By David Murphy, Head of Financial Services International, Publicis Sapient
Gen Z matters. Really matters.
The demographic cohort born between the mid-1990s and early 2010s is starting to enter the workforce. As they begin to assert their influence, with an estimated £353bn spending power, banks need to adapt to their preferences and needs.
In a time where 83% of Gen Z consumers report being frustrated with bank processes, banks and other financial institutions should be examining their customer experience (CX) at a macro level to find ways to engage these younger customers and develop loyalty with customer lifetime value in mind.
Financial services is an industry built by and for Boomers and Gen Xers and as a result, there is a disconnect between what some banks provide and what Gen Z customers want to see. So how do you solve a problem like ‘Gap Z?’
The answer lies in transparency – understanding this generation’s priorities and building authentic solutions to their biggest problems.
The changing tide
Gen Z represents about 20% of the UK population. As true digital natives, they’re unique in history and represent a real challenge to banks. A common mistake is to bucket Gen Z with millennials; Gen Z is a whole different ball game when it comes to how, when and where they interact and the expectations they have from their financial services provider. Gen Z is adept at using tech and won’t be confused by more sophisticated offerings. They embrace new ways of banking; a large proportion of Gen Z have a traditional bank account and 65% of Gen Z investors have added alternative investments such as cryptocurrency to diversify their portfolio. They prefer doing finance online, spend an average of eight hours a day on their mobile phone and have an average attention span of about eight seconds.
Seamless and customised
Gen Zers have grown to expect personalisation on all their platforms, and banks would do well to draw insights from other industries – like retail – that understand how to do this. This means providing personalised products and offerings for customers based on individual needs.
The generation has high expectations when it comes to digital experiences, and banks should focus on removing friction at all touchpoints and enhancing simplicity and ease of use. This goes for all digital interfaces but is particularly true for mobile apps. As well as digital natives, Gen Z is also a mobile-first generation, with 80% of Gen Zers getting their first smartphone around 12 years old.
The generation has grown up in a world of real-time digital interactions, where they have access to anything and everything at their fingertips. They are also the biggest users of social media and online gaming. If financial institutions want to engage with Gen Z, they need to go where they are: online.
This provides a great opportunity for banks to emphasise their presence across social media with platform-catered content that goes beyond selling a service. Engaging with Gen Z on social media will help keep a finger on the pulse and constantly improve accessibility to emerging payment options.
Meeting new expectations
They also have different expectations when it comes to defining what good service looks like. Contrary to older generations, Gen Z users are more comfortable talking to robo-advisers and chatbots. To address this need, financial institutions need to re-examine their customer service and the engagement options they offer.
This is also true for the financing options they provide. Research shows that the majority of Gen Z, 82%, have their sights set on homeownership. But one of the biggest challenges for mortgage providers and lenders is that Gen Z earns money in different ways compared to other generations. They are multi-earning, and many have side hustles, with 40% combining at least two roles. Across the board, they are also changing jobs more quickly. This means that the usual metrics for assessing customer mortgages in the ‘gig economy’ won’t provide an accurate picture of Gen Z earning power, and banks need new ways of judging income and asserting the likelihood and fitness to repay mortgage loans.
Authenticity as currency
When evaluating banking service providers, Gen Z doesn’t just want service; they want service with a purpose. This is the group that is highly informed and engaged with social and environmental issues. They actively seek out socially responsible investment in companies that are vested in helping bring change about. Most would switch their financial services provider if they don’t uphold the principles they hold dear, such as diversity, equal representation, climate change, mental health and higher education.
With many banks competing for Gen Z business, winning over the generation comes down to authenticity – they want to see authentic action and commitment. Banks should be taking steps to show that they’re trustworthy and transparent, offer options for ESG-linked investing, and make commitments towards preserving the environment.
Bridging the gap
There’s no denying Gen Z is changing the face of banking forever. Financial institutions must find a way to accompany them on this journey or get left behind.
Banking service providers need to understand the unique preferences and needs of this generation and find ways to demonstrate how their services can add new value to them.
Gen Z has high expectations for digital experiences, and that’s not a bad thing. It will push providers to innovate and develop their services, generating more user-friendly, streamlined and engaging ways to manage finances for the benefit of all generations.
