Capturing the Gen Z market starts with onboarding
For years, Gen Z was not a priority for most financial institutions. Millennials, Gen X, and Baby Boomers were the first to be exposed to digital banking products and were the primary population groups that banks historically focused on.
But with Gen Z now making up 32% of the global population and holding a purchasing power of over $143 billion, banks and fintech companies have started to shift their focus to this new population.
A generation unlike any other
Unlike any generation we’ve seen before, Gen Z is the first generation to grow up as true digital natives. As a broad generalisation, most of Gen Z never had to rewind a cassette player to listen to music, rent a VHS from Blockbuster for movie night, or monitor their pager for urgent messages. Instead, they grew up with supercomputers that fit into the palm of their hands from day one and are accustomed to products being digital and mobile-first.
The oldest Gen Zers are only 24, but they’ve already seen two global recessions. The first being the Great Recession of 2008, and the second resulted from the COVID-19 pandemic that we are still experiencing.
The latter of which hit Gen Z especially hard. In a March 2020 Pew Research Center survey, half of Gen Zers aged 18-23 reported that they or someone in their household had lost their job or taken a pay cut due to the COVID-19 pandemic. This context has undoubtedly shaped Gen Z’s perspective on financial services, products, and even their world view on what banking means to them.
Race to be first
Some fintech companies are taking note of this important growing customer segment and have begun building products and brands for Gen Zers early on. The strategy makes sense – financial products are sticky, so if you get in with Gen Z early and build a high degree of brand trust early on, they will likely stay loyal to your brand for years to come.
To capture this market, fintech companies must deliver the digital-first experience Gen Z expects starting from the minute they sign up for an account. Financial products no longer compete to have the most seamless sign-up flow compared to other banks, but rather other mobile products. It should be just as easy to sign up for a bank account as it is to press a button to call an Uber.
However, financial services adds additional complexity to ensure that this is not an easy task. The overall rise in fraud since the onset of the pandemic and the sudden influx of individuals going online make it significantly harder for banks and fintech companies to verify identities and prevent ongoing fraud risks with their Gen Z user base.
Financial institutions that use traditional data sources and methods of KYC create a lot of friction for this new generation. Using knowledge-based answer questions, relying on older data sets such as phone records and credit scores, or even asking for archaic information like “home phone number” creates friction for the Gen Z user. And don’t even think about requesting a Gen Zer to come into a physical branch or hop on a call with you – you’ll likely never hear from them again.
On top of that, Gen Z’s income sources are much different than we’ve ever seen before. They aren’t your average “W-2 workers”. Many of them are gig workers or self-employed – ushering in a new “creator economy” that many fintech companies are trying to uniquely serve and eventually monetise.
Adapting your existing processes and infrastructure to try to fit Gen Z’s needs is not enough. To attract and delight this demographic, you’ll need to redesign how you onboard new customers altogether.
Start by thinking about what the experience is that you’re trying to offer and who your target user is. Then determine which data sources and infrastructure makes sense to provide the best experience for this new demographic. Checking social media profiles, stats around their email, employer sponsorship, payroll data, or even guardian support are all new data sources to keep in mind when targeting a Gen Z audience.
Once you tap into the Gen Z demographic, the opportunity is endless. But the first step is getting them through your (virtual) door. A seamless, instant digital experience that taps into data sources relevant to the younger generation will help improve your identity verification process and customer onboarding.
About the author
Charley Ma is the general manager of fintech at Alloy. Ma joined Alloy from Ramp, where he was head of growth and helped launch the first corporate card built for savings.
Prior to Ramp, he was the first business hire at Plaid, where he led the fintech and developer sales vertical and built out the firm’s New York office prior to Visa’s $5.3 billion acquisition.