Personalisation: the Gen Z banking imperative
Generation Z, the next generation of bank customers, represents a sizeable market segment. This generational cohort, born after 1996, makes up about 20% of the US population according to Statista and data from Business Insider indicates that Gen Z wields purchasing power of more than $143 billion. Purchasing power that is projected by Boston Consulting Group (BCG) to increase by more than 70% in the next five years.
As the oldest Gen Zers begin to enter the workforce and become financially independent, this generational cohort represents a lucrative target market for financial services institutions. With new customer acquisition considered a top challenge in the financial services industry according to a BAI Banking Outlook: Trends In 2020 report, winning the battle for Gen Z market share will be critical to meeting this challenge and driving long-term growth.
The ability of banks to attract and retain Gen Z customers hinges on creating and delivering highly personalised banking experiences. A recent consumer banking survey on personalisation, digitisation, loyalty trends across generations found that more than 64% of Gen Z survey respondents considered personalised banking experiences, including recommendations that are relevant to them based on financial product usage and behaviours, as important or very important.
Growing up in the Netflix, Amazon and TikTok era, Gen Zers have an expectation for hyper-personalised experiences. These companies set the standard for earning a high rate of customer loyalty and long-term success through personalisation. Banks can take a page out of their book to create personalised options and incentives geared toward attracting and retaining Gen Z customers.
Banks have some work to do to meet Gen Z expectations for personalisation. The consumer banking survey found that only 12.5% of Gen Z survey respondents considered their interactions with banks to be fairly personalized and only 7.45% considered these interactions as very personalized.
Strategies banks can use to deliver on Gen Z’s desire for more personalised banking experiences include incentives and rewards programs, product bundles and benefits such as fee waivers, cashback, free Spotify account, VIP concert tickets and gadget insurance.
To increase Gen Z market share banks can get creative with incentives and rewards programs tied to achieving financial goals. For example, offering incentives for bank customers who successfully save for a house down payment or rewarding a customer who is a football fan with a chance to win a trip to the Super Bowl for achieving a goal of paying down student debt.
When it comes to product bundling, start by looking outside the banking industry. The first company to really put product bundles on the map was McDonald’s with the Value Meal. Apple recently applied this concept to tech with the launch of Apple One, which groups multiple services, like iCloud, Apple Music, and Apple TV+, in various bundles for consumers.
Banks can and should take a page from the history books and apply these same concepts to their own product bundles to remain competitive and relevant. Bundling offerings such as no-fee checking products, high-yield savings accounts and cash-or-point rewarding credit cards is a great way to attract Gen Z customers. These offers should be seamlessly bundled so they don’t need to pursue multiple applications or take several trips to the local branch. It is also not enough for these product offerings and bundles to be competitive; they need to be tailored to this generational cohort based on their spending habits, lifestyle and interests.
Cashback programs, fee waivers and free banking services such as an annual financial plan review are other cross-selling opportunities that allow banks to foster a stronger relationship with Gen Z customers.
Make no mistake about it, building and nurturing relationships with Gen Z customers is critical to retaining this customer base. This cohort has limited brand loyalty and will shop around for a financial institution that provides the personalised experiences they have come to expect. Banks that don’t offer personalised experiences could see their Gen Z customers making the switch to a new bank. About 40% of Gen Z respondents to the consumer banking survey indicated they have recently considered opening a new account with a new bank.
Gen Z acquisition and retention strategies go beyond providing an easy-to-use digital banking interface. With a hyper-personalised approach that crafts promotions, products and benefits tailored to this generational cohort, banks can capture and keep more Gen Z market share.