Generation Z (the cohort born from 1997 to 2012) has been characterized by its disruptive influence across many industries, and its ability to challenge established norms - prompting a fundamental reconsideration of business approaches. This transformative impact extends into the financial sector, where this generation's distinctive blend of traditional and digital banking habits is pushing financial institutions ("FI's") to rethink their business strategies.
In July 2023, Phase 5 (with panel partner Dynata) conducted an online survey of 952 consumers aged 18-29 years* in the US and Canada, to uncover key insights about their banking habits and preferences. Based on this research , we published "Gen Z Banking Insights - The Importance of Human Connections", which identified and discussed aspects of banking where these consumers tend to seek out and place value on having a human element in their banking experience.
This is the second article based on our 2023 study, this time with a focus on how and where technology can be leveraged to better serve Gen Z banking customers. 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. The findings shared below will help FIs better understand this important and growing segment, and intelligently assess where to invest scarce resources in technology to better serve them.
Offer Financial Advice Where Gen Z Lives
Through our research, we observed that Gen Z feels cautious when it comes to their future financial outlook. Over one in three (37%) are not confident about their financial future, with expense management (74%), rising inflation (60%), and housing prices (54%) being primary concerns. It makes sense that they could and would appreciate some guidance when it comes to managing money.
FIs have an opportunity here. By taking a proactive role and offering customized savings and investment advice and financial education, they can help equip Gen Z with the necessary tools to navigate economic uncertainties as well as position themselves as partners in Gen Z’s financial journey. But where and how can banks reach this generation with their message and service offerings?
Gen Z's approach to financial education is diversified. As our earlier article demonstrated, human connections matter: 43% of study participants rely on family and friends and 23% consult a financial advisor. At the same time however, 16% report turning to banking and budgeting apps, and 9% to social media (largely YouTube).
FIs need to tap into these digital platforms and leverage technology for effective engagement, and to provide meaningful, educational content where personal connections can’t. Offering Q&A sessions on financial topics, sharing success stories, or collaborating with carefully selected social media influencers are some ways to initiate connections online and begin to offer much needed financial guidance. By meeting Gen Z where they are, FIs can expand their reach and presence.
Improve Rewards and Service With Digital Tools
According to our 2023 study, nearly half of Gen Z respondents would consider switching FIs for better rewards, interest rates or fees. More than 1 in 3 would reconsider their banking ties in the event of bad customer service. In other words, rewards rates, and service drive loyalty and switching.
This finding underlines the need for FIs to prioritize customer experience, both in terms of service and value. Investing in customer engagement strategies and loyalty rewards programs might be a more sustainable approach for customer retention than just focusing on promotional offers to attract new customers.
Wondering where to start in terms of improving your organization's customer experience? Given how technology touches nearly everything, user experience is undoubtedly a critical part of customer experience. Consider a review of your User Experience through the lens of The Future of the Interface paper by Phase 5 Partner Arnie Guha, and/or an assessment of opportunities for your company's UX and CX teams to work more closely together.
A recent award winning example of leveraging technology to improve financial service is the JP Morgan Self Directed Investing platform, complemented by its proprietary online educational tool, The Know. According to JP Morgan, the platform received “strong marks for ease of use, investment options, mobile trading apps and commissions and fees”, and The Know contains “more than 550 articles and videos to help readers navigate their financial lives”.
Deliver Personalized Recommendations and Advice
A part of what “improved service” means is certainly personalized service. And as the 2023 study shows, about one in three Gen Z consumers feel that their primary FI lacks customized product offerings and personalized financial advice. A one-size-fits-all product or service offering isn’t compelling for this generation.
Over the past year, since the rise of Generative AI platforms such as ChatGPT, businesses across industries have been embracing AI at a dramatic pace to support and enhance business operations. FIs should leverage AI and advanced data analytics, coupled with customer research to better understand the unique financial behaviors and preferences of Gen Z and tailor their product and service offerings to cater to this generation. You can read more about examples such as personalized financial products, security and fraud detection applications, and top-rated customer service in Phase 5’s 2023 paper The Impact of AI on CX in Financial Institutions in North America.
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.
As our earlier article illustrated, there are important elements of Gen Z’s financial needs for which they prefer a human touch. However, as the above results from Phase 5’s study of Gen Z consumers demonstrate, there are several areas where digital tools and technology are key to connecting with this generation, and to providing the type of service and experience they expect from their bank.
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/
