There has been a lot of talk over the last few years about millennials. They are seen as a group that is quite different from previous generations in many ways. The differences come in how they consume media, how they shop, and how they make decisions. Many financial service providers have changed the way they operate in an attempt to cater to this particular demographic.
Financial agents have joined social media in order to have their voices heard by millennials. Robo-advisors have been developed to meet the instant service expectations of millennials. Mobile apps and websites have been developed, in all industries, to meet the needs of millennials. Millennials want to be able to do their business digitally.
The financial service industry has been altered greatly to meet the demand for a seamless experience, instant service, and unlimited control. It will have to shift again to live up to the expectations of the next big demographic: Generation Z.
Financial service providers have already begun shifting their strategy, modernizing operations to meet the needs of millennials. Those efforts will prove beneficial because Gen Z expects the technology solutions that millennials enjoy. Even though some solutions have already been put in place, financial service providers will have to move towards providing a true omnichannel experience to capture the next generation of consumers.
Characteristics of Gen Z
Gen Z consists of individuals born in the mid-1990s and beyond. Eventually, when this generation ages, a line will be drawn (between Gen Z and the next generational cohort), but today Gen Z consists of consumers who are aged 23 and under. This means that while older members of Gen Z are just finishing college, the youngest may still be in diapers. It is very hard (and quite unethical) to market your financial services to literal infants. So, we will focus on the consumer habits of the older members of this group, the members who have already developed some sense of self.
Gen Z is projected to be 2.5 billion people strong, and are already spending around $200 Billion annually, including their influence on household spending. That number will only grow as they enter the workforce, inherit wealth, and begin to invest their own assets.
Members of Gen Z are considered “digital natives”. Having grown up with technology, they feel very comfortable making purchases online and through mobile apps. Growing up with these technologies, they also have very high expectations of them. 60% of Gen Z will refuse to use an app or website that does not load fast enough.
This generation is constantly connected, they expect a seamless, truly omnichannel experience. They expect everything to be available, through any channel, whenever they want it.
Generation Z grew up with any answers they needed right at their fingertips. The availability of the internet has made them self-reliant. This self-reliance has enabled them to be smarter shoppers, comparing prices, rates and the overall offers with those of your competition.
You might be thinking: “wait, you just described millennials.” I know it seems that way, but despite their similarities, the two groups are fundamentally different in many ways.
For one, generation Z are more mobile-centric than any previous generation. According to Vision Critical, Gen Z uses their smartphones 15.2 hours per week, more than any other device. This is more than the 14.8 hours millennials use their smartphones. Generation Z also watches less TV than any previous generation, consuming around 13 hours per week. The youngest generation is also desktop averse, using a laptop more frequently than desktops. 74% of generation Z spends their free time online, 73% of them use mobile devices to text and chat socially with family and friends.
An example of how much they enjoy using mobile devices, 39% of Gen Z respondents ranked mobile banking as a top day-to-day banking service or feature, compared to only 17% of overall Americans and 32% of Millennials.
In order to get your messaging to Gen Z, you should focus your digital efforts on creating ads and content that looks good on mobile devices. Invest in responsive design and ensure the website is quick to load.
More In-Person Interactions
Believe it or not, Gen Z appears to be less interested in entirely digital experiences, preferring an omnichannel experience. Only 25% of Gen Z do more than half of their banking online or through a mobile app.
53% of Gen Z prefer in-person interactions over instant messaging or email. These preferences may have been developed after hearing about millennials struggling with in-person communications in professional situations. While they enjoy face-to-face interactions, technology solutions such as Skype, Hangouts, Facetime and Snapchat are still used to communicate digitally. These solutions allow them to utilize full sight, sound, and movement. They grew up with these solutions, which might be a reason they are more comfortable with in-person communications than millennials, who grew up with email and instant messaging (text-only mediums).
In order to attract generation Z to your practice, you will need to maintain a strong brick-and-mortar presence. Chatbots and other instant-messaging solutions will not be as appealing to generation Z as they are to millennials. However, solutions that allow for communication using sight and sound will be used and appreciated.
Much like their millennial counterparts, Gen Z has an interest in social and environmental responsibility. 76% of the generational cohort is concerned about humans impact on the environment, with 60% wanting to have an impact on the world (20% more than millennials). As a financial service provider, you will need to offer a variety of socially or environmentally responsible products and services for generation Z investors.
The social and environmental responsibility should not end there. Your business should have a cause that matters to you, something that you want to change. Make it a priority, giving employees time off to volunteer and partner with charities or causes. Do something to make the world a better place. Gen Z will notice and remember when it’s time to make their purchase decision. This generation may even be willing to give up a little bit of money to invest in social responsibility. 55% of online consumers are willing to pay more for products and services from companies that are committed to positive social and environmental impact.
Generation Z grew up in a very different financial environment than millennials. They have grown up seeing social security funds depleting, individuals crushed by student debt, and the 2008 recession greatly diminishing the economy. These experiences have left them with a different mindset about finances than the last few generations.
Seeing the banking system collapse the way it did, requiring a bailout, generation Z is skeptical of financial service providers in general. This skepticism will lead to the generational cohort diversifying their assets more than previous generations, using multiple financial advisors, banks, and insurers.
Gen Z has many other concerns about the economy that will factor into their financial decisions. A major concern is that the (still very) young generation will not be able to afford to get a higher education, or that if they do, they will be buried in student debt. This concern may lead to fewer post-secondary students in the generation, which could affect their future earnings. This concern about education may lead to them starting RESPs or otherwise saving for their own children’s education sooner than ever before.
The generational cohort is also concerned about having to support their parents or guardians in old age, which again may make them more risk averse. Having grown up in turbulent times, Gen Z will be wary of financial service providers. They were still young and impressionable in the post-2008 recession. Sentiments expressed by the media during that time may cause them to never trust anyone in the financial service industry too much. This makes it all that much more important to draw this generation towards your business.
Takeaways About Generation Z
So now you know a little bit about generation Z. They are digital natives, expecting the best experience, regardless of the device they are using. They care about the environment, about social responsibility. The generation is less trusting of traditional banking systems, based on their experiences growing up.
Many members of Gen Z saw the struggles of family members during the great recession. Many have older siblings who still live at home, parents, and relatives who were laid off or fired, cousins and friends who couldn’t find a job. This experience is still fresh in their minds and is a motivation to look for financial security. Because of their young age, we do not have a detailed profile of how this generation invests. However, due to the world’s financial situation during their youth, it is likely that they will be risk-averse investors.
To sum it up, generation Z is complex. Gen Z has a familiarity with technology that has never been seen before. They want instant, omnichannel experiences, regardless of what they are doing. You still have plenty of time to prepare for capturing this demographic. However, it will be a challenge unlike any you have experienced before. The benefits of capturing this demographic, while small today, will be huge tomorrow.
Are you ready to the next generational cohort? Do you think Gen Z are just millennials “on steroids”? Even though they are still young, their market will be huge. Tonka trucks and algebra classes today will be F-150’s and engineering jobs tomorrow. Are you going to prepare for Gen Z? Let us know on Twitter @VeridayHQ, we want to hear your opinions on this next generation.