Three Gen Z Banking Trends Driving Innovation
A 2021 bank study of 4,000 customers correlated twelve different banks to twelve attributes and mapped how differentiated customers perceived each one relevant to the others. Some attributes included how secure, trustworthy, innovative, personalized, and convenient the customers perceived each bank. The report found that customers perceive very little differentiation between financial institutions. As a new generation of banking customers enter the market, how banks differentiate their services concerning Gen Z expectations will be critical to earning their business.
Gen Z is the largest new customer base to enter the market since the Millennials, many of whom are still too young to earn their own paychecks. Their financial potential is enormous, with a record-breaking intergenerational wealth transfer from Baby Boomers worth more than $30 trillion in the coming years worth. Gen Z’s ages range from just 10 to 25, and 70% have already started saving for retirement. The median age this group begins saving is just 19 years old, the youngest of any generation by at least six years.
Attracting a new customer base means understanding their motivations and expectations. Although no demographic is a monolith, three aspects of the banking experience stand out to a typical Gen Z customer.
Three Emerging Gen Z Banking Trends
Personalized Support
A better experience, for Gen Z, means more than just moving from brick-and-mortar to a mobile app. For a generation of digital natives, the intersection of a cutting-edge interface with personalized and supportive features is critical.
Creating an end-to-end experience that customers can feel good about builds brand affinity. This group has high expectations for companies that prioritize empathy and social good. Gen Z can sniff out capitalistic motives from a mile away and are happy to switch to competitors who demonstrate a desire to listen and help them in their financial journey. As this customer base gets its first taste of economic freedom, personalized features designed to help monitor spending habits and teach them how to save their hard-earned money will stand out.
Bank of America launched its AI-powered assistant, Erica, in 2018, becoming the industry benchmark for personalized support. The product demonstrated a massive shift in motives as a prominent bank cannibalized its fee-based business in favor of customer service. Since then, the number of users utilizing the assistant has skyrocketed to over 20 million. With positive signals from the ambitious project, the bar has been set. While many banks won’t deliver at the same level, it’s clear that banks will need to prioritize personalized support if they hope to stand out.
Financial Wellness Guidance
Understanding why financial literacy is a priority to Gen Z means understanding the defining experiences of the generation. Raised by Gen X parents who came of age in an era marked by cultural and political crises, Gen Z is developing their own understanding of what stability feels like during the financial turmoil brought on by COVID, a dramatic economic downturn, and the Great Resignation.
And again, authenticity in the delivery is vital. Consider that this is a group of young adults and teenagers used to taking their advice on all subjects from experts on TikTok — and that those “experts” may have varying degrees of expertise. A generic delivery drenched in formality is unlikely to form the relatable connection Gen Zers seek.
This isn’t the first generation to face financial uncertainty, but they will be among the first to have unprecedented access to information and expert advice. There is a substantial opportunity to differentiate services by tailoring education to this age group’s specific circumstances and goals. Designing experiences that support the emotional burden typical of a recession-weathered demographic will also help banks stand out and attract Gen Z customers.
Speed & Convenience
Speed is everything today, whether it’s next-day delivery service or groceries guaranteed in 15-minutes. So it’s no surprise that this attribute ranks as a priority with any age group, but particularly with one who has never known anything different.
And true to form, the way this group defines convenience differs from the generations that precede them. While nonprofit BAI’s banking survey found that Millennial, Gen X, and Boomer consumers’ most frequent request was a clear and simple app for bill pay and check deposits, Gen Z “felt differently, citing quick transfers (57%) and faster payments (45%) as a high priority.”
“The way consumers define ‘convenience’ is rapidly changing from branch location to digital capabilities.” says Karl Dahlgren, managing director of research for BAI.”Our research indicates that organizations that aren’t actively finding new ways to meet this need are at risk of being left behind.”
Banks that adopt this mindset and prioritize it in every step of the customer journey will surely stand out.
How Banks Will Innovate The Banking Experience
Differentiation is more than just a creative marketing slogan. The experience itself must authentically deliver the value your customers are seeking, or they won’t hesitate to switch to a product that does.
This type of innovation doesn’t happen overnight. Delivering an innovative experience takes an innovative approach. Instead of basing the product strategy on business outcomes, it must be based on customer goals. Instead of making product decisions based on experience, they must be based on customer feedback. Instead of de-risking by planning extensively and mapping complex user journeys, do it with rapid, iterative testing and learning.
Customer inputs will guide the product roadmap.
To have a customer-centric approach means truly putting your customer’s priorities at the center of your decisions. Is your team actively gathering customer feedback now? If not, you must start.
“What product owners don’t realize is that their love of their idea can sometimes blind them, and they’re not necessarily focused enough on what the user wants, what the customer wants, what the market wants,” says Geoff Wilson, founder and CEO of Three Five Two.
To reduce the risk of investing too heavily in an approach that ends up failing, teams must bring the customer into the product roadmap from the very beginning. What gets your customer to you? What’s pain points are they feeling? What are their emotions telling you about their needs?
You have to go beyond a customer journey map to get this type of input. You have to really get close to your customers and talk to them.
“The customer journey is a series of processes and steps that we all know about. It’s how your business runs today. The challenge often comes from the needs you’re not addressing today. What are the user expectations, desires, or pains you have no idea about? We call this unknowable unknowns,” says Robert Berris, Managing Director at Three Five Two. “If you’re not talking to customers regularly, you’re not learning about their journeys and maybe more broadly about them. That becomes a massive threat to your organization.”
Agile processes will accelerate the speed of innovation.
Speed is a priority for your customer and their experience with your product. But speed is also crucial in how you compete with new products and features.
If your goal is to design the perfect product from the get-go, competitors may deliver a better solution before you reach your goal. To ensure your solution delivers against customer needs, prioritize learning over perfection in your go-to-market strategy. Minimum viable products allow you to quickly get ideas in market and validate decisions to iterate or pivot.
Think about how to continue learning about the pain your customers are experiencing, and keep everybody honest about what you observe when customers interact with your experience. Experiments should be designed to help validate the business model before perfecting the messaging and creative. These are really divergent points of view for many organizations used to waterfall product development.
Lean, cross-functional teams will outpace competitors.
Companies that can to reduce rigidity and siloed thinking are more nimble and innovative. According to Deloitte and MIT Sloan Management Review research, “a key advantage to cross-functional teams is enhanced access to resources such as adaptability, diverse perspectives, broader skill sets, and new ideas.”
To successfully put something into the marketplace quickly, you’re going to need a blended team throughout the whole process, garnering customer feedback and using it to inform and strengthen what you do next. People with different areas of expertise, from strategy to design to product development to marketing to research to analytics, need to come together and be accessible throughout the whole process to really fuel those quick iteration loops.
A cross-functional or blended team structure creates a healthy tension that generates valuable debate and conversation in support of finding the most effective way to bring an idea to market, find a viable business model, and make sure you’re learning the whole time.
Like generations that have come before, Gen Z presents new challenges for banks to understand and develop fresh experiences. To cater to the desires of this unique group, they’ll need to create more personalized experiences, features that authentically educate customers about financial wellness, and meet their expectations for speed and convenience.
Banks may need to adopt fresh working models they’re not naturally comfortable with to get there. To gain a competitive advantage, prioritizing customer research, agile processes, and cross-functional teams now will help them avoid falling too far behind.
Three Five Two is an innovation and growth firm. We’re business strategists, researchers, technologists, designers, marketers, and data analysts who excel at validating, building, and scaling businesses. We help industry-leading companies clarify opportunities, validate concepts, delight customers, and maximize growth.
Originally published at https://www.threefivetwo.com on February 22, 2022.
