You must have heard the terms ‘Millennials and Gen Z’ over and over recently. Well, if you have no idea what these terms mean, they're tags given to people belonging from different generations. This segmentation helps marketers and industries better define
their target audiences and identify people belonging to a particular age to have certain common characteristics, which helps them cater to the majority of that generation better. Before we move on to understanding how Fintech Organizations build a relationship
with GenZ and Millennials, let us break down these terminologies better –
- Baby Boomers – Born between 1946 to 1964 | Current Age – 57 to 75
- Generation X (Gen X) – Born between1965 to 1980 | Current Age – 41 to 56
- Generation Y (Millennials) – Born between 1981 to 1996 | Current Age – 25 to 40
- Gen Z – Born between 1997 to 2015 | Current Age – 6 to 24
Why does Fintech care about Gen Z and Millennials?
Millennials and Gen Z are a crucial part of Fintech's core market. Given their current ages, 6 to 24 (Gen Z) and 25 to 40 (Millennials), it also makes sense as to why Fintech Organizations are giving them such importance. They are at the prime age where
finance plays a big and active role in their life. Hence, Fintech needs to understand and engage millennials and Gen Z to survive the competition and be profitable.
The challenge and scope of building relationships with Gen Z and Millennials
Now we are dealing with the youngest age groups with millennials and Gen Z. However, both these age groups also have a significant age difference. Hence, what is preferred by one of the two might not be the preference of the other. However, there are some
middle grounds where Gen Z and Millennials can think alike. These similarities can act as efficient guide points for Fintech Organizations to better engage with the two groups.
The influence of technology amongst Gen Z and Millennials
Gen Z and Millennials are both heavily invested in technology. Millennials and Gen Z's only difference in terms of technology is that Millennials adopted technology as they grew up. It wasn't always there as a part of their lives. They have witnessed mobile
phones that weren't deemed as 'smartphones' and had physical keypads, and dial-up internet was the latest innovation to be excited about. Millennials have constantly adapted to technology changes and made use of it to ease their lives.
In contrast, Gen Z has never seen a world without the internet or a smartphone. They were born in the era of technology, and technology acts more like any other routine feature in their lives rather than something they had to adapt to and get used to.
How do Gen Z and Millennials approach finance and banking?
Any generation’s attitude and perception towards finance and banking is mostly shaped by the economic situations they witness and experience growing up. The same is the case for millennials and Gen Z. Let us examine what these groups look for or expect with
their finance and banking requirements.
What do Millennials expect?
Millennials are constantly ditching brick-and-mortar banks for newer banking options. One distinctive feature about millennials that all the previous generations didn't have is their comfort of shifting banks if they feel unhappy or dissatisfied with their
present bank. As per research conducted by
Gallup Poll, millennials are 2.5 times more likely than Baby Boomers and 1.5 times more likely than Gen X to switch banks. Here are some of the basic features or services millennial looks for with their finances and banking –
1. Convenience and Perks
When it comes to millennials, they want their banking activities to be hassle-free. They rely on technology to help them with their banking needs too. A study conducted by
Jumio in 2018 noted that Gen X/millennials had the fastest mobile banking adoption rate at 47%. Millennials use their mobile banking feature for –
- Transferring funds between accounts
- Schedule person-to-person money transfer
- Check their transaction history
The same study empathized on millennials' fickleness to leave their current mobile banking service for the slightest of inconvenience. These are the top reasons millennials abandon mobile banking –
Another study conducted by
Kasasa Survey mentioned 83% of millennials admitted they’d willingly switch banks for getting a little more value for their buck by getting perks like higher interest rates on deposit accounts, cash-back on purchases and more such added benefits.
2. Neobanks and Credit Unions
Neobanks/Fintech companies sit well with Millennials for their banking and financial needs. This is because these newer generation banks and financing systems focus more on a tech-based banking and finance approach.
Neobanks have the capabilities to offer any traditional bank services such as saving or checking accounts, but they can also provide additional products and services like –
- Investing and saving apps
- Bill Payment and Expense Tracking Apps
- Online personal or business loan providers
- Money Transfer and Payment
Neobanks generally don't have branches, and many plan to compete with the full-fledged brick-and-mortar banks. However, some neobanks are also an extension of a traditional bank, credit unions and financial institutions. Neobanks have a streamlined and tech-centered
approach to banking, and they have the capabilities to provide faster loan approval and funding than traditional banks. They don't charge banking fees, have a broader ATM network and many other features that interest them.
