What Banks Should Know about Gen Z’s Financial Behaviors

Financial behavior

Generation Z describes the generation of individuals born between 1997 and 2012. Though older generations are accustomed to thinking of them as children, the eldest members of Gen Z have long since grown up, entered the workforce, and begun earning their own money. In the process, they’ve emerged as an increasingly interesting, potentially lucrative market segment for many industries. And as more of these young people come of age, business experts anticipate that their already significant influence on global markets will only grow.

The vast majority of businesses today are raring to tap into this influence and cultivate mutually profitable relationships with members of Generation Z, and banks are no exception. Bank leaders everywhere recognize that maintaining their competitive advantage in changing times rests upon their ability to understand Gen Z’s desires, needs, and beliefs. Banks will need this in-depth knowledge, after all, if they want to develop products and services that are truly relevant to their younger client base.

Here are some important things financial institutions should bear in mind about Gen Z’s general approach to money and banking:

They Live Digital-First

Generation Z makes up the first generation of true digital natives. Most of them will have grown up with constant and ubiquitous access to computers, the internet, social media, and other information and communication technology. As such, they’ve been conditioned to value goods and services that promise speed, convenience, user-friendliness, and 24/7 accessibility. In practice, this means most Gen Z-ers will prefer service providers that are predominantly or entirely digital in their operations. 

In light of this, a robust digital banking solution is a must for banks aiming to provide Gen Z customers with the elevated, always-connected experience they expect. Banks that can leverage cutting-edge technology to the fullest will gain the agility necessary to create truly seamless, frictionless, omni-channel user experiences. They’ll also have the resources to provide more involved, personalized customer support and develop innovative products and services. 

They’re Frequently Anxious about Money

Growing up surrounded by global recessions, geopolitical turmoil, and financial crises of all kinds has fundamentally shaped the way most members of Gen Z think about and use their money. In terms of their financial attitudes, they’re a considerably more debt-averse, fiscally conservative, pragmatic generation than their predecessors, the Millennials. For instance, Gen Z-ers will generally hold fewer credit cards than older people and prefer debit for most transactions. Many of them will also have begun saving or investing toward retirement as early as their 20s.

Members of Gen Z are well aware that they’re growing up in a tumultuous, uncertain world, and they understandably worry a lot about money as a result. This climate creates a fruitful opportunity for banks to build trust with their younger customers. Providing access to low-interest loans and banking products to support young people’s financial goals can help banks secure Gen Z customer loyalty in the long term. Banks that invest in top-notch cybersecurity systems and have robust antifraud protocols in place are also likely to find favor with Generation Z clients.

They Appreciate Personalized Financial Advice

The much-documented emphasis Gen Z banking customers place on digital services might send the message that speed and convenience are all they care about, but this is not actually the case. Somewhat surprisingly, Gen Z-ers have also been found to value the human element of working with banks as long-term financial partners. While they mainly utilize mobile banking services for their regular financial activities, members of Gen Z with complex concerns usually still prefer to get help directly from human bank employees. They also visit physical branches more frequently than is often assumed.

Involved, personalized engagement is especially important to Gen Z customers who’d like to reach out to their banks for financial advice. Many members of Gen Z are deeply interested in learning more about how to be financially responsible, in part as a more constructive way to channel their persistent anxiety about their personal and financial well-being. They’re also interested in being educated about making intelligent investments, setting long-term financial goals, and other similar matters. 

Banks should thus work to provide their Gen Z customers with the advice and knowledge they seek—and, moreover, provide it in ways that are contextualized according to each person’s unique situation. This approach sends the message that a bank not only knows its customers well but is also deeply committed to safeguarding their financial interests in the long term. 

They Value Social Awareness and Political Involvement

Research on Generation Z suggests that they are the best-educated generation to date, as well as the most diverse. In more concrete terms, this means that members of Gen Z tend to be politically involved and socially conscious in their personal lives and want to patronize service providers with similar commitments. 

Gen Z consumers are highly likely to investigate brands’ stances on social issues like climate change, gender equality, racial justice, and other causes that are important to them. They’re most comfortable supporting and promoting companies whose beliefs and values align with their own, particularly if those companies are able to demonstrate these beliefs through concrete and impactful action. Banks that profess to care about climate action, for example, can draw more support from Gen Z consumers if they have a transparent and comprehensive plan for reducing their carbon footprint. 

Generation Z is a large and influential demographic whose needs and preferences are poised to shape global industries and market trends for years to come. It’s thus in banks’ best interest to learn all they can about how to better meet their younger customers’ needs, as this will help them remain competitive and profitable well into the future.

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