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Millennials and Gen Z now represent roughly two-thirds of newly opened primary checking accounts, according to new research from JD Power. The findings highlight both an opportunity and a growing challenge for traditional banks and credit unions competing for younger customers.
One positive takeaway for established financial institutions is that physical branches still influence many younger consumers when they select a new checking account. However, the research also shows that basic checking products are no longer enough to win their loyalty.
Instead, Millennials and Gen Z increasingly want accounts that serve as financial command centers. They are looking for tools that help them manage spending, avoid fees, build savings, monitor credit and make smarter financial decisions.
Online Banks and Fintechs Gain Ground With Younger Consumers
JD Power’s first U.S. Millennial and Gen Z Checking Satisfaction Study found that online banks and fintech companies account for 28% of new primary checking accounts opened by consumers in these two generations.
That figure is eight percentage points higher than the companies’ existing share of the market among Millennials and Gen Z. The trend suggests that digital providers are attracting younger customers at a faster rate than traditional financial institutions.
Customer satisfaction scores also favor online banks and fintechs in several areas. Among Millennials, online banks and fintech providers recorded an average satisfaction score of 699 out of 1,000. National banks averaged 672, while regional banks scored 617.
The pattern was similar among Gen Z customers. However, JD Power noted that some premium checking accounts offered by traditional banks scored higher than fintech products. These accounts often include enhanced features but may require customers to maintain minimum balances or meet other eligibility requirements.
The research also suggests that some financial institutions could improve satisfaction simply by doing a better job of communicating the services they already provide. Many customers may not know that their current bank offers the tools and benefits they want.
Branches Remain Valuable, But Digital Features Matter More
Traditional banks still hold a strong position, with approximately seven out of ten consumers choosing a conventional bank for their checking relationship. Branch access remains an important advantage, especially for people who expect to need financial advice in the future.
Yet branches are less important to consumers who primarily want convenient transactions and flexible account management. Fintechs are responding by combining digital tools with alternative methods for accessing cash.
One example is OnePay, a fintech partly owned by Walmart. Although Walmart stores do not provide traditional financial advice, OnePay customers can deposit and withdraw cash at participating locations.
National banks, regional institutions, community banks and credit unions continue to lead in total checking relationships. However, their share among younger customers has been declining. JD Power warns that the shift could accelerate if traditional providers fail to modernize their checking products.
One major reason digital providers appeal to younger customers is their focus on fee avoidance. By designing the account experience around preventing overdraft charges, surprise fees and unnecessary costs, online providers change the way consumers evaluate checking accounts.
Younger Customers Want More Control Over Their Finances
For Millennials and Gen Z, the most important feature of a modern checking account may be control. These customers are more likely than older generations to use automated savings tools, budgeting services, credit monitoring and other account-management features.
Accurate and timely account information is central to that sense of control. Younger consumers want the balance displayed in their banking app to reflect their actual spending position. Online providers often make pending transactions and other account details more visible.
They also value alerts related to transactions, low balances and account activity. Avoiding overdraft fees is a major priority, along with tools that support saving, credit improvement, stronger financial habits and rewards.
According to JD Power, online banks and fintechs generally perform well in these areas. OnePay, which ranked highest in satisfaction among Millennials and Gen Z in the study, offers cash-back rewards and credit-building features as part of its service.
Huntington Shows How Traditional Banks Can Compete
The competitive situation is not hopeless for traditional financial institutions. Huntington, a regional bank based in Ohio, earned the highest customer satisfaction rating among the institutions included in the study.
The bank has focused heavily on reducing overdraft concerns. Its features include a $50 safety zone, a 24-hour grace period, early direct deposit and standby cash options. Huntington also provides a broad selection of account alerts.
These services help customers avoid unexpected charges and make account balances easier to manage. JD Power described Huntington’s approach as an example of how traditional banks can use product design to reduce financial anxiety.
The lesson for other banks is clear: checking accounts must do more than process deposits, withdrawals and payments. They should actively help customers avoid surprises and make better financial decisions.
AI Is Becoming a Major Financial Research Tool
Artificial intelligence is also changing how Millennials and Gen Z research financial products. JD Power found that 81% of respondents had used some type of AI tool during the previous year.
Among those surveyed, 39% had used AI for a personal finance purpose. Of that group, 79% said they acted on information or advice provided by an AI tool.
Based on those figures, JD Power estimates that 31% of Millennials and Gen Z have taken a financial action after receiving AI-generated advice.
The most common financial searches conducted through AI tools included:
- Best credit card to open: 26%
- Best checking or savings account: 24%
- Best places to keep money: 24%
- Best investment account: 22%
- Best lending account: 14%
ChatGPT has effectively become a starting point for many younger consumers researching financial products. This means banks and credit unions must consider how their products and brands appear in AI-generated answers, not just how they rank in conventional search results.
Young Consumers Trust AI Advice More Than AI-Powered Banking
The research reveals an important distinction in how Millennials and Gen Z view artificial intelligence. Although they are comfortable using AI to research financial products, they are more cautious about financial institutions using AI directly.
About 38% of Millennials said they were comfortable with their financial provider using AI. The figure dropped to 32% among Gen Z consumers.
This creates a potential challenge for banks. Younger customers may rely on AI for recommendations while resisting automated interactions or AI-driven decisions within their banking relationship.
Financial institutions will need to explain how AI is used, protect customer data and maintain human support where it matters most. Transparency may be essential for building trust.
Recommendations and Search Still Influence Account Selection
AI is gaining importance, but it is not yet the primary way younger consumers first discover checking accounts. JD Power found that recommendations from friends and family were the leading source of initial interest, cited by 35% of respondents.
Other discovery channels included:
- Internet search: 26%
- Previous experience with the provider: 19%
- An offer received or viewed: 17%
- Commercial or advertisement: 14%
- Seeing a local branch: 14%
- AI-powered search or chatbot: 6%
Promotional offers remain common across the checking account market. Digital providers often use cash incentives, rewards and other benefits to attract new customers.
However, promotions may be more effective later in the selection process than at the beginning. Recommendations, search results and prior experiences typically create initial interest, while rewards and financial incentives can help customers make a final decision.
What Banks Need to Do Next
The battle for younger checking customers is still undecided, but traditional banks and credit unions cannot rely on their existing relationships forever. Branches remain a meaningful advantage, yet that benefit must be combined with modern digital tools and a simpler account experience.
Successful checking products for Millennials and Gen Z should make it easier to avoid fees, understand balances, monitor activity, save money, build credit and earn rewards.
Banks that combine trusted human service with strong digital functionality may be best positioned to compete. Those that continue offering basic accounts without addressing the financial priorities of younger consumers risk losing market share to online banks and fintech companies.
Source: TheFinancialBrand.com