How Canadian youth are digitally transforming the banking industry

How Canadian Youth Are Digitally Transforming the Banking Industry

There’s no doubt that today’s youth (defined as ages 16-21) are more digitally inclined than their older peers or predecessors in most aspects of life, from how they go about socializing, shopping, learning and even banking, but how digitized are Canadian youth when it comes to banking? What digital channels do they use? Which platforms have the most influence on their decision-making? These are all critical questions for any financial institution looking to attract, satisfy, and retain younger clients over the long haul.

Since RFI’s mission is to help our clients answer difficult questions to better meet the needs of customers, we’ve been helping our international clients navigate this young and unique client segment through our Youth Banking Council since 2019.

Before we go into how digitized Canadian youth are when it comes to banking, let’s start with why they are such a unique and important customer segment.

There are three main reasons:

• According to our latest Youth Banking study, Canadian youth between the age of 16 – 21 (as defined by RFI) are 25% “very likely” to switch their main financial institution over the next 12 months, making it absolutely crucial for financial institutions to understand what young people are looking for and how to best retain them as loyal customers.
• The uptake of financial products by consumers, globally, is the highest between the ages of 18 and 34. In order to successfully capitalize on this heightened demand, it is critical to understand youth’s financial needs and behaviours from an early age.
• Finally, young people are generally early adopters of technology and are less likely to be blindly loyal to a single brand their whole life. Financial services providers who want to stay relevant need to move fast.

1. How digitized are Canadian youth in their day-to-day banking?

Based on our 2022 Canada Youth Banking Study, we found that mobile banking is the number one channel through which Canadian youth conduct their day-to-day banking activities. 94% of youth reported using this method to go about their day-to-day banking.

Not only is mobile banking the most popular method of banking for Canadian youth, but it is also the most frequently used banking channel, with 70% reporting using mobile banking on a daily or weekly basis to conduct their banking activities. That’s significantly higher than the proportion of youth who visit bank branches or use ATMs at the same frequency, as shown in the graph below.

2. What channels do youth use for which activities?

When we asked Canadian youth to identify which channels they use to conduct various banking activities, three key insights surfaced:

• Mobile banking is by far the leading channel of usage when it comes to conducting standard, non-urgent activities such as transferring money, checking account balances/transactions, and paying bills.
• Bank branches and ATMs are still key to daily activities not supported by digital channels, such as withdrawing and depositing cash.
• Bank branches and phone calling are the most popular channels for when youth are seeking answers to specific questions or want to resolve a problem.

So, what does this tell us about how digitized Canadian youth are in their day-to-day banking?

• It is clear that Canadian youth prefer using digital channels to conduct standard, day-to-day banking activities over traditional, non-digital channels.
• Bank branches and ATMs will continue to play an essential role in Canadian youth’s banking experience as long as they serve a unique purpose not supported by digital channels.
• When it comes to more personal and sensitive tasks, youth seek channels that provide a human element, which is a key consideration for financial institutions investing in developing their chatbots.

How influential are digital platforms such as social media as sources of financial advice?

When we asked 1,000 Canadian youth where they go for financial advice, a third identified social media as one of their key go-to sources, which puts social media in third place next to friends/family, and just after parents/guardians and family members.

Out of those who have identified social media as a key source of financial advice, 28% reported TikTok and 24% reported YouTube as the social media platform with the strongest influence on their banking and financial decision-making.

So what does this tell us about the influence digital platforms have over youth’s banking decision-making?

• Digital platforms have become a key trusted source of financial advice for Canadian youth, and occupy a leading position, alongside parents, family, and friends.
• YouTube and TikTok are the most critical social media platforms financial institutions need to be aware of when it comes to reaching and communicating with Canadian youth.

How digitized are Canadian youth when it comes to investing?

As for how influential digital tools are in Canadian youth’s investing activities, our latest findings show that 15% of Canadian youth have adopted trading/investment digital tools as an investment medium; Wealthsimple being the most popular investment tool amongst this young segment.

While 15% is not necessarily a major proportion, it nonetheless indicates the clear penetration of digital tools in Canadian youth’s investing world.

Despite digital tools having had a modest impact on how Canadian youth go about making and managing their investments, our findings show that they have had a much bigger impact in terms of what Canadian youth invest in, with digital currencies showing up as the leading asset class Canadian youth invest in, surpassing all other asset classes including mutual funds, stocks, and even ETFs.

So what does this tell us about how digitized Canadian youth are when it comes to investing?

• Youth have already adopted digital investing/trading tools as a trusted investment medium.
• Youth see more value in investing in digital assets, specifically cryptocurrencies, than any other asset class.

What should financial institutions take away from these findings?

• To guarantee their youth clients’ satisfaction, financial institutions need to ensure a wholesome and user-friendly experience over their digital channels, especially mobile banking, as it is the single most popular and frequently used banking channel for Canadian youth.
• Social media platforms are critical channels for communicating with youth clients. Financial institutions should focus their efforts on YouTube and TikTok as they are the two most influential platforms for youth’s financial decision-making.
• Financial institutions should prioritize developing and promoting their investment/trading applications amongst their youth clients and highlight any cryptocurrency features and capabilities as they are a key investment class for youth.

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About the Author

George Kawar is the Insights Director at RFI’s Toronto office and oversees the design, roll-out and delivery of consumer-focused syndicated research within the Canadian market. George has over 10-years of research and analysis experience within the fields of finance and technology & innovation and has dedicated his career to supporting the growth of tech startups and financial institutions through market research.