Gen Z is the talk of the town as of late, and for good reason. This generation may be one of the youngest, but they are proving to be one of the most influential across all industries.
In the banking industry, Gen Z is making waves thanks to the massive preference for digital and personalized services. Unlike generations of the past, Gen Z is more eager to embrace change within the industry and expresses interest in newer strategies, such as open banking.
To write Gen Z off is to ignore the swell of new financial customers and investors coming to age as we speak. As this generation grows into adulthood, they will undoubtedly change the landscape of finance as we know it now – and, in fact, they already are.
In this article, we will discuss how Gen Z is transforming the banking industry and how financial institutions can adapt accordingly.
Why Banks Need to Pay Attention to Gen Z
Gen Z encompasses the pool of individuals born after the widespread popularization of computers and smartphones. As a result, this generation is considered to have the highest innate level of tech-savviness.
The Pew Research Center includes everyone born from 1997 to 2012 within this generation. As of 2021, everyone born in 2003 or earlier is legally an adult, making a good portion of Gen Z eligible for full financial services. As this generation continues to grow older, they will soon become the dominant demographic served by banks.
Gen Z and Digital Banking
Due to the widespread use of smartphones, the majority of Gen Z is inherently expectant of digital services to some degree – particularly when it comes to mobile services.
According to research by Morgan Stanley, 50 to 80 percent of smartphone-owning Gen Z members already use mobile banking. However, it is important to note that while Gen Z demonstrates a preference for mobile and digital services, this does not mean they are not interested in traditional banks.
Recent FinTech research reveals that 87 percent of Gen Z financial consumers prefer traditional banks over newer business models such as neobanks.
This shows us that most members of Gen Z are searching for a hybrid between traditional and technology-based financial services. In turn, this also reveals that well-established financial institutions do not necessarily lose their competitive edge over technological innovation alone.
Nonetheless, Gen Z is both adventurous and young, making them less likely to remain loyal when it comes to financial providers. To keep or attract the attention of this generation, banks will need to look deeper into what types of services Gen Z truly prefer.
Embracing Open Banking to Provide Personalized Experiences
Historically, broad sets of customer data and insights were held by only a small portion of financial institutions. This lack of access to data made it difficult for banks of the past to get to know their customers better. Thus, there was a lack of unique and tailored experiences for most banking clients.
Nowadays, open banking has begun to reshape the reality of financial customer data. Open banking refers to the practice of financial service providers sharing data and information according to conditions agreed upon by the customer.
By embracing open banking, financial institutions can gather much greater amounts of information and details on their Gen Z audience. This allows them to significantly heighten the personalization options for the services they provide.
In fact, personalization is one of the most important factors to customers regardless of their generation. According to Zafin’s 2020 Consumer Banking Survey, 88 percent of respondents across all generations surveyed believed personalized recommendations are important services for banks to provide.
Engaging Gen Z Clients Through Gamification
Aside from personalization, banks must also consider other creative ways to keep Gen Z engaged. After all, the higher their engagement levels, the more likely they are to stick with a financial institution long-term.
One method emerging for increasing digital engagement with Gen Z is the use of gamification. Gamification is the application of game-style elements and features within a digital experience. For digital banking, examples of gamification include:
- Cashback rewards for financial spending
- Helpful video and educational exercises that incorporate financial literacy skills
- Interactive loyalty programs
- Tutorial games for apps
Gamification enables banks to make services and processes that are typically seen as tedious into more interactive and memorable experiences. This is especially beneficial when dealing with Gen Z, who naturally expect more seamless digital interactions.
Final Thoughts: Attracting Younger Banking Customers is Crucial
Gen Z is a fascinating generation of young people who value both technology and personal financial stability. As more of them emerge into adulthood, they will continue to drive the financial industry to reimagine traditional banking.
Impressing Gen Z will require a greater focus on personalization and engagement. Open banking and gamification are two great examples of how financial institutions are leveraging new technologies to create a more immersive banking experience.
With Gen Z being a large and diverse generation, they are sure to have massive impacts on global financial markets as they come of age. To remain competitive amongst customers within this age group, banks must think beyond simply providing digital services.
CPQi helps financial institutions across the Americas implement technologies and strategies like these. Get in touch to see how we can help you build a stronger relationship with Gen Z.