Gen Z is the emerging battleground for growth in Financial Services. This generation will soon make up nearly 40% of the global population – outstripping even Millennials with a combined spending power of $143bn. They were born into times of economic instability: global terror, financial meltdowns, and climate change-driven events around the world. And not only do they have unique characteristics and behaviours, but their expectations are increasingly driven from the experiences they have outside of Financial Services.
According to Millie Gillon, Senior Managing Director and Global Head of CX at Standard Chartered, “Clients are not making bank-to-bank comparisons, necessarily — they are comparing us to their experiences with Starbucks, Disney, Louis Vuitton, Emirates Airline, and Chanel.”
Gen Z are part of the rising YOLO economy – forgoing stable jobs to recapture a sense of excitement and purpose in life. They expect to run their own business within the next decade, along with 50% of their peers. They are digitally savvy and financially engaged, with 40% believing saving as ‘fundamental’ for the future, according to research by Zopa, while 70% check their finances daily. What’s more, they are more likely to prefer investing in the crypto market compared to a traditional stocks and shares ISA, (7% compared to 5% according to Nasdaq).
Yet, the reality is that since the 2008 financial crisis, Gen Z’s trust in financial institutions has declined across the world. The Edelman Trust Barometer found that in the last year alone, trust in financial institutions declined further in 10 out of 27 countries including the UK. Furthermore, trust for 15 major institutions dropped to an incredibly low 46%. Compared to the 40% of Gen Z who say that an influencer’s recommendation is important in purchase consideration, a top driver for this generation is being a trusted brand, with 86% indicating it’s important.
However, when the COVID-19 pandemic hit, Gen Z faced further financial upheavals as they pursued higher education or started their career. Despite this, their motivations today are less about security and more about fairness, an ability to play and win, and so trust in financial institutions is essential.
We also know that Gen Z are less optimistic about the future, but increasingly believe they can shape it. In the US, 62% of Gen Z believe that they have the potential to change the world – meaning they will not accept the status quo but will look for alternatives. They appear to have had enough of traditional incumbents and are actively moving towards challengers compared to previous generations. According to a Mintel report, younger people are more likely to have switched their main current account in the last three years. Furthermore, they are increasingly inspired by the combination of playing with volatile markets, social media platforms and financial influencers, or ‘finfluencers’, for example Money Hub / TikTok, instead of traditional investment platforms and institutions.
The get rich now impulse and expected sense of immediacy has resulted in a new wave of financial advice, different from the generations before who opted for ongoing advice.
To Gen Z, traditional Financial Services institutions are at best being used for the most basic of functions and, at worst never front of mind as they lean into new challenger financial brands. However, engaging Gen Z effectively has significant upsides.
Firstly, you will be there for the moments that matter. You will be able to sustain deeper engagement across various life stages and events, whether that’s their first job, starting their own business, getting married, having a baby, owning a home, dealing with loss, retirement and so on. They will appreciate your interest beyond just the functional needs, use more of your services and change moments of consideration into actual consultations.
Secondly, they will become your brand ambassadors and finfluencers. They will advocate and influence their peers across a multitude of earned media channels to actively consider your brand and become more important to your future marketing strategies, changing moments of satisfaction into actual advocacy.
And thirdly, they will help you become a more ESG-focused, and purpose-led business. They will challenge your business strategy and help you to pioneer and experiment new products and services, giving you real-time feedback and support to make things better, changing passive feedback into active participation and co-creation.
Make no mistake. By not engaging Gen Z in the right way, FS brands will continue to lose market share of this generation of customers to challengers, will have lower engagement value from Gen Z and will see continued decrease in reputation and influencing power.
So how can Financial Services shape their customer strategy to best engage Gen Z?
- Prove your purpose
Gen Z actively seeks out brands that align with their values. They want a provider that will look after them and their futures, which also means looking out for their communities and environment. FS brands must clearly outline their values and ESG initiatives and continually demonstrate how they uphold them. They should also implement community-level initiatives around education, diversity & inclusion.
- Become a financial wellbeing coach
Gen Z want a provider that is actively trying to teach them new skills, help them find better deals or make smarter decisions with their finances. Since Gen Z are just starting out, general messaging about financial wellness is less likely to land if they don’t understand and don’t believe a brand is genuinely working for them. FS brands need to proactively find customers the best deals and offer advice, and then infuse behavioural science and personalisation into experience design to nudge and educate customers toward better financial decisions.
- Protect data to protect relationships
Gen Z expects a good value exchange at all stages of the journey when sharing data, and high degrees of protection. Not only does Gen Z expect data to be used intelligently but will hold brands accountable if data is misused, with over three quarters of Gen Z considering leaving brands after a data breach. The key is to understand cultural differences in opinion towards data security and financial protection and to target different areas appropriately. FS brands must clearly state how data is used and what measures are in place to protect customers from misuse and fraud.
- Design for active participation
Gen Z expects brands to build back better and want to be heard and more actively consulted on business actions that are important to them, including environmental issues, inequality, and discrimination. FS brands should create a two-way relationship with customers by understanding their issues and needs, and involving them in brand and product development. It’s about bringing inclusion into your organisation’s experience design (XD) practices.
Paresh Gandhi is Senior Strategist EMEA at WONGDOODY, the human experience company, powered by Infosys. WONGDOODY creates new customer value propositions, designs human experience led transformation, delivers tangible products and services at speed and scale, leverages data creatively and creates human experiences that transform the business.
