Generational Shifts Are Remaking B2B Banking and Payments (Bring Your Mobile)

Big generational shifts are playing out in B2B banking and payments. They’re subtly affecting all aspects of operations as Millennials move into senior-most positions in banks and businesses, with Gen X and even Gen Z executives right beside them, or close by.

New attitudes and expectations will accelerate change as these demographics fully take charge, either as small business owners (SMBs) or as top corporate and finance leaders.

The unique worldviews and life challenges of these demographics are shaping the next wave of financial innovation. It’s a massive societal sea change, yet many familiar names remain. According to the Datos Insights Q1 2024 Survey of the SMB Market, the big four banks – Bank of America, Citibank, JPMorgan Chase, and Wells Fargo – still dominate among SMBs owned or managed by members of the Millennial, Gen X, and Gen Z demographics.

These are often the same banks their parents or siblings introduced them to as teens.

Presented at the Datos Commercial and Small Business Banking Forum in October, in a study of over 1,000 SMBs in the US, Datos found that nearly 60% of Millennial and Gen Z-owned small businesses are using the big four banks, as are 58% of Gen X SMB owners.

It leaves many credit unions, smaller commercial banks, and even superregional institutions at a competitive disadvantage, playing catchup in the innovative products and experiences that digital natives prefer (and big banks can afford).

Smaller financial institutions (FIs) need to close the gap. That’s largely a matter of embracing new preferences, keeping generational bias in check, and imagining a brave new world of B2B banking.

“I think about my son. He's 23, Gen Z, graduating college, just starting his career,” said Rodney Nilson, Vice President of Product Management at Bottomline. “He's going to be an executive in just a couple of years.” And while his son still uses the big four bank his dad first took him to as a teen, that’s where the financial similarities end.

B2B Mobile Grows Up, Gets a Job

Mobile banking for business isn’t new, but it’s becoming a bigger slice of the pie, mainly because these three demographic groups have smartphone-centric lifestyles. They navigate between banking apps, games, from Amazon to Zillow, as if born to it.

The downside is younger generations don’t love services that can’t be accessed via smartphone, so their fondness for mobile banking shouldn’t be underestimated. B2B firms must seize the opportunity with innovations in mobile security, content creation, and payments; all adapted to the small screen for business use. An innovative mobile UX is also essential.

As if on cue, Zelle® – the mobile banking app owned by Early Warning Services (EWS), which itself is owned by Bank of America, Capital One, JPMorgan Chase, PNC Bank, Truist, U.S. Bank, and Wells Fargo – said in late October 2024 that it’s “phasing out the ability to enroll and transact within the standalone app” and “encouraging those who use the standalone app to instead start using Zelle through a participating bank or credit union.”

That’s how it starts. Like Rodney Nilson’s Gen Z son, who banks with one of the big four, but whose payment behaviors are far more diverse and specialized.

“What's interesting are his thoughts about payments. He's got all kinds of different apps and wallets to facilitate payment. His preferred mode of payment is something mobile,” Nilson said. Translation: the consumerization of B2B is taking a flying leap forward.

To that end, Nilson said smaller FIs “need to step out of their comfort zone from a procurement standpoint, which has typically been to buy everything from their core banking provider” but sans a futureproofing strategy. It’s not ideal. “There are fintechs and PSPs to partner with,” he said, adding that smaller FIs need “a new set of competencies.”

Younger generations take pride in doing things differently, especially when it comes to mobile. "I don't think managing a business will ever be the same after the pandemic,” Nilson said, with a nod to predictions of a coming spike in mobile ERP and B2B banking.

“It's not a trend, it’s a durable fact,” he added. “Some sort of app-based distribution model is how younger generations want to consume [business] products and services.”  Not acting on this kind of market shift can relegate banks and corporates to a follower or laggard positioning in the marketplace.

Meanwhile, imaginative banks, FIs and payment service providers (PSPs) are seeing profit potential in such forms of digital transformation. As McKinsey & Company said of its own 2004 B2B Pulse Survey, “...all B2B decision-makers show a willingness to adopt higher-quality interactions and more advanced digital solutions,” adding that leaders "use an average of ten sales channels, and they consistently desire omnichannel interaction.”

The Up-And-Comers

What’s riskier: expanding mobile business banking for your business clients (and your organization) or shelving that and sitting on the cash for something else? At times like this, it can be wise to ask yourself: WWZD – what would Zuckerberg do? As the world’s fourth richest person said, “The biggest risk is not taking any risk. In a world that is changing really quickly, the only strategy that is guaranteed to fail is not taking risks.”

Business owners and corporate leaders are usually willing to pay fees for products and services that cater to their work patterns, which have changed dramatically since 2020. Just make sure business products aren’t hyped-up versions of consumer tools. If accessing powerful B2B payment networks and support services is a problem, buddy up.

“If you're offering me essentially the same product and service as a consumer, I want to pay as much as I do for that consumer product, which is nothing,” Nilson joked. “As soon as a bank or PSP demonstrates that I’m getting incremental business-specific capabilities like mobile that make running my business easier, I'll be willing to pay for those services.”

Nilson said smaller commercial banks and credit unions could successfully compete with the big four by outmaneuvering them with a tech-centered generational strategy.

Nilson foresees a wave of innovation from “maturing AI capabilities, and business leaders willing to leverage those capabilities,” he said. “In younger generations there is very much a willingness to rely on new technology to do things prior generations would not. That’s going to create a flywheel effect, and we’ll see impacts” in just a few years from now.