Most financial professionals would agree that in recent years, we’ve been inundated with articles and reports containing tips and tricks for capturing the loyalty of the Millennial generation. Yet, in what felt like a blink of an eye, the oldest members of that cohort are now approaching middle-age; and today, there’s a powerful generation emerging that deserves focus and attention – Gen Z.
Born between 1996 and 2015, Gen Z is already the single largest population segment, counting 68 million in their ranks. Within the next five years, Gen Z will be the fastest growing generation in the workplace and in the marketplace. In fact, you’re probably already working with Gen Z employees, because the oldest members of this generation are 23 years old. Gen Z will make up 40% of all U.S. consumers by 2020, with $44 billion in annual purchasing power. They are approaching several key life-stage milestones, such as graduating from college and establishing their own households.
Financial institutions should take note: a window of opportunity currently exists to earn their business and loyalty since Gen Z is forming their financial habits and relationships now. Forward-thinking banks and credit unions can win the hearts and minds of this critical new group of consumers by deploying tactics in four key strategic areas.
Gen Z is frugal with both their time and money. They are accustomed to accessing an entire universe of information within seconds and they are gifted multi-taskers. To appeal to Gen Z, financial institutions must ensure their solutions are practical, intuitively-designed, fast, and convenient. Think: easy digital account on boarding and apps that load quickly.
Offer an ecosystem of products and services through a time-saving hub, which simplifies multiple aspects of the user’s transactional and informational requirements.
Gen Z is looking for “table stakes” digital capabilities like mobile-native interfaces, digital money management, conversational banking, and cardholder controls. But keep in mind that they also want access to a live person at a branch. Although Gen Z’s primary bank account access is digital, 20% visit branches weekly (outpacing the frequency of Baby Boomers!) This means it’s important to deliver a consistent customer experience across all channels, including the branch.
Gen Z cares deeply about value – quality in relation to cost. More than 80% will switch brands for a product with better quality. This fee-sensitive generation wants to avoid overdraft fees by harnessing money management tools; and staying informed via alerts and notifications. Institutions can impress Gen Z by explaining the advantages of recurring payments; and by offering prepaid cards that help them stay within a budget and protect their depository account credentials when shopping. Proactively present new products to users at the right moment.
A Bloomberg News survey reveals Gen Z is more willing than previous generations to put its money where its values are. Their “BS radar” quickly identifies organizations that are inauthentic or lack credibility. Members of this generation want to purchase products from ethical companies that are aligned with their values, and 80% refuse to buy from companies involved in scandals. Almost two-thirds are more likely to purchase from brands that support causes or charities that are important to them.
Communicate how your institution’s brand integrity aligns with Gen Z’s values; for example, spotlight your employees’ involvement in the community. Where appropriate for your organization’s mission and identity, take a stand on issues that Gen Z cares about, like the environment, healthcare, housing and education costs, equality, terrorism, and data privacy.
While their lives revolve around social media, Gen Z’s social media presence differs from previous generations. A significant number believe Facebook is for “old” people. Gen Z prefers to engage brands via Instagram or YouTube. They trust YouTube videos more than traditional forms of advertising and about half follow more than ten influencers on social media.
Gen Z consumers are highly connected, engaging frequently with their peers to share their perspectives – and they expect the same type of relationship with brands. Reach Gen Z via their preferred social media channels with a focus on building your brand rather than directly selling products. Remember they desire two-way conversations with companies, so create a space for listening to their input and opportunities for building dialogue.
You may be surprised to discover that despite Gen Z’s dependence on social media, more than half say the strongest influencers on their decisions are their family and friends. In a shift from Millennials and Gen X, Gen Z relies on their parents for financial advice. Parents shape Gen Z’s money habits, and that influence extends to the selection of a financial services provider. When it is time to open an account, 61% choose the same financial institution their parents use. It makes sense to leverage the existing relationships with parents by offering linked savings accounts, a teen-focused prepaid debit card for younger Gen Z people, and by providing parents with financial literacy tools they can share with their family.
Gen Z’s top financial goals are: saving money, building a career, mastering financial management skills, and operating within a budget. Despite these aspirational objectives, money topics create anxiety for many Gen Zers. More than 80% of Gen Zers between 18 and 21 say money and finances are a leading source of stress to the point that worrying keeps them up at night. Paying bills is confusing for some Gen Zers, with more than a third forgetting to pay a bill, and more than half paying bills late. Having come of age observing their parents deal with the financial ramifications of the last recession, many Gen Z people are debt-averse. Twenty percent say debt should be avoided at all costs.
To help Gen Z gain proficiency in money management and reduce their stress levels, financial institutions should provide financial management tools, online educational videos, and personal finances coaching at the branch. Its notable that Gen Z consumers are three times more likely to take a financial education class than Millennials. Alerts, notifications, and contextual tools that help Gen Z understand their status and avoid missteps will be met with enthusiasm.
Their savings goals are not limited to building a nest egg, saving for college, or accumulating a down payment for a home. One-third of Gen Z plans to start saving for retirement in their 20s because they expect to retire at 60. With extended lifespans for many Americans reaching well past the age of 90, a retirement plan targeting 60-years-olds will require a significant amount of savings.
To help Gen Z achieve these objectives, offer solutions that make saving money convenient, painless, and automated. Consider using gamification techniques to encourage savings. Some institutions may want to offer wealth management and investment advisory services as the Gen Z cohort matures.
One last piece of advice for winning the hearts and minds of Gen Z: think of your Gen Z strategies as supporting their journey as they grow and mature, rather than a single initiative for your financial institution. Noted author Robert Louis Stevenson said, “Don’t judge each day by the harvest you reap but by the seeds that you plant.” Today’s investments to understand Gen Z’s needs and to empower their ability to succeed are not only beneficial for capturing customers and members for your financial institution – it also contributes to tomorrow’s strong, financially-responsible citizens.
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