How fintech companies are attracting Gen Z through customer experience
The digitization of the financial services industry has largely been driven by the demands and preferences of Millennials, the first fully digital generation. According to a Salesforce research report, 75 percent of Millennials rely on a mobile banking app to perform basic money-management tasks such as depositing checks, checking their balance or paying bills.
In order to attract and retain customers, banks are learning from innovative financial technology (fintech) firms — typically young, agile start-ups that are redefining what it means to be customer-first. These fintechs are capturing market share through transparency, convenience and end-to-end digital solutions to provide better customer experiences.
But just as these legacy financial institutions are getting up to speed on engaging Millennials, a new generation of digital natives is coming of age and entering the market for financial services. Generation Z is the post-Millennial generation, and its constituents are hyper-connected, more demanding and very frugal.
This means that financial services firms that have cracked the code on engaging Millennials may have to go back to the drawing board to figure out how to serve this up-and-coming generation.
The difference between Gen Z and Millennials
Gen Z has grown up in the digital age of social media, information overload, high-speed internet and on-demand services. As a result, they have higher expectations than Millenials ever did. They value speed and efficiency, and are perpetually connected to one another, as well as to mass amounts of information. They’ve also learned to filter through this information in an average of eight seconds (the average Gen Z attention span) by relying on trending pages, curators and influencers.
While some Millennials would remember dial-up internet, Gen Z won’t remember a time when they couldn’t order food from a smartphone or talk to friends halfway around the world with video chat. And while brand loyalty remains somewhat important to Millennials, Gen Z is busy curating their own personal brands, and they expect companies to cater — and be loyal — to them.
Generation Z takes a more values-based approach to investing and to engaging with products and services. “Gen Z is suspicious of any product or service that is not focused on shared value creation (i.e. what’s in it for them?)” says Anthony Danon, a member of the investment team at Anthemis Group.
They also understand the trade-offs between data permissions and a better user experience, and are happy to give their information to companies that use it responsibly in order to deliver a better product or service. In fact, they’ve come to expect it, and are much more trusting of automated services as long as they feel they’re deriving value from the experience.
When it comes to money, however, Gen Z is careful about who they trust and also quite savvy about saving. Their habits are largely shaped by perceptions of previous generations. “Gen Z has it hammered into their heads the importance of saving,” says David Stillman, generations expert and co-author of Gen Z @ Work: How the Next Generation is Transforming the Workplace. “They watched their Gen X parents’ net worth fall by 45 percent. On top of that, Gen Z is seeing Millennials saddled with so much college debt.”
What Gen Z means for fintechs and banks
Many financial-services firms have taken steps to upgrade the way they do business to cater to younger generations. They’ve developed apps, improved the online banking experience and dabbled with social media and content marketing with varying degrees of effectiveness.
Newer banks and fintechs have gone one step further, going mobile-first, providing transparency around fees, and building new features such as peer-to-peer transfers that specifically appeal to a younger, digital generation. However, based on Gen Z’s high expectations and preference for personalized services, delivering the right customer experience will also be key in the battle for market share among this cohort.
For example, Generation Z does not have the patience to wait in a queue for a representative to take their call or to endure a multi-step account application process. Banks and fintechs will need to find innovative ways to accommodate their eight-second filter in order to get their attention — and keep it.
Technology driven solutions: AI and omnichannel support
Financial services companies will need to meet these younger, more tech-savvy generations where they are, says Niall Bellabarba, co-founder of personal-banker chatbot Ernest. “Gen Z and Millennials are probably the first truly ‘always online’ generation. This means having an ‘always on’ service that is instantly available.” Technological solutions, like chatbots and automation, are some of the most efficient and cost-effective methods to deliver high quality 24/7 customer service at scale.
However, while Gen Z is more likely to embrace the idea of talking to a chatbot, they still value face-to-face and offline engagement. In fact, the Financial Times reported earlier this year that one in four Gen Zers visit their bank branch at least once a week. “Where other generations blurred the lines between physical and digital, Gen Z sees no line at all,” says Stillman. “Other generations watched brick-and-mortar struggle to build an online presence while Gen Z has seen brands that started online now building brick-and-mortars (e.g. Warby Parker). Too many banks separate their brick-and-mortar strategy from their online strategy, where for Gen Z they need to be one and the same. Whether Gen Z walks into a bank or logs on, the experience needs to be as identical as possible.”
This unification of the online and in-person experience is fundamental to a modern omnichannel strategy. With so much noise and competition with the introduction of fintech, traditional banks need to pay attention to how they can engage this young crowd and provide the best service and a consistent experience across all their touchpoints.
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Working together to engage Gen Z
“If the key to engaging the next generation of savers is to link up the physical and digital banking experience, then both banks and fintechs stand a chance,” says Ambreen Razaq, a business-development associate at venture-capital firm Techstars. “Even more powerful would be if they combined forces. Banks can offer deep experience in running their businesses through face-to-face interactions while fintechs can layer in new digital methods of customer interaction.”
Perhaps this represents the biggest opportunity for collaboration between fintechs and traditional banks. By working together, the financial services industry can effectively engage Gen Z where they are present both digitally and physically in a way that appeals to them — through personalized and efficient service.