Gen Z has introduced a new set of behaviors that are changing the dynamics within the banking and fintech space. Dubbed the “throwback generation,” the post-millennial era could be the key to bucking the trend of rising distrust among consumers.
According to a recent survey by Raddon, 67 percent of high school students 16-18 years old have a bank or credit union account. Since this generation witnessed the 2008 financial crisis at a young age, Gen Z is especially keen on working for their own money, with 77 percent earning their own cash through freelance work, a part-time job, or earned allowance according to research from The Center for Generational Kinetics. Although young, Gen Zers are already savings-driven. The same survey showed 12 percent of them are already saving for retirement and 35 percent plan to start saving for retirement during their 20s.
Financial institutions must build Gen Z’s trust by addressing the next generation’s shifting perceptions and educating them as they begin to manage their own financial health. Banks must realize that consumer trust is a currency for financial services that can only be gained from instilling a culture of putting the customer first. To achieve this, we must first meet Gen Z customers where they are in terms of lifestyle and needs. Fixated with convenience, this generation will continue gravitating toward brands that provide the best personalized data-driven user experience, value, and ultimately, the best means to reach their financial goals.
Younger consumers are often more receptive to technology and personal finance management tools that make the process more proactive through a simple online dashboard. Consumers just starting out on their financial journey will be more interested in financial technology improvements that offer advice or a way to automate their transactional needs. Therefore, the key will be to offer them the right content, at the right time, in the right place.
A customer-first approach will offer endless benefits for both the customer and their financial institutions. Financially healthy customers are less risky, which in turn are better customers. Banks need to promote tools and services for financial literacy among Gen Z by building tiers of trusted behavior in engagement with apps, so that these become part of their lifestyle. The goal is for customers to assimilate these tools into their everyday lives, so that financial health becomes a habit. In addition, institutions should take advantage of the opportunity to address consumer trust on the data side.
Today’s bank-led initiatives have set security standards in place, but also have resulted in less functionality and consumer choice. Stakeholders are not properly represented, with banks and aggregators dominating the conversation and end users lacking awareness of issues regarding data and security. We must move toward solutions that allow for competition while protecting consumers and allowing their voice to be heard.
Financial institutions must realize the potential of consumer-permissioned data aggregation through personal finance management tools that adapt to Gen Z needs. This generation’s dependence on money and payment apps will only accelerate, as people become comfortable with a cashless reality. When building relationships with Gen Z, we must make sure that users trust not only that banks have strong vaults, but that their institutions genuinely think of their consumers first.