How Neobanks and Fintechs are Winning Generation Z Over

The financial services industry has undergone significant transformations over the years. Neobanks and fintech companies have become major disruptors in the financial services industry, challenging the long-held dominance of traditional banks in primary financial relationships with consumers. These innovative players offer technology-driven solutions that cater to the evolving needs and preferences of today’s consumers.

Established financial institutions also have to deal with the changing preferences of consumers, particularly among the Generation Z cohort. Gen Z, the largest population group worldwide with considerable spending power of $360 billion, is now the focus of financial institutions’ attention. As the first truly digitally native generation, Gen Z has grown up with smartphones and has become accustomed to using mobile apps for almost every aspect of their lives, including banking. As a result, they expect financial institutions to possess high-level digital capabilities, as well as operate seamlessly and provide them with personalized experiences during their interactions.

To thrive in this rapidly evolving landscape, established financial institutions must embrace digital innovation and prioritize personalization. Understanding and effectively engaging with Gen Z customers will be essential to succeed in this competitive market.

The Characteristics of Gen Z Customers

Let’s define who Gen Z is before delving into the unique traits that make them special. Gen Z, also known as the iGeneration or Zoomers, refers to the group of individuals born between the mid-1990s and the early 2010s.

They have grown up with technology at their fingertips and never experienced life without the internet, so they are highly comfortable navigating mobile apps, online banking, and digital payment platforms.

Gen Z exhibits unique characteristics that distinguish them from their predecessors. They are known for valuing authenticity, being socially conscious, and prioritizing experiences over possessions.

The COVID-19 global pandemic during their formative years has exposed them to uncertainties and disruptions. This has resulted in them developing a remarkable sense of financial caution and resilience. They approach financial institutions with a discerning and pragmatic mindset, actively seeking solutions that offer both security and adaptability to their ever-changing needs.

Currently, there are approximately 72 million Gen Zers, and they will play a pivotal role in defining the ultimate customer experience in the financial services landscape. Here are some key characteristics that banks should keep in mind when engaging with this generation:

Seamless Integration

By 2025, there could be 42.9 million Gen Z digital banking users. To meet the expectations of this significantly large customer base, financial institutions must provide all-inclusive mobile apps and platforms that can handle multiple tasks seamlessly, are intuitive and user-friendly, and contain no glitches nor delays.

This could entail a suite of online financial services that combines investment, budgeting, and payment tools, delivering real-time experiences effortlessly.

Financially Conscious and Ready to Embrace Fintechs

Gen Zers didn’t directly experience the economic recession in 2008, but they saw how it affected their parents and families during their childhood, leading to higher financial anxieties.

According to a survey, 81% of Gen Z consider money a major stress and 33% feel anxious about personal debt. As a result, they place a stronger emphasis on savings and effective money management. Practical financial decisions are a priority for them.

The bad news is that they find traditional banking services more challenging and inconvenient, and 44% of Gen Z prefer conducting financial transactions with technology companies instead.

Mobile-First

Gen Z has a mobile-first mindset where they use their smartphones as their primary device for accessing information, shopping, entertainment, social media, and financial services.

Research shows that 55% of Gen Z spend more than 5 hours online daily on their smartphones. This means that banks must optimize their mobile presence and ensure that their apps are responsive, fast-loading, and easy to navigate.

Additionally, established banks must incorporate mobile features like biometric authentication, push notifications, QR codes, and chatbots into their apps. By doing so, they can significantly enhance the convenience and security of their services.

Diverse and Individualistic

Gen Z is the most diverse generation in history with a wide array of backgrounds, cultures, ethnicities, and identities represented among their population. They take pride in their uniqueness and express themselves through multiple platforms like social media, music, art, fashion, and activism.

Banks must recognize and respect their diversity and individuality and demonstrate an understanding and appreciation for these personal traits.

They can accomplish this through flexible and hyper-personalized marketing campaigns, active support for social and environmental causes, and tailored products and services to align with specific needs and preferences.

