The first true digital generation, the largest generation ever, the cashless generation – the demographic called Gen Z is expected to reshape the financial industry with wide-reaching implications for all consumers, banks, and payment service providers.
Born between 1996 and 2010, most members of Generation Z have not yet formed brand loyalties that determine where they store and how they spend their money. For banks and payment providers, attracting young consumers at the beginning of their financial lives will unlock lucrative opportunities down the road.
As a banking and payment software provider, we devote a lot of time and resources to researching how demographic changes impact our clients and the industry. At SDK.finance, we believe that understanding the banking customers of tomorrow is key to developing modern payment platforms and future-proofing our products.
Generation Z: who are they?
Generation Z is the largest demographic on planet Earth. Currently aged 10 to 24, they account for 32% of the global population or 2.5 billion people worldwide. Although most Gen Zers are not old enough to have their own bank accounts, they are already responsible for up to $143 billion in direct spending in the US.
Morgan Stanley research found Gen Zers to be more technologically savvy than previous generations, with 60% of surveyed respondents using a smartphone before the age of 14. They are very comfortable navigating online experiences and cross-referencing many sources of information to find better deals and services.
Young adults that have graduated and entered the workforce are fiercely opposed to fees and overdraft accounts, a large source of fee income for traditional banks. The new generation of digitally native customers brings new behaviors and preferences that will reshape established business models of financial institutions.
Facts banks need to know about Gen Z
Gen Zers grew up with smartphones and have not put them down since. Mobile penetration is as high as 97%, with an average daily usage of just over 5 hours. They rely on the digital world more than any previous generation and have little patience for anything other than a seamless digital experience. Going offline is also problematic: 60% of young adults are unwilling to spend more than 8 hours without the internet.
More than half of Gen Zers use digital wallet apps like Venmo and Zelle monthly, and over three quarters use other digital payment and P2P apps. Digitally-native, authentic, and social products that offer value have the highest chances of attracting, engaging, and retaining young customers.
Recent research suggests that the impact of the Great Recession and austerity on their parents has left a mark on Gen Z, resulting in a more pragmatic and frugal approach to spending. Gen Zers are highly informed and value price above all. According to an EY report, saving time and making the most of their money is a high priority.
How can banks attract younger customers?
Generation Z is a prime candidate for online-only banks that offer a streamlined digital experience with modern capabilities, transparent pricing, and low fees. Saving and budgeting tools are powerful features that put banks front and center in the lives of Gen Z customers. With many modern banks and payment providers offering reliable and consistent online and mobile banking experiences, it is vital to differentiate services using the latest technology.
Sophisticated personalization strategies enabled by artificial intelligence (AI) and machine learning (ML) create memorable experiences for young customers. Delivering the most relevant financial opportunities, interactive tools, and educational resources at the right time will help to form a closer relationship with the well informed Gen Z clients.
Become an integral part of customer lifestyles
Saving, budgeting, and investment tools engage and retain Gen Z customers by giving them more control over their money. Next-generation features such as voice banking help simplify, improve, and speed up daily operations that involve clients and make banking a lot more convenient.
Add wow-features to increase the customer lifetime value
Gen Z has higher expectations and different habits than traditional banking clients. Banks that adapt existing services and add new innovative features to address consumer needs will ensure lasting brand favourability.
Talk to Gen Z on their terms
Banks should leverage and create mobile in-app chats, gamified chatbots, customer feedback forms, relevant questionnaires, and short personalized videos to keep Gen Zers engaged. Clear communication helps to address their concerns and determine where and when they might need help.
As Gen Z consumers mature, banks and payment providers need to create authentic customer experiences to attract, engage, and retain the incoming generation. During these interactions, trust will remain the main driver of banking relationships. It is worth looking into it if banks wish to remain relevant in the coming years.
SDK.finance is the core software for developing future-proof banking products.