What Gen Z can tell us about the future of banking
This week, I was planning to write about geopolitics, the hardening of relationships between East and West and how the new cold war is really about the battle over the new silk road and the emerging crypto ecosystem.
However, something else caught my attention, and as my thoughts on China vs the USA are still cooking, I changed tack.
An ex-banker friend recently introduced me to a youth-led consultancy, LIVING PROOF. What they do is extraordinary. They train young people in half a day to go into their communities to undertake research on their behalf.
These young people research in safe places with people they know. They then report back and deliver insight. LIVING PROOF has just completed and published some insight on Gen Z and money.
All too often, the voices of young people seem to be ignored. They don’t make much money, you see. The logic that young people turn into adults seems to escape most.
But I would argue that there has never been a more critical time to talk and listen to young people. Their daily lives are so connected to technology, media and data. What they do and how they do it filters up through the generations. They are the canary in the mine, letting us know what is going to happen.
Here are some headlines from the research:
Gen Z wants assets and financial stability: They live in the awareness that you can lose money through no personal fault of your own, anytime. Hard work isn’t always enough for safety.
They are hyper-aware of debt: Gen Z are spooked by the myths/truths that 30-year-olds are still paying off their (much smaller) debt today. They are getting jobs at 16 and younger to save for uni, often cash in hand, because most employers don’t take them seriously. They are deliberate and frugal spenders.
Their financial literacy is self-taught: This is often through watching YouTube, following influencers and experimenting with small amounts of money.
Their spending is pragmatic and curbed: It’s helpful to track spending to ease anxiety, but sometimes it does the opposite and causes more. It’s a struggle to find a balance between freedom and control, to feel calm and at ease. Each purchase is seen as an investment, needing ROI.
They are wary of credit: They do not have credit cards and do not want them either. Student loans weigh heavily on their awareness and taking on more debt is triggering. They would rather save up and buy the item, even if they have to wait.
They are actively saving: Crypto wins over junior saving accounts, but it doesn’t help boost credit scores or get a mortgage. It’s the same problem with Klarna. Crypto is one of the few attractive risks.
Bad education: Financial education at schools from people who do not share similar backgrounds and family setup has limited value, so they are learning from social channels instead. “If you don’t understand what it’s like for me and can’t show me how to move up, what’s the point?”
Money talk is taboo: Young people often learn from a young age not to talk about money or ask questions (even with the family closest to them). Lots of parents don’t talk about money at home, or if they do, it’s stress, arguments and big emotions.
Guilt: When spending the money they’ve earned on fun/extra things, the happiness felt is fleeting, replaced by anxiety and shame. They’re constantly aware of how hard their parents worked just to get by.
The stark gender differences: From an early age, gender identity and socialisation affect money priorities and worries, with differences in saving, investing and spending. Girls have a longer-term view of money.
Envy: Seeing people on social media heightens feelings of being behind.
My key takeaways from this research include:
Gen Z wants to control and be money confident. They want to be able to balance money-in with money-out. Providing tools that help them do this is critical – everything from spend analysis to cash forecasts for a month. Moreover, they want knowledge. The more they understand, the greater their confidence.
Entrepreneurship is a big deal. From a young age, many young people are looking at business ideas to generate cash. They have seen the potential of social and new technology in reducing the barriers to entry for business ideas.
But their age is a barrier to getting a bank account, so their finance needs are not being met. Finding ways to tap into and help these budding entrepreneurs feels like a no-brainer. Who will be the first to launch a young person’s business account?
The future mix of products is unclear. The more young people eschew credit cards, the more a credit card’s usefulness is brought into question. I guess this is the opportunity that the BNPL brigade has seen. But what the research seems to say is that young people have a genuine desire to stay debt-free.
On the other side, saving in a low-interest account is of zero importance. Crypto is seen as a legitimate investment tool, and they will expect banks to have a crypto proposition. This has massive implications on the banking product mix. They want new products that simply do not currently exist. Actuaries, you need to get your thinking caps on – the product set needs updating!
Social channels are vital for outreach and education. Young people are plugging gaps in financial literacy through watching others on social media. But they also see the risks and downsides associated with that. They want to be educated, but by those they recognise and can identify with, not a grey-haired advisor.
Banks need to play their part and work out how to use social for the good of their customers. If they do not, I would question the actual societal role they play. Banks could and should fulfil a real purpose – connecting young people with money positively in a relevant way that matters to them.
If I were a bank I would be leaping for joy. The answer is there and so obvious. And not that difficult to achieve!
Young people want to be treated as individuals and expect personalised content, products and services. This research project is not alone in finding men and women see money differently. Plenty of others, including my own, have come to this conclusion as well.
Honestly, if a bank truly believes that it is customer-focused, developing a personalisation strategy must be a top priority. The technology exists, the data is there, it just needs a CX champion to make it happen!
About the author
He is a passionate customer advocate and champion and a successful entrepreneur.