Successful Strategies for Gen Z Customers

To win over Generation Z customers, established banks need to adopt a customer-centric approach and leverage digital innovation to cater to the unique preferences and expectations of this digitally native generation. Here are some key strategies that can help banks attract and retain Gen Z customers:

Leveraging the Power of Data for Hyper-Personalization

Neobanks and fintechs are leveraging technology to deliver highly personalized and customer-centric financial solutions. Neobanks, in particular, operate entirely online, allowing them to gather extensive data about their customers’ financial behavior and preferences. This data-driven approach enables them to offer personalized recommendations, better-targeted financial products, and more efficient customer service.

Fintech companies, too, hold a competitive advantage over traditional banks in accessing extensive customer data. By harnessing advanced AI and machine learning technologies, these companies can effectively segment customers and analyze their behaviors and spending patterns. This data-driven analysis allows fintech companies to provide tailored financial advice, helping customers make more informed decisions about their finances.

The level of personalization achieved through these strategies not only enhances customer satisfaction but also increases customer retention and loyalty. When Gen Z customers feel that their specific needs and preferences are understood and catered to, they are more likely to remain loyal to a particular bank.

Moreover, hyper-personalization goes beyond just recommending financial products; it extends to real-time and personalized marketing efforts as well. By analyzing customer data, banks can deliver targeted and relevant marketing campaigns to Gen Z customers, ensuring that promotional content aligns with their interests and financial goals.

Investing in Building Connected Journeys

88% of Gen Z prefer seamless and interconnected experiences across various platforms. To meet these expectations, banks must focus on building connected customer journeys that offer consistent and cohesive experiences across all touchpoints.

For instance, a Gen Z customer may start a financial transaction on their mobile app, but later they might want to continue or review the details on their laptop or tablet. By investing in omnichannel capabilities, banks can enable a smooth transition between devices and channels, ensuring that the customer’s journey remains uninterrupted and frictionless.

Building connected journeys involves integrating data and systems across various platforms to provide a holistic view of the customer. This way, regardless of whether the customer interacts with the bank through the mobile app, website, social media, or in-person at a branch, the bank has access to relevant information and can deliver personalized and consistent experiences.

Creating Value and Differentiation with Real-Time Personalized Experiences

Personalization is a key element that can significantly enhance the functional benefits of financial products and services. 81% of Gen Z consumers worldwide consider personalization as a crucial feature that could strengthen their relationships with brands.

To illustrate how personalization can make a difference, let’s consider a scenario involving a bank:

• Mobile Payment Integration: A Gen Z customer uses your banking app and completes a transaction using one of the popular mobile payment platforms like Apple Pay, Google Pay, or Samsung Pay. The seamless integration of these mobile payment solutions allows the customer to make secure and convenient transactions directly from their mobile device.
• Real-Time Notifications: As soon as the transaction is completed, the banking app sends a real-time push notification to the Gen Z customer. The notification provides an update on their account balance, reflecting the deducted amount from the recent mobile payment transaction. Additionally, the notification informs the customer about the reward points earned from the transaction, adding a sense of instant gratification and recognition for their engagement with the app.
• Personalized Offers and Promotions: Based on the customer’s spending habits and transaction history, the banking app identifies relevant personalized offers and promotions. Shortly after the mobile payment transaction, the app sends another push notification, presenting the customer with exclusive deals or discounts tailored to their preferences and interests. This level of personalization fits into the customer’s overall banking experience and provides value-added benefits.
• In-App Budgeting Tools: The app continuously keeps track of the customer’s spending patterns. If the customer’s spending exceeds a predetermined threshold within a seven-day period, the app triggers a proactive push notification or SMS. This notification encourages the Gen Z customer to take advantage of the in-app budgeting tool available in the banking app. The tool allows them to track their spending, set financial goals, and manage their money more effectively. In addition, the app provides personalized insights and tips to help the customer adopt responsible financial habits and stay on track with their budgeting goals.

Let’s Collaborate to Help You Connect with Gen Z

For established financial institutions aspiring to reach new heights in their businesses, the key lies in crafting connected customer journeys that make customers feel heard and valued.

At Evam, we specialize in customer journey orchestration, enabling our partners to achieve their engagement goals. With the Evam Marketing Suite, you can seamlessly design and manage customer journeys across all channels and touchpoints while managing both batch and real-time marketing campaigns.

Are you prepared to seize the next significant opportunities in the new financial landscape? We are fully equipped to discuss how our expertise can assist you!

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