Recent years have seen much discussion regarding millennials’ entry into the workforce, spending and financial maturation. But as the oldest millennials approach 40, Gen Z banking is zooming into focus for the financial services industry.
Understanding Gen Z’s Digital-First Mindset
Born between 1997 and 2012, Gen Zers (also nicknamed Zoomers or iGenn) represent approximately 40% of American consumers and are expected to make up to 30% of the labor force by 2030. As this digital-first generation enters the workforce, it’s important to note that they don’t know a world without social media, smartphones or the technology facilitating online collaboration. As such, they expect these capabilities to be integrated into every activity.
In the past, business technology and frameworks were typically dictated from a top-down approach for institutions, but as Gen Zers continue to enter the workforce, they expect this familiar collaborative technology to be integrated and readily available in their personal and professional lives. This holds true from a consumer aspect as well.
So, just as they’re expected to make up to 30% of the labor force by 2030, they’re also anticipated to drive trends in the financial services industry. Here are some notable pointers to consider when taking your institution from point A to Generation Z.
Reaching Gen Z: Striving for Convenience
The first point should hardly come as any surprise to those following general industry trends and the surge in digital banking preferences. Members of Generation Z are digital natives that have never known a world without smartphones, so they are likely to continue relying on digital channels for banking. Additionally, statistically shorter attention spans mean little patience for applications that complicate their lives. Gen Z bankers prefer:
- Easy P2P – Gen Z reports the highest use of P2P platforms of any generation, with 79% using this payment method at least once a month. This represents an opportunity for institutions who want to get ahead of third-party providers and offer their own P2P system.
- Digital Wallets – 46% of Gen Z reported using digital payment services one to five times a month, and 13% use them between six to 10 times a month. In other words, there’s a push for push provisioning—or the ability to add cards directly to digital wallets.
- Semi-Autonomous Digital Banking – Gen Z prefers websites and apps that can predict and personalize their needs and preferences. Digital banking apps that use data analytics to anticipate needs or suggested actions can simplify their digital experience further.
Prioritize the Personal Touch
Despite (or perhaps due to) Gen Z’s technological immersion, real human connections are as essential as ever. Statistically the loneliest and most isolated generation, Gen Z visits physical branches far more than one might think. To that end, institutions that illustrate expertise and genuine desire to meet their financial needs have a leg up. Consider these best practices to provide a more personalized experience:
- Relaxed Environment – Gen Zers reported visiting or wanting to visit branches, and a café branch seems to accelerate reported satisfaction during visits. To that end, complimentary food and coffee with an expert is a simple step that can carry an institution far.
- Emotional Engagement – Connecting with the Gen Z lifestyle can also catch the attention of these potential customers. As they tend to be mobile, socially engaged and financially aware, there are many engagement opportunities available. These can include supporting or informing about causes they care about, sharing the ways your institution has given back to the community or strategic social media campaigns addressing common pain points.
- Human Connection – With any of these best practices, a sincere human touch as a financial guide makes a huge difference. While institutions can thrive in-branch on this front, video or live chat features within digital banking can also provide that personal touch.
- Interactivity – Constant inundation with ads has led this generation to generally tune out traditional marketing display banners. As such, useful interactive tools such as calculators, chat features, customer feedback forms, questionnaires and even games can be implemented to engage Gen Z.
- Authenticity – This attribute applies to all the above. Gen Z tends to be hypersensitive and aware of disingenuous appeals to them. So, in trying to engage them, remember to be authentic. They’ll be looking for your expertise, not a failing attempt to be hip.
Like the millennials before them, a combination of rising costs, recessions and now COVID-19 has engendered concern among Gen Zers over long-term financial stability. But while millennials favor spending on experiences, Gen Z banking needs lean more heavily toward saving. In building a relationship with these customers, bear in mind these common characteristics:
- Frugality and Moderation –Generation Z skews in a financially conservative direction. Indeed, many are already saving for retirement. They are also more inclined to shop for deals or seek out sales and coupons before making purchases. Emphasizing available innovative savings products or services can appeal to this thrifty streak.
- Debt Wariness – Given rising education costs, Generation Z is on track to be the most debt-ridden generation in history. In addition, many despise overdraft charges and are less inclined to use a credit card. In this respect, positioning your institution as a resource for services to avoid debt can ease that anxiety and bring them to your door.
- Hunger for Financial Education – Generation Z is eager to learn, so institutions can build trust by providing expertise. This can include financial education services or materials that discuss spending habits, paying down college debt and building credit. Offering convenience and personalization, institutions can make these services available either in person or through digital and mobile banking.
Secure Digital Collaboration Tools
Technology should empower your institution’s employees, allowing them to complete fundamental tasks with ease in the office or in a remote environment. If your institution does not embrace technology such as digital collaboration tools, your Gen Z banking employees—and your Gen Z customers—will go elsewhere.
As you decide which tools will best support your institution’s goals and strategy, consider the following tips to secure your technology and mitigate your risk.
- Develop policies for collaboration tools – As digital collaboration tools become more entwined with business processes, institutions must create policies and controls—along with support frameworks around these platforms—or the security risks associated with them will increase. Your institution should take ownership of these platforms, providing in-house support to employees and creating your own policies to govern their use.
- Create technology-focused positions – To support Gen Z employees and facilitate use of new platforms, institutions should ensure specific employees are focused on technology. These “technology user gurus” should fully understand banking software and the other tools critical to business processes, such as collaborative platforms. In addition to providing support, these individuals could also ensure a good user experience and identify ways to better use and manipulate the technology to achieve business goals.
- Choose your technology strategically – While it is difficult to limit collaboration tools to a single platform, your institution should designate a preference. There are a seemingly infinite number of technology solutions available to support your institution, but it is important to remember that you should prioritize investing in technology that aligns to a business objective. Regardless of which collaboration platform or software you use, your staff should understand the risks involved and how to take basic measures to protect themselves and the institution. Your IT department or service provider should also know how to configure security within these platforms.
- Host employee training – Ensure your Gen Z employees – and the rest of your banking staff – know how to effectively use collaboration tools within a framework accepted by your institution. Especially as updates are released and the tools change, your employees need to know how these tools support business functions. Providing internal training and support will also decrease employee dissatisfaction surrounding these platforms.
- Prioritize a security-focused culture – Using a top-down approach, incorporate security as an integral component of your institution’s culture. All employees at your institution should understand basic security risks and ways to mitigate them. By promoting a security-focused culture among employees of every generation, your institution can reinforce best practices, share knowledge and better protect against malicious activity.
Major Gen Z Banking Takeaways
Institutions that hope to capture the trust, business and employment of Generation Z must act on these trends before they are left behind. With the competition of banks and tech companies affecting their expectations, Generation Z will likely continue to influence the financial services industry for many years to come.
As this is especially true in the digital space, our Digital Payment Trends in Banking white paper offers insight to further guide you as you plan for your institution’s future.