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Financial institutions must pivot to engage and attract Gen Z customers

The following is a guest post by Andy Newman, VP of Business Development Wildfire Systems.

How can banks plan for the customer of the future?

As Gen Z grows into a robust consumer base with an estimated $360 billion spending power, FIs need to consider the factors influencing this generation and beyond and adjust their strategies to attract and retain this customer cohort.

With a range of new external considerations, including payment form factors changing, new consumer expectations, the proliferation of digital-only banks, and internal ones such as Gen Z’s concerns with social issues and the environment — how will banks/FIs meet the needs of Gen Z and beyond?

Gen Z characteristics at a glance

The members of Gen Z are still maturing into their spending power, and they are rapidly approaching or just entering their prime earning, spending, and borrowing years.

The oldest members of this generation are now about 25 years old, likely in their first jobs, and starting to flex their dollar muscles. They pay close attention to where they spend their money and the brands and companies they spend it on.

While it’s always tough to generalize an entire generation, some characteristics hold for most cohort members. In general, Gen Z is values-oriented and values-driven. They care about social, environmental, and moral issues and expect the brands they do business with to reflect their values.

But, at the same time, they expect companies to be transparent and authentic. They can see through fake posturing by brands and will reject – and even boycott –  those that don’t match their morals.

Related: Serving Gen Z demands alternative data, AI to foster more inclusive credit decisioning

As an age group who has never known life without the internet, Gen Z is online all the time. They are digitally savvy, especially when it comes to mobile phones, and social media (TikTok is the current favorite) is critical to them.

They are also hyper-aware of data capture and privacy issues. Only 25% feel in control of their data. This generation is likelier to take online data protection steps like using a VPN to protect their privacy or an ad-blocker.

Finally, growing up in an era where they saw their parents impacted by the 2008 recession and are now entering the workforce in a time of extraordinary inflation, Gen Zers are stressed about money, and many lack basic financial literacy.

They are also wary of debt. They don’t hate credit cards but are careful about how they use them.

Many have tried “Buy Now Pay Later” (BNPL) services to pay for items online, but according to Piplsay, almost half of them missed BNPL payments for purchases made during the 2021 holiday season.

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What this means for banks

First, banks must meet this generation where they are. They are online often and usually with their mobile devices – 55% of Gen Z spend five-plus hours daily on their smartphones.

Because of this, financial institutions must ensure their brands, products, and services offer seamless digital experiences, regardless of the device a consumer uses.

Because they are digital natives accustomed to smooth online experiences from the sites and companies they interact with, Gen Z won’t settle for a poor customer experience from their banks either.

According to research from Finn AI, Q2, and Rival Technologies, 53% of Gen Z want to be able to find quick answers to their customer support questions online. With this in mind, banks must make every experience and interaction convenient and easy to understand. Digital bill payment and person-to-person (P2P) payment services are “must haves” for this generation.

Plus, with sensitivity towards Gen Z’s concerns around data protection/privacy, banks can work to reassure them of the ways they protect customer data.

Be upfront with how consumers’ information may be shared with a bank’s affiliates and marketing partners, and forthcoming with instructions on opting out of any sharing.

Don’t count social media out

Next, banks must also consider how they present their brand publicly.

Because Gen Z is a heavy social media user, banks interested in appealing to this audience must have a social media presence and showcase the ideals and mission of the bank in ways that appeal to Generation Z.

Banks must be transparent and authentic without seeming like they are fake or trying too hard.

Consider including educational content that helps them learn more about being financially responsible and how a bank can assist them in this goal.

Opportunity for financial education

This brings me to my next point: With social media, as well as through financial management features and education, there’s an opportunity to become a financial wellness partner with this generation.

Banks can work with influencers (who play a significant role in helping Gen Z shape their opinions and knowledge of brands) to provide valuable tips and information regarding financial responsibility, such as how to build monthly budgets, create an emergency savings fund, learn about how credit scores work and what affects a score, the risks of using BNPL services, etc.

In addition, banks can help educate these prospective customers about the bank’s products that can help them build credit responsibly (e.g., debit cards connected to checking accounts). There’s an opportunity to educate these customers and help them make an informed choice.

For example, BNPL or installment-type products can be introduced as a cash flow tool to teach people how to manage their money over time, not irresponsibly. In addition, new niche card products are coming to market that encourage on-time rent payments with rewards and incentives and builds credit ratings. Bilt Rewards is one company offering such a product. 

The goal is to build trust through transparency and fiscal education.

Creating a solid dialogue by offering trustworthy content that helps these younger customers get smarter about money will help a bank develop longer-term relationships and assist these consumers in ways that benefit them and the bank to build a productive and hopefully lifelong partnership.

  • Andrew Newman

    At Wildfire, Andy Newman develops strategic revenue-enhancing partnerships with financial institutions and fintechs, helping them incorporate value-adding customer loyalty features powered by Wildfire’s platform. He has deep experience in partnerships in the payments and loyalty space, having held leadership positions at Cardlytics, Truaxis (acquired by MasterCard), and then at MasterCard as Vice President Loyalty Solutions.