Is Gen Z The Next Big Thing in Banking?
A powerful generation of future consumers is emerging. Marketers who want to attract and retain tomorrow’s customers need to act today – and they need to act smart when it comes to their approach. Banking is no exception.
To youngsters, brands represent more than products and services. They’re ways to communicate who they are, who they want to be, or even want to appear to be. That’s why, generation after generation, the young have been a major target for marketers across multiple industries – from entertainment, beverages and fashion to healthcare and furniture.
Banks haven’t given much attention to young consumers though, and it’s easy to understand why. Teenagers aren’t old enough to qualify for credit cards or loans, and they don’t have total control over where they can store and spend the bulk of their money.
Yet something is different about Generation Z – those born between 1996 and 2010 –who, according to some estimates, hold up to $143 billion in spending power:
- For the most part, Gen Z knows nothing but prosperity — a stock market that has risen 400% since 2009, writes The Financial Brand.
- GenZers have been exposed to gadgets, the internet and social networks from their earliest days – so their high levels of digital literacy and ability to instantly information make for a seriously well-connected generation.
And there’s more. Here are some interesting statistics that round out the story:
- By 2025, the group will make up a quarter of the Asia–Pacific (APAC) region’s population — the same as millennials (born 1980–1995), McKinsey finds projects.
- By the year 2034, Gen Z will comprise the largest generation ever in the U.S., peaking at 78 million, according to Morgan Stanley’s population forecasts.
- Older and younger GenZers combined already represent approximately 40% of the USA’s consumer purchasing power, writes The Financial Brand, quoting industry research.
- In Brazil, Gen Z already makes up 20 percent of the country’s population, Juan Guerra, Head of Rappipay Mexico, Rappi said during the FintechOS Annual Summit, a virtual event dedicated to innovation in financial services and hosted by FintechOS.
Therefore, a powerful generation of future consumers is emerging. Marketers who want to attract and retain tomorrow’s customers need to act today – and they need to act smart when it comes to their approach. Banking is no exception.
Why today? And what does acting “smart” mean?
“Gen Z and Millennials could reshape the financial industry in their tech-savvy, mobile-first image” – Morgan Stanley
Consider – Yes. Act – Hmmm.
“Ignored and misunderstood: Gen Z is the toughest audience to please. So how can banks and insurers serve this digitally-demanding demographic?”
FintechOS addressed this topic and explored how Gen Z is reshaping the future of banking. Here is one major key take-away from the FintechOS Annual Summit: “Banks do consider Gen Z as the next big retail segment but they don’t always act like it”.
So, what’s to be done?
Here’s a list of three major actions that might work.
#1 Breathe digital
Following extensive research, McKinsey found out that “GenZers want brands to be personalized, be customized, and help them be distinctive. Therefore, brands can’t rest on history. To stay relevant in the market, brands need to leverage their legacy while investing in fast and continuous innovation”.
When it comes to banking, the situation is no different. “To attract, engage, and retain GenZers, financial services firms must develop products that are social, authentic, digital-native, and educational, offer value, and evolve over time”, writes Business Insider Intelligence, who conducted research on the preferences of younger generations.
Are banking brands acting this way?
“I think banks do consider Gen Z as the next big retail segment, but they don’t act like it. They try, but they don’t succeed”, said Eduard Burghelia, a 23-year-old Entrepreneur, Founder of Confidas, and a speaker at FintechOS Annual Summit.
Burghelia, who is 23, admits that he doesn’t get upset when the bank calls him to come to the branch, “but my friends who are 16 years old or friends who just turned 18 years old get really upset”.
Why aren’t some banks hearing GenZers’ preferences yet? Maybe because “A lot of banks focus on their current market, on their current revenues and on their current network”, observes Oluwaseun Omotosho, Head Digital Business & Ventures, Union Bank of Nigeria.
#2 Be agile. Leave demographics behind
But, as Fintech and Big Tech players expand their payments functionality, banks will need to invest in so-called “teen banking”. This doesn’t necessarily require anything different in terms of tech; it really just calls for a new approach.
For instance, Nina Mohanty, Co-Host at Breaking Banks, says she knows GenZers who are influencers and have so much money “that they should be considered for private banking”.
So “We need to start moving from demographic banking to more of a life span”, and hyper-personalisation of products and services is part of the new thinking.
Sergiu Negut, Co-Founder and EVP at FintechOS, agrees: “Let’s treat people, not according to the demographics. Let’s think of who they are as people, as humans, and as digital consumers. And this gives us the opportunity to include everyone.”
In short: “If you want to have a future, you need to cater to the younger folks, because once you capture them as customers, they’re not going to leave you”, Juan Guerra Head of Rappipay Mexico, Rappi concluded.
#3 Be social. Play
It is well known that gamification techniques aim to leverage natural desires like socializing, learning, competition, success, self-expression, and closure to elicit positive change. “And today, using technology, gamification can be easily employed to improve financial behaviour and engagement in Gen Z customers”, said Teodor Blidarus, Co-Founder and CEO of FintechOS in his presentation dedicated to Gen Z Banking.
Research talks. Gamification is a note-worthy trend with a global market expected to grow from $9,142mn (2020) to $30,741mn (2025), according to Tokara Solutions, which claims that CRM gamification encourages user adoption and increases lead conversion.
Here is an example: Emirates NBD’s fitness app launched an incentive to motivate people to save more while working out. “Customers could achieve daily goals like 12,000 steps per day and get a 2% interest rate as a reward. The results were tremendous: $4.37 million in savings”, reveals a case-study quoted at the FintechOS Annual Summit.
Will being digital, social and playful be enough for banks to gain and retain GenZers? Time will tell, but catering to them starting today and embedding the right technology seem to be the first steps towards staying in tomorrow’s banking business.
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