Generation Z has been characterized by its disruptive influence across industries. This cohort (born from 1997 through 2012) is challenging established norms and prompting a fundamental reconsideration of business approaches. The transformative impact extends into the financial sector, where this generation's distinctive blend of traditional and digital banking habits is pushing financial institutions ('FIs') to rethink their business strategies. With an estimated 18-20% of consumers in Canada and the US1, Gen Z's growing presence is undeniable, and projections suggest that there could be >50 million Gen Z digital banking users by 20252, making them a pivotal and influential force in the financial landscape.
In July 2023, Phase 5 (with panel partner Dynata) conducted an online survey of 952 Gen Z consumers (aged 18-29 years*) in the US and Canada to uncover key insights about their banking habits and preferences. The results reveal a number of takeaways that will help FIs better understand, and therefore better serve this important and growing segment. In particular, findings offer guidance on when to double down on digital tools, and conversely, when to dial up the human element of service. This is the first of two articles that will summarize the study's insights; read on to learn when Gen Z banking customers most need their banks to show their human side.
Financial Advisors Should Not Be Robots
While Gen Z consumers prefer digital tools for routine banking tasks, such as bill payments and fund transfers, face-to-face interactions remain vital for financial advice and guidance. Notably, 50% prefer in-person consultations with a financial advisor. Furthermore, while digital channels are most used for learning about products and services, there are still nearly one in four (23%) who prefer to gather this information in-branch.
The takeaway? Traditional banking methods remain valuable to Gen Z at critical points in their financial journey. While digital channels are accessed for convenience and efficiency, the human touch remains essential when it comes to more complex financial matters. Clearly, FIs need to continue investing in user-friendly mobile apps and online platforms, which could include using AI to help personalize purchase and planning journeys for Gen Z customers. At the same time though, the research suggests that FIs need to maintain the ability to provide face-to-face and in-person services. Re-purposing traditional branches to information hubs, where customers can seek advice or get one-on-one consultations is a trend that many FIs are focusing on.
Referrals from Friends & Family IRL Matter
Personal relationships greatly influence Gen Z’s choice of FI: Close to half (49%) select their FI based on parental affiliations, and 41% say recommendations from family and friends also play a crucial role. It’s these real-life human connections and personal ties that are driving their banking choices.
What does this mean for FIs? This finding demonstrates the importance Gen Z places on trust and personal relationships. Banks may want to consider incentive-based referral programs for the Gen Z parent demographic (e.g. Gen X) as well as for existing Gen Z customers. Additionally, the use of carefully selected influencers may be considered as tactics for customer acquisition.
Be a Human, and Take Care of Your Fellow Humans
While only a fraction (7%) of Gen Z currently cites social responsibility as a significant factor in bank selection, close to one in five (17%) would consider switching their FI if they felt that their current FI did not support essential values or causes. As this generation matures, their likelihood to consider social responsibility in their choice of FI may become more important.
Social responsibility and value alignment - in other words, taking care of each other and the planet - does have an impact on Gen Z choices. Banks should consider supporting local causes to help build trust and showcase commitment to the values that resonate with Gen Z. This effort could also serve to differentiate the FI in a competitive market.
Summary
Gen Z is reshaping the banking landscape. By understanding their habits and concerns and proactively adapting to those, financial institutions can cater more effectively to this influential demographic, position themselves as authentic partners and foster long lasting loyalty.
Phase 5’s 2023 study of Gen Z consumers demonstrates that while this generation was born into a digital world, with search engines and social media and all types of apps, there are still important elements of their financial needs for which a human touch is preferred.
Not surprisingly, there are still many aspects of financial service for which Gen Z prefers digital channels. Our second article in this series will dive deeper into how banks can leverage technology to better serve this growing segment.
To learn more about our studies, or to discuss how we can support your organization’s Gen Z engagement strategy specifically, contact us.
Footnotes:
*Note: In this survey, we also included the age cohort at the cusp of Gen Z and Millennials (27-29 years).
1) https://www12.statcan.gc.ca/census-recensement/2021/as-sa/98-200-X/2021003/98-200-X2021003-eng.cfm
https://www150.statcan.gc.ca/n1/pub/91-520-x/91-520-x2022001-eng.htm
https://www.statista.com/statistics/296974/us-population-share-by-generation/
