Marketing has always been about connecting with consumers as early as possible and forging relationships that lead to longtime brand advocacy.
Financial marketers are certainly trying to do that with Gen Z, but those digital natives just don’t have the same priorities as other generations. And though they carry over $143 billion in purchasing power that’s expected to grow by more than 70% in the next five years, according to Business Insider, Gen Z views finance differently. A Phoenix-Synergistics study found that 90% of Gen Zers would turn to big tech or other nonbank entities for a bank account.
Unfortunately, it isn’t as simple as sending out a mailer offering a free toaster with a new bank account — though, admittedly, the kitsch factor alone could drive some interest. To effectively connect with Gen Z and win their business, financial institutions must engage in ways that build trust. With nearly 90% of Gen Z using online banking and over 81% going the mobile route, according to Insider Intelligence, the time has come for traditional financial institutions to up their digital game.
By 2025, expect to see 45.4 million Gen Zers using digital banking services of some kind.
It can be difficult to acquire established, higher-net-worth customers later in life. Harvard Business Review found that securing a new customer can be anywhere from five to 25 times more expensive than retaining an existing one. And even if financial needs change, bank hopping isn’t a popular sport; in the last year, only 11% to 17% of customers moved from one financial institution to another, a Mobiquity survey found.
Therefore, establishing a relationship at an earlier age is a better strategy. This allows financial institutions to create lifelong customers whose business will become more valuable with time.
All that’s left is to make that first connection. The area with the greatest potential can often be found in very different approaches to basic financial services: On the one hand, you have the option to offer dynamic checking accounts that make it easy to avoid fees. On the other, is the imperative to avoid offering “unattractive” credit cards. Both are priorities for Gen Z.
4 Ways to Make a Good First Impression
When working to attract younger customers and establish strong connections, it’s important to keep in mind four truths about the Gen Z demographic:
1. Transparency is essential.
Hidden fees, rate increases, buried terms, and other “money-grabs” — which is how Gen Z views such tactics — leave a sour taste in their mouths. Being upfront and honest about charges and actions involving their personal assets is a must.
Citizens Bank is one example of a financial institution that is putting more emphasis on transparency, introducing Citizens Peace Of Mind in October 2021. This feature allows all customers to avoid the expense of unexpected overdraft fees by “depositing or transferring enough funds to bring their account to a positive available balance prior to the close of business the following business day, which will automatically reverse all overdraft fees.”
Smart move, because in a matter of seconds, Gen Z can easily find on their phones alternatives to any financial institution’s services that they feel isn’t a fair deal.
2. Gen Z doesn’t appreciate it when you push credit cards.
Gen Z is a debt-wary bunch, with 52% believing that personal debt should be reserved for only select purchases — or avoided altogether, according to the Center for Generational Kinetics (CGK). Sure, they may take out a credit card, and they may even use it a time or two. But financial institutions can no longer rely on this product to drive loyalty or bolster the bottom line. While still profitable, this channel is currently pulling in less revenue, Reuters reports.
With young people often lacking a long credit history, it could be advantageous to offer other credit features for this particular age group, such as low-interest personal loans.
3. Any initial outreach should be customized.
Though it should go without saying, a shift has been taking place among younger generations around their expectations. They believe the entire user experience for websites, apps, and technologies should be highly functional, seamless, and frictionless. They also expect a whole lot of personalization. Since last year, the majority (64%) of Gen Zers now expect recommendations on banking products and services that are unique to their circumstances.
Tailoring a loyalty program around their interests would more likely drive engagement from this demographic. Many Gen Z consumers have considered leaving their primary financial institutions for institutions that offer more rewarding consumer engagement — as well as greater convenience, of course.
4. Digital should also be present in brick-and-mortar locations.
More important, financial institutions can’t compete if those banking experiences don’t move seamlessly between the virtual and physical realms. Gen Z may find themselves in a brick-and-mortar location, but that smartphone is always handy to double-check a price, service, and so on.
Tap Into Their 'Digitalness':
Why not take advantage of Gen Z's digital dexterity by placing QR codes in ads or in-branch displays?
This is why the use of QR codes by financial institutions can be so dynamic. If a customer is waiting to make a transaction and sees an interesting advertisement for low-rate auto loans or home refinancing, they can scan the QR code and be sent to an informative webpage that outlines all the necessary steps, highlights potential benefits and even allows them to start the application process on their phone as they wait. Banks such as BMO Harris have begun using QR codes on ATMs to present a truly touch-free banking experience.
- The Future of Loyalty in Banking is at Risk
- Gen Z Craves Good Tech From Banks+Credit Unions, Not Neobanks
- The Future of Customer Experience in Banking is Personalized
Reaping the Rewards Requires Using Data
Regardless of which tactics a financial institution chooses to employ, once you’ve won over a Gen Z customer, capturing relevant customer data and interactions will be central to keeping them. For example, transaction histories will be key to improving the user experience and offering more personalized dealings to this customer base.
Offer up some educational information on mortgages, investments, and other services in exchange for their personal information.
Employ these tactics to set the foundation and continue building on them to see that initial interaction grow into a much-needed lifelong relationship.