts. When a payment is processed, it moves through the ACH network to the final account only after the first account approves the transaction.

There are currently over 10,000 financial institutions that operate as part of the ACH network and they move trillions of dollars in financial transactions every year.

The ACH Process

The ACH process can be broken down into three simple steps.

1. An entity requests to send money from its financial account to another financial account.
2. The ACH network receives the funds from the first financial institution and routes them through the ACH to the final financial institution account.
3. The receiving entity gets the money into its account from the ACH.

The funds transfer from one account to the other quickly and easily with the help of the ACH network.

ACH Payments

The electronic financial institution-to-financial institution transactions that move through the Automated Clearing House are known as ACH payments but are also referred to as ACH transfers or ACH transactions. It should also be noted that these payments can only be applied to bank transactions and not to debit or credit card transactions.

ACH payments are broken down into two main categories: direct deposits and direct payments.

Direct Deposits

Direct deposits cover all types of payments that move directly from a business or government account to a consumer account. Direct deposit transactions include:

• Annuities
• Employee expense reimbursement
• Government benefits
• Interest payments
• Payroll
• Taxes and other refunds

Direct Payments

Direct payment covers the use of funds for making payments. Direct payments can come from either individuals or organizations in order to make payments.

An ACH direct payment can be further broken down into two more categories: ACH credits and ACH debits. The credits are added to the account while the debits are withdrawn from the account.

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Benefits of ACH

Many businesses prefer to use the Automated Clearing House Network for the provided benefits. These benefits include:

• Low costs — ACH payments cost less to process, especially compared to credit card transactions.
• Fast and easy — Since ACH transactions are done electronically, they can be completed faster and easier, including the ability to avoid paperwork that slows traditional payments down.
• Improved customer service — ACH payments are easier for customers, meaning they’ll prefer to work with a business that offers this option.
• Recurring transfers — Customers can set up recurring ACH payments to avoid missed bills or late payments.
• Bulk payments — The ACH network makes it easier to process and manage bulk payments, like payroll.

Disadvantages of ACH

While ACH transactions are beneficial for businesses and consumers alike, there are still some disadvantages to the systems. These disadvantages include:

• Transaction fees — Businesses are responsible for paying a fee for every transaction. While the fee is usually very small, it is still a cost to be considered.
• Fund delays — ACH transactions are not instantaneous. Funds can take anywhere from a few hours up to four days to appear in the receiving account.
• Transaction cut-off times — Financial Institutions can’t process ACH payments after a certain time, which can cause further delays.
• Country-specific — ACH transactions are mainly confined to the United States, with limited capacity for international payments.
• Fund limits — Some financial institutions have limits on how much money can be sent per day, per transaction, or per account.

How Much Does ACH Cost?

ACH payments are free for consumers to use. However, companies and financial institutions need to pay to send and receive these transactions. The median cost of sending and receiving an ACH transfer is $0.29 USD. This low cost is why many businesses prefer to use the ACH network.

There may be additional fees associated with ACH transactions, including:

• Flat fee per transaction
• Percentage fee per transaction
• Monthly network fee
• Batch fee per each batch transaction
• ACH return fee
• ACH reversal fee

ACH transactions are convenient for consumers and businesses alike, but businesses and financial institutions need to be aware of the additional costs.

Need More Financial Knowledge?

At BMA, we understand all the ins and outs of the financial banking industry. We help new and existing banks, credit unions, and other financial institutions make the most of the services they have to offer. Contact BMA to learn more today.

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