Generation Z (born between the mid-1990s to about 2010) is the fastest-growing generational cohort, and with an estimated income of $33 trillion, is expected to surpass millennials by 2031. Accounting for more than 25% of total economic value at stake, the ability of traditional banks to understand and prepare to cater to the needs of Gen Z could very well be the difference between survival and extinction by the end of the decade.
Such a generational shift in economic power has huge implications for the banking sector. In addition to individual changes in basic needs, attitude towards finance, behavior and preferences, and factors like technology also play a major role.
So, let us look at four traits and expectations that set Gen Z apart from the rest, and four corollary measures traditional banks can take to become Gen Z-ready:
- Gen Z are the first digital-native generation, a hybrid of online and offline is a default mode for all things transactional
- There is a definite demand for financial literacy and help in making financial decisions among Gen Z
- Gen Z expects a wide range of next-gen financial products and services that better suit their financial needs and habits
- In the age of the consumer, Gen Z appreciates personalization and a degree of customization to meet requirements unique to their situation
- Delivering experience in a hybrid environment
Despite being prolific users of the mobile and digital services, 49% of Gen Zers feel that it is critical or important to have a branch appointment scheduler on their mobile banking app, and 59% think it is important for their app to have a customer service calling facility. As paradoxical as it sounds, the reason more often than not is an unsatisfactory or ineffective digital experience.
When it comes to matters of money, consumers expect a smooth transaction, a quick resolution to queries, and a human to speak to in cases of financial emergency.
This applies to Gen Z as well and highlights the vitality of human engagement even in the future. And for the banking industry, it indicates a pressing need for them to be able to deliver a seamless user experience in a human-machine hybrid environment.
- Offering a portfolio of next-gen financial services
Today, all major banks offer a mobile app and funds transfer facility, yet over 80% of Gen Zers use a third-party money transfer app. While just one example, it is symptomatic of how traditional banks are missing out on large and lucrative opportunities by not offering a workable solution to a relatively basic service in today’s day and age.
Digital platforms offer an inherent advantage of being able to consolidate multiple services and to cater to multiple related needs, all without the customer having to leave a singular interface. And in the banking industry, operators can map their services to the customers’ financial lifecycle and habits. In addition to enabling self-service for transactional activities, it also offers banks an opportunity to meet the financial needs of Gen Z with digital financial products such as credit, payments, BNPL, loans, and mortgages; as well as avenues for savings and investments.
- Opportunities for financial decision-making tools
Nearly 40% of Gen Zers in the US have never received any form of financial education at any school level, and nearly a quarter cite it as a hindrance in fulfilling their financial goals. However, 80% of them also indicated that they have taken actions to improve their financial position4. This indicates a huge unmet demand for banks to provide financial literacy as well as smart tools that help users make better-informed decisions, and choose the best suited financial products.
Given their grounding in finance and a grassroots understanding of personal economics, the banking industry has a huge edge over technology companies that also offer financial services. However, when it comes to Gen Z customers, the biggest challenge for banks is to translate that knowledge into actionable, accessible, and user-friendly applications.
- Making personalization scalable
Personalization is the buzzword these days for all products and services. However, given the unique factors involved in each individual case, personalizing financial services can be a complex and expensive exercise. And despite the availability of data, privacy laws and current methods of analysis make personalization at a scale unviable.
However, thanks to advances in Artificial Intelligence (AI) operators can now run complex analytics on large volumes of data and enable a dynamic tool to offer tailor-made offers while maintaining complete individual privacy. Additionally, integrating that with Machine Learning (ML) and Natural Language Processing (NLP) models can help deliver data-driven financial recommendations over interactive advisory tools.
Very often the commentary about the future of any industry gets reduced to ‘humans versus machines’ debate. And not without reason, given the possibilities that digitalization and automation can unlock. But when it comes to money and financial matters, trust is an integral part of a relationship, and at the end of the day or in an urgent situation, the human aspect is non-negotiable.
More importantly, the digitally native Gen Zers know it is possible to get the best of both worlds. They already enjoy that kind of experience in most other walks of life including food and grocery, clothing and all shopping, renting a home or hotel, booking a cab, flight, and even a space trip! So, if traditional banks don’t offer a similar experience for financial services, and fail to align their future goals with the expectations of Gen Z, it is only a matter of time before they look elsewhere.
Xebia: Helping banks become Gen X-ready
At Xebia, we have worked with over 150 banking and financial service providers across the globe as a partner to help them navigate the technology landscape of the banking and financial services sector. This includes 8 of the top 30 global banking institutions as well as leading financial enterprises, fintech companies, digital and neo banks.
The width of our recent exposure builds on a legacy understanding of the banking sector we have built over years. The diverse tech stack we offer is designed to enable banks of the future, from cloud solutions that power services on the go to MLOps to aid automation and analytics at scale, we help banks keep pace with the emerging digital reality.
Within the BFSI domain, our capabilities cover the following areas:
- Corporate: We help simplify supply chains, support new products, and harness innovation so that our partners can become more customer-centric
- Lending: We help our partners achieve rapid and profitable credit growth at scale with artificial intelligence and automation
- Retail: Xebia helps BFSI players digitally transform their omnichannel banking strategies for superior CX and agile operations
- Wealth: We leverage tools and technologies that help our partners enhance the productivity of relationship managers and advisors
- Insurance: Xebia helps insurers improve market share by achieving speed to market in delivering products and services