64 GEN Z AND THE FUTURE OF BANKING: AN ANALYSIS OF DIGITAL BANKING ADOPTION Chitra Laksmi Rithmaya 1 *, Herwin Ardianto 2 , Evi Sistiyarini 3 1,2,3 Faculty of Economics and Business, Universitas Hayam Wuruk Perbanas, Surabaya 60296, Indonesia *Corresponding authors; Email: citra@perbanas.ac.id 1 Submitted: July 16, 2023; Reviewed: July 17, 2023; Accepted: Feb. 24, 2024; Published: March 1, 2024 Abstract In the era of digitalization, a digital bank was the development of banking services. Bank innovation led to innovation in providing various alternative services and improved the ease of transactions for digital banking applications. This study aimed to discuss how digital banks used service features using a modified UTAUT2 approach. The data used was that of respondents belonging to generation Z in Indonesia who used digital banking services on mobile devices. Data analysis was done using PLS-SEM. The findings demonstrated that performance expectancy was the highest variable determining behavioral intention and used behavior. Habit and trust on service provider also predicted intention, and facilitating conditions also had a direct effect on usage behavior when adopting digital banking in generation Z. Surprisingly, effort expectancy, social influence, hedonic motivation, price value, and trust in the internet did not have a significant relationship, for which some possible reasons were explained further. In this article, theoretical and practical implications were also discussed. Keywords: UTAUT2, generation Z, digital bank. Introduction Banking technology advancements are becoming quicker, more effective, and more efficient. The digital market in Indonesia is also increasing rapidly, thanks to generation Z users who are comfortable with, if not born in, the internet environment. Generation Z was born between 1995 and 2010 and can be considered the generation born in the age of Internet technology. This generation is well familiar with digitalization and, of course, digital banks. The grounds for the growing number of digital bank customers in Indonesia are fast, safe, comfortable, easy, and efficient transactions. In the digitization era, a digital bank is a deve- lopment of banking services. A digital bank is a bank with an Indonesian legal entity that supplies and conducts business through electronic channels without or with a restricted physical location other than the head office. Digital banks can be new or existing banks that have converted to a digital system. The popularity of digital banks is currently on the rise. Many people in Indonesia have also used digital banks. Developments in information technology, fol- lowed by increasingly high levels of bank competition, have encouraged innovation in providing various alternative banking services that are safe, fast, efficient, and global. The concept of digital banking, in which transactions are safe without needing to be physically present at the bank, is one of the technologies currently commonly employed in financial organizations. The oldest digital bank, the first in Indonesia, is Jenius. Jenius is a digital bank application released by BTPN in 2016. This virtual bank application makes it easier for customers to make banking transactions and payments. Jenius is also the most popular digital bank. In a survey conducted by DailySocial, 64.2 percent of respondents know Jenius as a digital bank (Figure 1). The total number of Jenius users recorded in the first half of 2022 was 3,995,013 customers, growing 19 percent annually (year on year/yoy) from 3,345,061 customers as of June 2021. Other digital banks also known in Indonesia are Digibank, Neobank, LINE Bank, SeaBank, TMRW, and others. Figure 1. The most-known digital bank in Indonesia Source: DailySocial, 2023 The advancement of communication technolo- gies also aids in the advancement of digital banking. JMK, VOL. 26, NO. 1, MARCH 2024, 64–78 DOI: https://doi.org/10.9744/jmk.26.1.64-78 ISSN 1411-1438 print / ISSN 2338-8234 online