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If you want to reach the next generation of banking customers, you’re going to need to face up to one simple fact: you’re doing it wrong.
As an industry, we’re saying the wrong things, on the wrong channels, and using the wrong media.
How Gen Z and Gen Alpha Consume Media
The younger generations of banking customers aren’t reading whitepapers, visiting your website, or attending your webinars to learn how to manage their finances. At a recent panel I sat on at the American Banker Digital Banking Conference, Liz at Spotify made this point specifically. Spotify’s Culture Next report shows that podcast listenership among Gen Z grew by 62% over the past year.
Edison Research backs that up in its State of Podcasting 2022 report. 64% of Gen Z and 55% of Gen Alpha listen to podcasts regularly. However, it’s not just podcasting that’s capturing attention.
Gen Z and Gen Alpha consumers live in an omnichannel world. They are seeking out specific content providers and engaging with personalized and interactive content, such as quizzes and calculators, rather than just reading.
82% of Gen Z and 75% of Gen Alpha say they prefer media that is personalized to their interests according to McKinsey, and they’re willing to share data to get it. The Humanizing the Bank Customer Experience By American Banker and Monigle show that nearly three-quarters of consumers are willing to provide personal information to get personalized benefits.
Younger consumers are also interested in gamification. Nearly 90% of Gen Z and Gen Alpha identify themselves as gamers. These generations have grown up with smartphones and spend as much time on gaming as they do on social media. Gamifying your marketing and diversifying your marketing mix to meet younger consumers where they are is crucial.
We’re Telling the Wrong Story
People are living longer, and people are not living linear lives.
Retirement looks a lot different for younger generations than it did for Baby Boomers and older customers. Pension plans are nearly non-existent, social security isn’t a given, and people today plan on living longer than past generations. Yet, nobody wants to outline their savings.
You’ve got to make a plan that looks long-term but what’s often missing from the conversation is the financial journey people take is significantly different than with past generations. In the past, the narrative used to be that you go to school, get a job and work for 40 years before retiring and living happily ever after.
Today, people are choosing multiple career paths later in life. The average Gen Z worker now expects to work as many as 18 different jobs, live in 15 different residences, and span six different careers. That’s far different than the last few generations. Younger workers are also more likely to take time off between jobs or go back to school later in life.
Financial services are still talking to people as if they are only following a straight-line path when that’s no longer the case.
We need to tell a different story but they still need solid financial advice.
There’s a serious financial literacy problem in our country. Only 22 states demand a semester-long financial course for graduation and only a handful have fully implemented programs. Test data from the National Financial Educators Council shows that nearly 52% of 15- to 18-year-olds fail basic financial literacy quizzes. The average overall score is just 63.8% for all students.
Financial planning is a lifelong event. With people today living longer, financial education is more important than ever, yet most people don’t know where to start with their finances. Financial institutions need to approach messaging as more than pushing specific products. For example, the financial services industry tends to think their point of relevancy is in context with immediate financial decisions, such as opening up an account or taking out a loan. This can make financial decisions more transactional than building a long-term relationship.
The customer journey is bifurcated in the financial services space. Marketers now track digital journey maps. digital segmentation, and behavioral data but there’s often no connective tissue with them. There’s a lot of good information available but none of it is stitching together the totality of the brand experience. They have a lot of great behavioral segmentation, but no attitudinal or psychographic segmentation to help with delivering an overarching brand perspective.
This offers a massive opportunity for financial services brands to step in and answer the call. They can do this by:
- Showing up across the customer lifespan, adding value in other spaces that might not be expected.
- Go beyond telling and focusing on engaging, using gamification, budget calculators, and tools that have support decisions.
- Meet consumers where they are on the right channels and where they are in life.
The new marketing strategy requires brands to be personalized, pervasive, proactive, and persistent across an expanding array of physical and digital channels regardless of the preferred point of interaction.
Our study shows that younger generations are more likely to piece together their banking needs with multiple providers and are more willing to switch. The number of younger consumers willing to switch or somewhat likely to switch providers is about double previous generations.
While trust is still foremost, brands need to flex and show there’s not one single path for every individual. That has a lot of implications for incumbent banks because FinTechs can flex and anchor in niche products. Incumbent banks often find themselves trapped in legacy systems that are difficult to transform. As such, many financial service providers are partnering with FinTechs at an increasing rate. Others are building their own capabilities to meet customer needs.
In every area of marketing, personalization yields better results. McKinsey research shows that companies that excel at personalization generate, on average, 40% more revenue than their competitors.
Yet, many financial institutions still present a menu of services rather than personalizing financial pathways. Gen Z and Gen Alpha aren’t as interested in knowing what types of accounts you have. They want to know what accounts are best for them and how they should be planning financially. They want a technological financial advisor that knows it’s not so much about wealth accumulation as it is about having the money they need to manage their life choices.
People want personalized services from their banks, particularly loyalty and cash-back rewards, and saving and investing recommendations. Young customers are also particularly interested in insights into how major purchases affect their cash flow and advice on saving money.
What Are the Most Important Benefits?
When asked to rank the five most important benefits, 47% of financial institution customers choose personalized loyalty and cash-back rewards and 40% picked personalized savings and investing strategy recommendations to achieve financial goals as among the top three in our study.
A quarter of Gen Z specifically said they would appreciate personalized feedback regarding their spending habits with recommendations on reaching their financial goals. 30% of Gen Z want a personalized summary of their subscriptions, including expiration dates, and suggestions for personalized bundles that can save them money.
Going Beyond Behavioral and Intellectual Appeals
Overall, most financial services providers are delivering similar experiences targeting the behavioral and intellectual dimensions of the customer journey. So, the biggest opportunity for competitive differentiation may reside in the emotional and sensorial dimensions.
A financial institution’s primary objective in the minds of consumers should be to empower the consumer to meet their financial goals. It’s not about saving money, it’s about creating and enjoying the life they want today and tomorrow. The emotional dimensions of experience may represent the best opportunity for financial institutions to humanize their customer experience.
Our analysis of Ally Bank shows how the transformation to a unified digital financial services company showed significant growth through a relentless focus on financial well-being rather than just products.
Looking ahead, delivering on the emotional drivers needs to go beyond mere communications and be embedded in products, services, and solutions that are anchored in the consumer journey toward financial well-being.