Facebook has a problem. Gen Z thinks it’s outdated old “boomer” platform.
In 2012, 94% of teenagers had an account. A decade later, only 27% of teens are thought to use the network.
Last year, Mark Zuckerberg hastily announced that attracting young users should become his immediate north star. However, with its stock plummeting $230 billion in a single day this month and its CEO losing more personal wealth than Estonia’s entire GDP, it may be too late.
But let’s take a step back from social media. Is there a lesson here for financial services?
Perhaps, with an eye to the future, a lesson can be learned about the dangers of inertia around engaging younger generations with your products.
Banks, lenders, wealth managers, let’s explore what you need to know about Gen Z…
First of all, why bother?
If Facebook’s parable doesn’t scare you, consider these statistics.
Millennials have enjoyed being the darling of the media for some time, but according to Bloomberg, Gen Z overtook them in 2019. They are now the largest living cohort, making up just over a quarter of the world’s population.
Additionally, McKinsey & Co shows that Gen Z now represents more than 40% of global consumers. In the United States alone, they have a rapidly growing purchasing power of $150 billion.
Now that you’ve sat down, what broad traits can we infer about this fast-growing demographic?
The Gen Z archetype
Born between 1997 and 2010, the oldest members are celebrating their 25th anniversary this year. So far, they have proven themselves to be an empowered, driven, down-to-earth and business-savvy generation.
It is important to note that Gen Z are digital natives, being the first humans to never experience life without the internet. This set up many early successes, taking advantage of the technology developing around them, mixed with their creativity and eye for side hustle.
While millennial predecessors found out the hard way that following your passion won’t guarantee success, Gen Zers enter higher education cautiously, and only if it directly adds to job prospects.
Likewise, after watching their parents and siblings weather a Great Recession and a global pandemic, they cultivated a unique, if not jaded, financial perspective. For them, frugality is a feature, not a bug, and they are always looking for value.
As the youngest of the set open up savings accounts and the older ones think about car loans and getting on the property ladder, let’s look at four financial insights that can impact your strategy.
Think mobile first
Fluorescent and metallic bank cards may have hit millennials, but it looks like Gen Z will have a higher attraction bar.
First, Gen Z takes care of their finances. 70% consult them daily, because of their mobile-centric vision. Consider these stats from Zopa and Target:
- 95% have access to a smartphone
- 35% feel anxious away from a device for more than 30 minutes
- 68% are interested in opening an online-only account – the best of all generations
- 60% want to talk to support via an app
With that in mind, it’s hard to see how mobile won’t be the defining technology for this generation. So the first question to ask is how optimized is your mobile approach?
The Tik Tok Advisor
Growing up sandwiched between a Great Recession and a pandemic means Gen Z is naturally looking for a trusted ear. YPMI found 59% feel COVID-19 has made them more anxious about money at a pivotal time for their finances.
But where to turn? Target data found 73% will seek advice from a family member and, curiously, 43% will consult friends for financial advice, despite the fact that they might also be relatively immature financially.
This desire to know – perhaps spurred by looking over their shoulder at the Millennials’ raw contract – is positive overall. But are they getting it in the right places?
Seduced by the possibility of getting rich quick through NFTs or crypto, and with a 115% year-over-year increase in interest in investment apps, Gen Zers are turning to their favorite platform, Tik Tok , for advice. “FinTok” is a trend that is rapidly gaining popularity. The hashtag #personalfinance alone has accumulated over 4.4 billion views.
It’s a very real possibility that this generation’s financial literacy can be nurtured on social media. It is worrying. With such a barrier to entry to sharing advice with millions of people, experts fear there is a growing amount of misinformation, leaving a void for mainstream financial services to share their knowledge.
Lend and spend
Although dubbed the “cost-conscious generation,” Experian reports that Gen Z saw the highest debt growth of any generation between 2019 and 2020, averaging 67% growth.
Still, that was roughly in line with age expectations, with most monies owed under the ‘personal’ and ‘mortgage’ categories. So when it comes to lending, who captures the hearts and minds of the young consumer?
Unsurprisingly, BNPL fintech.
Experian found that traditional banks accounted for just 28% of loans from young consumers, with fintech accounting for 40%. For example, Klarna alone reports that 18% of its customers are Gen Z, which equates to more than 10 million Gen Z shoppers worldwide.
For traditional lenders, this could be an early warning that digital natives are showing a preference for digital native solutions.
Green does not wash off
Finally, it’s time to get serious about greenwashing and virtue signaling.
Millennials may have adopted a more social paradigm, but Gen Z is going to hold you to account. Remember they are realistic. In banking, tools like bankgreen are proving popular for “bad” banks and several “green” challengers are springing up to fill the void.
Costs could also be dramatic, BAI found that 60% of Gen Zers would switch financial service providers if they felt their social goals were misaligned. Not only is it a moral imperative for them, but they feel they will have to live with the effects of bad choices now.
Still, HubSpot’s research shows that 61% still start with the bank their parents used, so maybe there’s still time to salvage the relationship.
Overall, like every generation, Gen Z has a unique and diverse set of wants and needs from their financial services partners. However, early signs are concerning for mainstream models.