What does Gen Z expect?
As we discussed earlier, Gen Z is a generation of people born in the technology era; they had never seen a time when there were no smartphones or the internet. It is safe to call them the 'internet generation' as well. Let us remember that this generation
has seen 3 life-changing financial crisis at the young age they're in already - September 11 Terrorist Attacks, The Financial Crisis and now the COVID-19 global pandemic. These events surely would have some impact on how they go about their finances, amongst
many others. Let us examine what Gen Z look for or expect from their bank –
1. In-Branch Experiences
Surprisingly, Gen Z has more affinity towards in-branch experiences than Millennials, who want everything online and at the ease of their fingertip.
The Financial Brand mentioned individuals with lower smaller financial savings tend to gravitate more towards in-branch experiences. Most Gen Z individuals prefer having café-style banking branches and get attracted by free food provided in some of these
2. Greater Long-Term Financial Awareness
Gen Z is surrounded by technology and the internet. They are always one step ahead and know about the latest news regarding whatever catches their interest. Also, this generation has more student debt than any prior generations. These factors shape up a
generation that is more aware of their financial needs and the importance of handling their finances responsibly. Gen Z has also witnessed millennials suffer and struggle with a home purchase or rearranging their finances after the Financial Crisis of 2008.
So they expect their banks to provide them with banking services and educate them innovatively about the important fundamental banking concepts.
3. High Digital and Mobile Expectations
Marketers have still millennials figured out to an extent. Gen Z has taken tech-fluency expectations to a new level, probably because they are the first all-digital generation. They consume more information and entertainment on their mobile devices than
any generations before. For this, they want their mobile app experience to be seamless. Gen Z also looks for emotional pulls from their online experiences. They want to have some meaning with their brand relationships, consider social good and finding innovative
ways for gamifying their digital interactions. Naturally, Fintech organizations also need to consider this for providing an immersive banking experience and finances to Gen Z.
How can Fintech Organizations build a relationship with Gen Z and Millennials?
So far, we have understood both Gen Z and Millennials and the different factors that drive them about their financial needs and banking preferences. Now we can better focus on steps and efforts Fintech Organizations can take to better engage with Gen Z.
Here are some of to build better relationships with Gen Z and Millennials –
1. Create Streamlined Digital Experiences
Both Gen Z and Millennials (the younger generations) are technology-dependent and technology-empowered. They are more open and accepting to technology, playing a crucial role in their financial relations and activities. Fintech organizations need to keep
in mind to make the online experience straightforward, easy to use and have a mobile-first approach. Seamless customer journeys with responsive customer support is a must for engaging with these generations.
Fintech organizations can’t even rely on the traditional credit database check system as an eligibility barometer for these generations to open their bank accounts. Those systems are slow and will often reject younger generations with smaller credit histories.
Hence Fintech Organizations should take it on themselves to find an alternative way of helping companies streamline their digital experiences.
2. Be transparent and honest about your products and services
An interesting study conducted by Salesforce Research pointed out that 71 percent of millennials trust companies than 63% of Gen Z. Moreover, only 55 percent of millennials are comfortable with how companies might use their personal information, in comparison
to only 44 percent of Gen Z. This study shows that there is a sense of distrust amongst the millennials and Gen Z about how Fintech organizations or any other companies treat consumers and their data.
Hence, Fintech Organizations need to consider transparency and integrity when approaching the younger generations; only incentivizing the offers is not enough to win their trust. Treating them right should be the top priority.
3. Leverage technology to help customers achieve their goals
Gen Z and Millennials are more financially aware than any previous generations; they want practical solutions by leveraging technology to help them achieve their goals – this could include saving, making investments or attaining financial independence. Hence
Fintech Organizations should bundle their packages and design their services with latest Fintech trends in their mind. There can be features that alert customers against making a decision that can lead to serious debts. Investing can be made easy as a straightforward
in-app - feature in banking tools.
Wrapping it up!
We looked at different factors affecting and influencing the financial and banking decisions of Gen Z and Millennials. There is a lot of scope for improvisation in the financial sector to better match these generations' needs, which would help everyone get
access to better services and ease of finance. Fintech organizations can look at this as a challenge or an opportunity, but one thing they can’t do is ignore it. Best prepare yourself for the future of finance!