Gen Z, or those born between 1997 and 2012, are beginning to enter the workforce and earn their first paychecks. With Gen Z and Millennials set to inherit trillions of dollars in the next decade, financial institutions should pay attention to how these younger generations prefer to bank.
Unlike any other generation before them, Gen Z was born in the digital age. They’re digital natives, comfortable with all kinds of technology, and expect convenient online experiences from the brands they interact with.
This younger generation has also faced significant challenges in their short lives, from a pandemic to recent inflation to growing environmental concerns. These societal trends shape their choices and behaviors greatly – including how and where they spend their money.
So, what is Gen Z specifically looking for from their bank and what can banks do to meet their needs? We continue in part three of our series on digitization in banking by exploring Gen Z banking needs and trends.
Security and trust
Gen Z wants to be able to trust that their bank will keep their assets safe. When asked about what banking features they’re looking for, 57% responded they want advanced identity and credit protection. Half of the respondents also listed data protection as something they want from their banking provider.
This may be why these same respondents trust larger national banks over smaller, regional banks. 44% of Gen Z respondents trust national banks whereas only 15% trust local banks. This is because they trust larger banks to put more robust security measures in place and safeguard their assets more closely.
Financial institutions can help support a more secure environment with technology. Banks must go beyond 2FA to impose strict authentication measures without compromising experience. Using machine learning and data analytics, banks can more easily detect and deter fraud attempts automatically. Some banks are also looking into blockchain technology to increase security and reduce fraud. This technology makes systems hard to hack and data tougher to compromise.
Aside from leveraging technology to secure customers’ assets, change must be made internally to make a bank more secure. Hiring experts in cybersecurity can ensure the company is secure and up-to-date with the latest practices and processes. Banks can also provide customers with tips and tricks via their customer portal or online to keep their assets safe and deter fraud attempts.
Financial education and literacy
As new members of the workforce, Gen Z admittedly doesn’t know much about their finances yet. But they’re concerned about their financial health and willing to learn. Right now, 84% get information regarding financial literacy from family members and another 34% get this information from TikTok or YouTube.
What’s more, having faced a few financial hardships in their time, they’re generally worried about their savings. According to one study, 43% of Gen Z respondents reported being overwhelmed with saving. On the other hand, ⅔ of respondents to a Goldman Sachs study said they prioritize financial fitness over physical fitness.
To help Gen Z meet their financial goals, the banking industry must provide the education they’re looking for. Providing easy-to-access financial literacy information online and through banking apps is critical for this digitally savvy group. Banks can also offer the option to provide automated advice and budgeting tips to those that want it. Banks should also meet customers where they are and give financial tips on TikTok and YouTube to share advice and broaden their reach.
Fintechs are already taking advantage of TikTok to reach new audiences and share insights. Fintech brand Current, for one, has gained a massive following of 600 thousand followers and counting. They have been able to maintain and grow their following by sharing approachable, authentic content that mixes memes and education about the product. Banks would find most success on this platform by providing relevant, authentic, and educational content.
Banking convenience
While overall more trusting of national banks than fintechs, Gen Z is comfortable with using fintech banking tools like payment apps and BNPL loans. They use these services because they provide the convenience their banks often don’t or can’t.
Traditional banking offerings don’t meet the convenience needs of this generation. In fact, four in ten Gen Z and Millenials have been unable to find what they’re looking for from their bank online. For a generation less likely to visit a bank branch to get the information they need, this can be deterring.
To provide a seamless experience for this group of customers, banks must make the answers to their questions accessible online through FAQ pages or chatbots. Banks should also consider integrating or partnering with fintech apps who fill a void in their offerings. Explore why customers are choosing fintechs for certain financial needs over traditional banks before deciding which company to partner with. Often the answer to this question leads back to convenience.
To offer increased convenience for their bank app customers, ING has partnered with Minna Technologies to give customers an overview of their subscriptions and cancel or change subscriptions without leaving the app. With one survey finding that Gen Z pays almost $380 a month on subscription services, an integration like this one helps them better understand and manage their finances.
By investing in digital transformation and partnerships, banks get one step closer to retaining this younger generation of customers.
Personalization
All generations of banking customers seek a more personalized experience, especially Gen Z customers. This group is accustomed to personalized experiences across industries. From streaming platforms recommending the next TV show to watch to retail shops serving them highly-targeted social media ads.
Banking should be no different. In fact, 64% of Gen Z are looking for their bank to offer personalized products and financial service recommendations. With the wealth of data available to banks and credit unions today, analyzing this data should enable product and service personalization down to the individual customer. For example, data analytics allows banks to offer these young people a credit card tailored to those earning their first paychecks.
Cleaning up your data, investing in tools to analyze it, and using advanced analytics and machine learning strategies to personalize solutions for customers will make this possible.
Social and environmental consciousness
As mentioned before, Gen Z cares deeply about the morality and ethics of the companies and brands they’re investing in. One survey found they are seven times more likely to pay a premium for an ethically produced product than Baby Boomers. This desire to support ethically-responsible brands extends to banking.
What banks should avoid doing in an attempt to appeal to this group is greenwashing. This socially-aware generation can see right through attempts to appear sustainable or socially responsible without substance. Instead, look into offering investment options aligned with environmentally and socially responsible companies. One Swiss bank took initiative in this vein, creating models to help clients create ESG-aligned investment portfolios.
Explore the five drivers of digitization in finance today
It will be fascinating to see how this digitally-inclined, socially responsible, and financially wary group of investors and customers shapes banking trends in years to come. In the meantime, banks should ready themselves with more advanced digital tools. This will enable seamless digital experiences and investment options suited to this value-driven group.
“Catering to this digitally savvy group will look different than it did for former generations, and banks need to be cognizant of that if they want to attract and retain customers from this segment.”
Max Tirschwell
Principal, Senior Sales Manager, Zayo