January 9, 2020 | Caroline Vahrenkamp
As Gen Z comes of age, financial institutions must adapt to capture business from these digital natives.
It’s no secret that Gen Z – roughly defined as those born in 2000 or after – are digital natives. Ninety-eight percent of Gen Z individuals use a mobile device at least once a day, and 60 percent of them use social media to help make purchasing decisions.
But when it comes to finances, it’s complicated. Nearly two-thirds of 16- to 19-year-olds surveyed for the latest Raddon Research Insights report on Gen Z said they would not rely on social media for financial advice. Only about a quarter of respondents said they’ve clicked on a financial institution’s social media ad – ever.
But they are banking. Over 60 percent of Gen Z already has a sole or joint banking account. And their potential is huge – especially since 70 percent of Gen Z hasn’t reached the need for loans or sophisticated products yet.
It’s critical for financial institutions to understand what Gen Z does online and how to connect with this large and growing group of consumers. By the numbers, Generation Z has surpassed baby boomers in size, representing enormous potential for any financial institution that can break through and create a connection.
Gen Z uses the connected world differently than other generations, and their expectations are higher, too. Instagram, Snapchat and YouTube are in a three-way tie for Gen Z’s favorite social media channel; each earned about a quarter of the vote, compared to just 6 percent for Facebook. The three favorite channels all feature photos and short videos, which Gen Z both creates and consumes.
While 60 percent of Gen Z relies on social media to decide what to buy, only 29 percent say the same about financial decisions. This is largely due to how they view online content – with suspicion. They’re digitally savvy and wary of things that feel “salesy” and fake.
Instead, Gen Z prefers to get financial information from people they know. Eighty-six percent of respondents said parents and family members were important sources for financial information, followed by other adults and mentors. Only about a quarter of Gen Z respondents said they look to social media for financial guidance.
Influencers are a unique contradiction to this trend, though. Gen Z responds favorably to influencers, which are social media users with large followings. Influencers post about topics like fitness, food, shopping and travel and promote brands through their social media content. Gen Z consumers find the posts authentic – even though they don’t know influencers personally – and rely on them as a source of trusted information.
Financial institutions can meet a critical need for Gen Z that hasn’t been fully answered online – yet. Gen Z needs a strong boost in financial confidence. About a third of respondents said they’re “not very” or “not at all” confident in their personal financial knowledge – which is a 17 percent drop from just two years prior.
Financial institutions can help Gen Z increase its financial education. To connect with young banking consumers, financial institutions can create educational content that is helpful, authentic and transparent.
Gen Z has a strong preference when it comes to content and educational material online: They want short videos and interactive content. Some financial institutions are finding success with short videos on distinct topics, paired with longer articles for further reading. Focused, modular videos allow users to pursue individual interests, which makes the content seem more personal and relatable.
Real-life examples of people overcoming financial obstacles also appeal to Gen Z, more than content about generic concepts. Stories meet Gen Z’s desire for authenticity and are perceived as more trustworthy.
This generation also appreciates online tools, such as savings goal calculators. Seeing the long-term impact of saving today allows consumers to understand their financial well-being in an integrated way, and offers transparency that Gen Z values.
Financial institutions can build trust with Gen Z through product features, too. Compared to millennials and baby boomers, Gen Z consumers are about two to three times more likely to choose an account that protects them from overdrafting.
Luckily, Gen Z is eager to learn and ready to trust financial institutions. Nearly half of respondents said they’d visit a bank or credit union website to learn about financial products and services. Financial institutions just need to connect.
It pays to engage with Gen Z on the platforms they already use. Nearly two-thirds of Gen Z prefer to do their day-to-day banking on a mobile device, and 53 percent have used person-to-person payment products like PayPal or Venmo.
Financial institutions may be able to connect with younger consumers with tools they already use, like Instagram and Snapchat, by adding convenient banking features. Direct messaging (DM) and other communication features could serve as valuable troubleshooting or financial guidance tools.
Where older generations would walk into a branch or reach for the phone, Gen Z might prefer financial institutions that say “DM me.”
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