Banks are already thinking about how to improve customer experience for their newest cohort of customers—Generation Z. To some, this might seem premature. After all, most Gen Zers still can’t vote.
But don’t let their ages fool you. While Generation Z is still quite young, two-thirds of them already have a bank account. Oh, and by the way, they already hold up to $143 billion in spending power.
So, there’s that…
Today, we’re going to break down who Generation Z is and what they care about. We’ll explore the relationship they currently have with financial institutions, including their spending behavior and banking preferences.
Finally, we’ll give you some pointers on how to create experiences that resonate with this demographic, so that you can start building brand loyalty today.
Hold up, who is Gen Z?
According to Pew Research Center, Generation Z covers everyone born after 1996. This group has come of age during very turbulent times, from the Great Recession to the COVID-19 pandemic.
Today, many are entering post-secondary schooling. Some are even stepping into the workforce for the first time. For them, employment has been precarious.
50% of the oldest Gen Zers or members of their households have experienced pay cuts or lost a job due to the pandemic.
To say that they’ve had it tough would be an understatement.
In terms of values, Generation Z is similar to Millennials. According to the same Pew research study sourced above, they are generally progressive and pro-government.
Beyond being the most ethnically diverse generation, they’re also tracking to be the best educated. They’ve grown up in a world that is highly interconnected. In fact, 45% say they’re online almost constantly. Many can’t even remember a world without smartphones.
For Gen Zers, the idea of consumption itself has changed. Instead of being about possession, Generation Z is reframing consumption in three key ways: consumption as access instead of possession, consumption as an expression of self, and consumption as a reflection of ethics.
Financial institutions looking to build a relationship with this cohort would be wise to pay attention to these trends, as they promise to have a big impact on tomorrow’s marketplace.
Gen Z and banking
The only experience most Gen Zers have with banking products is a bank account. That said, they’re driving adoption in the digital payments space. 50% use digital wallets every month and 75% use digital payment apps over the same period of time.
Surprisingly, this group prefers doing business with the big four U.S. megabanks—in other words, Bank of America, Chase, Wells Fargo and Citibank. That’s because branch accessibility ranks high for them, as well as the in-person experience. Of Gen Zers polled for a Qudini survey, 81% felt that face-to-face service was important.
While Gen Z is still young, it’s oldest members are actively engaging with their financial institutions.
Now is the perfect time for banks to step up and start building relationships with these soon-to-be-customers. And here’s how they can do it.
Improving customer experience for Generation Z: five tips
Tip 1: Invest in "teen" banking
While many Gen Zers can’t open an account without a parent’s signature, they’re already active online. Financial institutions have about a five-year window to start making a case for themselves. With teen-driven banking accounts, they can help younger people join the banking population.
Look to Jassby’s virtual debit card and GoHenry’s teen-friendly account as current examples.
Tip 2: Improve your mobile banking app
According to Morgan Stanley Research, 79% of 18- and 19-year-olds with a smartphone use mobile banking. We already know this cohort values the in-person experience.
Financial institutions that can make mobile and online banking more seamless, stand to gain ground with Generation Z. Reinvesting in mobile from a feature, functionality, and UI perspective will be critical moving forward.
Tip 3: Build financial wellness products
Gen Z is already facing economic challenges. That might be why they’re thinking about saving, and why they hate debt.
Right now, their oldest members visit branches more than any other generational cohort. Clearly, finances are weighing heavily on them. Financial institutions that decide to help this generation become more financially savvy, with educational and budgeting tools, are likely to become big winners.
Tip 4: Boost your branch experience
We’ve explored some of the ways banks are upping their branch game. Freebies like coffee and snacks also go a long way.
Tip 5: Improve your community and social impact
If community development isn’t on your radar, it should be. In fact, it can become a key differentiator. Whether it’s programs to support local businesses, youth, diversity and inclusion, or the environment, giving back is important to the newest generation.
Fintechs have already started rolling out socially responsible investment products. It’s the future.
By 2034, Generation Z will be the biggest generational cohort the U.S. has ever seen at 78-million-people strong. Tomorrow’s category leaders are adapting their businesses to fit these consumers’ needs today.