Gen Zers expect banking services to be accessible on mobile devices, enabling them to open accounts, pay bills, send money, get financial advice, apply for credit, invest, and save seamlessly.
Research shows that Gen Z consumers use an average of five banking products and would use more if available. Their willingness to switch banking relationships to obtain desired services is higher than that of older generations, emphasising the need for financial institutions to offer comprehensive, mobile-centric solutions.
These banks appeal to Gen Z by offering seamless, fully digital experiences. However, gaining the trust and loyalty of this demographic requires more than just digital convenience.
Gen Z’s engagement with financial services often involves neobanks, which serve as primary budgeting tools. These digital-first firms excel in providing user-friendly experiences, engaging graphics, and gamified features that resonate with a generation accustomed to play-to-earn video games and meme stock phenomena. For instance, Capital One’s First-Gen Focus program uses educational gamification to support first-year, first-generation college students through financial education and skill-building workshops.
Gen Z’s attitudes towards money and finances exhibit both similarities and stark differences compared to older generations. While they may trust traditional banks for data security, they demand exceptional digital services. As a result, traditional banks are also enhancing their digital offerings to compete with these so called ‘neobanks’.
According to management consultants, Deloitte, digital banking penetration in Europe was around 58 per cent in 2020 and is expected to continue growing.
A report by management consultants, Accenture, suggests that digital-only banks could capture a market share of 35 per cent in the UK by 2025. This would translate to approximately 23.5 million digital-only account holders, given the UK’s current population.
Digital-first banks have been rapidly increasing their user base in the UK. For instance, Monzo has over 6 million users as of 2023, a substantial proportion of whom are in the UK; N26 (Germany) has over 7 million customers across Europe, and Bunq (Netherlands) and Revolut (which has over 20 million users globally) have significant user bases across the EMEA region. The trend towards digital banking is accelerating, driven by factors such as high smartphone penetration, growing internet access, the convenience of mobile banking, the increasing digital literacy of the population, and the impact of the COVID-19 pandemic, all of which has pushed more people towards online banking solutions.
Notably, Gen Z’s spending power is expected to surpass $140 billion by 2025, highlighting the significant opportunity for financial tools and education tailored to their needs, such as budgeting tools, savings goals, and investment advice, specifically designed for Gen Z.
Understanding the preferences and behaviours of Gen Z is crucial for businesses, especially in the financial sector. As the first digital-first generation, Gen Z’s relationship with technology profoundly shapes their expectations for banking services. Financial institutions aiming to attract and retain this demographic must adapt swiftly to meet their unique needs.
Financial institutions face challenges in meeting Gen Z’s expectations
Gen Z (individuals born between 1997 and 2012) now make up around 30 per cent of the world’s population, their influence is considerable, comparable to that of Gen X and baby boomers combined. This generation’s tech-savviness, characterised by their use of multiple screens simultaneously, positions them as highly influential in shaping the digital transformation of various industries, including banking.
Gen Z is 2.5 times more likely to leave their current financial institution if services are unavailable or fraught with friction. For instance, many banks will not engage with cryptocurrency investment options, despite these being in high demand among Gen Z. Innovation gaps, such as the lack of instant issue cards or Buy Now, Pay Later (BNPL) products, can be costly.
Creating a community for Gen Z involves blending digital and physical experiences. Initiatives like Capital One Café offer informal spaces for Gen Z to gather, interact with financial experts, and access interactive learning resources. Digital banks like Step utilise platforms such as TikTok to make financial literacy engaging, leveraging influencer partnerships to reach a wider audience. Spotify’s financial playlists combine music with financial education, catering to Gen Z’s preference for audio content.
To cater to Gen Z, financial institutions must carefully brand their businesses, ensuring that their mission, ethics, and culture resonate authentically with this demographic. Despite the challenges, there are opportunities for financial institutions to connect with Gen Z, in order to achieve this, they need to focus on:
- Understanding Gen Z’s Financial Attitudes, Concerns and Knowledge Gaps
- Fostering Trust and harnessing Digital Transformation
- Engaging Gen Z through Digital Experiences and Ease of Use
- Building Community and Culture incorporating Personalisation and Seamless delivery
- Addressing any Innovation Gaps
This younger demographic values authenticity and social responsibility in the brands they support. They are highly responsive to personalised and interactive marketing efforts, favouring brands that engage them with relevant content tailored to their interests and behaviours. In the Consumer Trends Index 2024, which surveyed 10,000 consumers worldwide, Gen Z’s voiced their opinions strongly when it came to how they want to be marketed to and they are showed they won’t settle for anything else.
Among the Key Insights were:
- Personalisation: Gen Z expects brands to understand and cater to their individual preferences. Generic, mass-market messaging is less effective compared to targeted, data-driven communication that feels personal.
- Social Responsibility: Brands that demonstrate a commitment to social and environmental issues resonate strongly with Gen Z. They prefer to engage with companies that align with their values and contribute positively to society.
- Interactive Engagement: Interactive and immersive experiences, such as gamified content, quizzes, and polls, are highly effective in capturing their attention and fostering loyalty.
- Digital Channels: This demographic predominantly communicates through digital channels. Social media platforms, particularly Instagram, TikTok, and Snapchat, are crucial for reaching and engaging Gen Z audiences.
Financial institutions that adapt their strategies to meet these needs will not only attract Gen Z but also set the standard for digital banking across all generations.
Jerome Tillotson has a diverse work experience spanning over several companies and roles. Tillotson is the SVP Customer Success, EMEA & APAC, Marigold. Prior to this, he held the position of VP Customer Success, EMEA at Cheetah Digital and VP, Corp Dev and Alliances at Wayin. Jerome has also held positions at WeWork as the MD EMEA, Conductor and as Director, EMEA, Customer Success, at Domo, Inc. He has also served as a Member of the Advisory Board and Chief Customer Officer at EngageSciences.
Additionally, he has worked at Huddle as the Head of Client Services, EMEA; at RightNow, Oracle Corp. as the Director, International Solutions Consulting and Client Success, EMEA; at Omniture, An Adobe Company as the Director Account Management, EMEA, and at Vignette in various roles such as Managing Principal, Senior Solutions Consultant, and Technical Services Manager. Jerome's early experience includes being a Webmaster at Columbia HCA.
