Born roughly in the mid-1990s to mid-2000s, Gen Z are not only tech natives, they have fast, convenient apps like Uber and Snapchat embedded in their digital DNA. What’s more, they are already making their first financial decisions: opening banking accounts, signing up for their first credit cards and taking out loans for college. By 2020, Gen Z will account for approximately one-third of the entire U.S. population, and their consumer preferences and marketplace behaviors will have more profound impacts on financial institutions than their Millennial predecessors.
So how can financial institutions begin to better understand this new group? They should start with what they’ve learned working with Millennials. By taking a look back at how and why seriously they struggled to engage this previous generation, financial marketers can form an evidence-based game plan for embracing Gen Z. Below are three lessons gleaned from the challenges banks and credit unions faced when targeting Millennials.
1. Get Visual
For Millennials, mobile is undoubtedly the medium of choice. Banking providers that quickly adopted mobile services and strategies wound up big winners, while slow adopters fell behind.
Gen Z uses mobile services at an even higher rate than previous generations. Hardly a surprise, but it’s important to remember: they are the first generation that has never known anything else — they are the first truly-digital generation. But what financial institutions must realize is that mobile is now table stakes for younger consumers.
Gen Z are visual multi-taskers. They use multiple apps simultaneously and have an attention span the length of a six-second Snapchat. Text has been replaced by images popularized through emojis and apps such as Instagram. For financial marketers, it’s no longer about just having mobile and digital services, but rather about simplifying them and creating new visually rich experiences that are as easy and engaging as, say, a swipe or a touch. Intuitive digital access to financial products and services — always built around a visual interface — should be your number-one priority when designing strategies for Gen Z. Some industry innovators have already embraced this shift. Venmo, for example, has incorporated emojis into its transactions.
( Read More: Get Ready… Gen Z is About to Rock the Banking Industry )
2. Get Personal
With Millennials, one of the biggest challenges that financial marketers faced was their generation’s lack of trust in the financial system stemming from the 2008 financial crisis. In the aftermath of the financial meltdown, too many banking providers focused their energy solely on capturing dollars and retaining profit margins (e.g., fee income), rather than building relationships with Millennials and looking for ways to meet their unique demands.
This time around, it will be critical for banks and credit unions to meet Gen Z on more a personal, human level, and help them address the challenges they grapple with most: basic banking decisions, financial education and literacy. As Gen Z starts to take out loans, buy cars and rent apartments, financial institutions need to create a highly personalized, engaging experience for them. It’s no longer about just managing their money well; it’s about helping Gen Z easily make sense of their finances to make smarter, more informed decisions.
One of the most effective — yet frequently untapped — approaches to build these types of personalized experiences is through data. By figuring out how to harness the massive amounts of data that an individual generates each day — and integrating it with mobile and digital services — financial marketers can help create a complete picture of an individual’s finances. By providing a more comprehensive view of spending and saving behavior, financial institutions can not only help educate Gen Z on their financial state and help them make better decisions, but also build a meaningful relationship that targets their core needs.
( Read More: Gen Z and The Future of Money )
3. Get On Board Early
As Millennials fast became one of the largest banking generations, many banks and credit unions initially underestimated their demands and relative buying power. As a consequence, they found themselves scrambling to catch up, as more digtally-savvy fintech disruptors targeted them with greater success. Banking providers cannot afford to make this mistake again.
Gen Z may have a shorter attention span, but that does not mean they are any less complex or demanding when it comes to their financial needs and services. Think of Gen Z as Millennials 2.0 — they expect even more out of their technologies than their Millennial predecessors, and have an even lower tolerance for hiccups in mobile and digital channels. Anything that isn’t both powerful and easy to use will likely be met with criticism and derision.
It’s essential that financial marketers think about how Gen Z — the “Venmo Generation” — thinks about their money. They must stay on top of technology trends, market research and user studies to achieve an edge over their less responsive competitors. Market trends and research may seem like a dusty approach, but mobile technology in an app-based economy is bringing access to a new data streams and new insights into consumer demographics of that financial institutions can’t ignore.
The Next Big Generation
In a world of fast, fleeting apps and services, it can be difficult for banking providers to pinpoint precisely how to engage a group as complex, tech-savvy and particular as Gen Z. But as Gen Z quickly becomes the next big generation, banks and credit unions can no longer afford to brush aside their increasingly loud demands and billions in buying power. As the wise man says, the best way to learn is from the past. By applying takeaways from their oversight of the previous generation, financial marketers can find solid footing as they tackle the next.
John Bird is Vice President of Product Marketing & Alliances at Envestnet | Yodlee, where he is responsible for leading the product marketing and commercialization of Yodlee’s platform for financial innovation to both financial institutions and innovators.