How Gen Z are reshaping the banking landscape
Generation Z (Gen Z) are projected to be the largest consumer group with a monumental impact on global markets, making them the most influential generation since the baby boomers. They were born between 1997-2012, and account for 32% of the global population. They are unique compared to other generations for a number of reasons: they were raised in an entirely digitised era, are therefore known for their use of technological devices and social media, their interest in environmental, social and political issues, and matters of ethical concern.
Their behaviours and thought processes have been influenced by being raised in an era of economic instability, thus affecting their consumption patterns, financial vulnerability and relationship with brands. This blog will discuss the challenges and opportunities banking and other financial organisations face when trying to attract and retain Gen Z as customers.
How are Gen Z reshaping the consumer landscape?
Gen Z are displaying vastly different behaviours to prior generations, revolutionising and reshaping the consumer landscape, with consequences permeating the financial services market that are both transformational and challenging. This puts pressure on businesses to rethink how they communicate, deliver value, attract and retain customers and ensure they are upholding the high expectations of this cohort.
Organisations will have to ask themselves what do Gen Z want and how can we best deliver it?
Only eight seconds?
Members of Gen Z were raised in a highly stimulating environment and are digital natives due to a lifelong exposure to technology. This has resulted in a hypercognitive generation adept at utilising a myriad of digital devices, social networks and platforms.
Gen Z are also used to having readily accessible information at their fingertips and are proficient at multi-tasking, often swapping between activities and screens at a rapid rate. This has resulted in them having the lowest attention span when compared to other demographics, a mere eight seconds. Consequently, organisations must work harder to capture their attention and sustain it in a fraction of the time comparative to other generations.
App design is key
Due to their digital upbringing, Gen Z are more comfortable using online and mobile banking platforms and are less likely to visit traditional branches. This increases the importance of financial services organisations having a strong online presence and the availability of digital banking options.
Research shows that most Gen Zs check their bank account balance daily and are likely to use savvy banking apps to analyse their spending and savings data to effectively manage their accounts. This may in part be due to the current confluence of geopolitical and economic challenges and macroeconomic trends, resulting in Gen Z being significantly worse off financially compared to their baby boomer counterparts at the same age.
Traditional banks have lost 22% market share since 2009 to the challenger banking apps, like Revolut and Monzo. They are therefore attempting to keep up with disrupting challenger FinTechs by pivoting to app-based services and working to improve their digital offerings to win back market share.
Revolut and Monzo help customers to monitor their spending and assist in creating workable budgets and rewards for keeping on track. Another FinTech example is Plum, which helps users invest, save and manage their spending. Plum analyses the users’ saving potential based on an expenditure evaluation within three minutes. Consequently, financial services organisations need to create more targeted offerings, focusing on product and app design opportunities to meet expectations and support this demographic.
Core banking processes
Gen Z have a strong desire for immediacy – they’re used to being able to do everything on their phones and having information available immediately. This poses a challenge for some legacy banks, where their payment processes can take up to four working days to transfer funds internationally. Long wait times for bank account, loan and mortgage approvals, and ineffective processes will cause frustration within this cohort.
Banks should be investing in making improvements to these processes to ensure they remain a competitive and viable option for Gen Z.
We are seeing a gradual step change. A project we completed with a global tier one bank revealed that particular focus is being dedicated to optimising the customer onboarding process, to ensure customers can use the products and services on offer through simple and intuitive methods. Streamlining processes using straight through processing will be key with enhanced onboarding functionality, intuitive, minimalist design and accessibility.
Ethicality must be considered
Due to the widespread availability of information, younger consumers are quick to form an opinion of a brand, the company who owns it and their suppliers. 28% of ‘Zoomers’ cite the ethics of a company would be influential in their decision making, thus financial services organisations will need to be mindful of this and aspire to be inwardly and outwardly ethical to avoid scandal and any negative publicity. A key example of this is the funding of environmentally negative companies.
Following a number of high-profile cyber-attacks on businesses, data security has been proven to be an integral requirement for Gen Z from their financial providers, with 66% highlighting they would only stay with a financial services organisation if they have a proven record of robust data security practices.
As the Gen Z workforce matures and increases their buying power they will become savvy market participants. Gen Z’s insatiable appetite for instantly available information, a customised experience and desire for financial awareness presents an opportunity for financial services organisations to develop functionality within applications, like AI virtual assistants and spending analytics to guide Gen Zers to make informed financial decisions.
The prevalence of an increasingly diversified financial services market means organisations will have to work harder to remain competitive. Financial services organisations must invest in attracting and retaining Gen Z and be mindful of their lack of attention span, the huge availability of alternatives and increased digitalisation, meaning swapping providers can be done with ease.
Serving this cohort in a relatable way, whilst attempting to ensure the banks’ other customers are not alienated is going to be a game changer.
About the author
Marie is an experienced management consultant, having worked on a variety of large-scale projects across financial services and technology.