How bankers think about Gen Z
When the coronavirus quarantine is over and life returns to some version of normal, banks will need to go back to thinking about how they will work with the next generation of young adults.
Some fintechs are already doing so. One startup, GoHenry, which targets kids aged 6 to 18 with a banking app and debit card, announced this week that it’s reached the milestone of a million customers. According to the company, those customers contributed more than $13 million to the U.S. economy and spent more than $4.5 million online at stores like Microsoft, Apple, Amazon, Google and Playstation.
In a webcast this week, bankers shared how they think about this segment of consumers and how they intend to reach out to them.
Young minds shaped by the coronavirus
Generation Z members are roughly in the 6-to-24 age bracket. There are 2.47 billion of them — almost 30% of the population.
They are growing up in a strange time, having to practice social distancing when many just want to be with their friends.
Many of those over 18 are struggling financially, particularly since much of the nation went on lockdown to help slow the spread of the coronavirus. A recent Harris poll found that workers under the age of 22 are losing more work hours than any other demographic and almost one-third of Gen Z workers have been put on leave. A Harris/Nerdwallet survey found that 46% of this population receive help from family members for housing costs and 41% feel anxiety about their personal finances.
And those under 18 are affected by their parents’ economic difficulties.
“Watching the news headlines that we're seeing, reporting historic unemployment numbers, will ultimately have a sobering impact on their psyches,” said Julia Carreon, the managing director of digital and fiduciary operations at Wells Fargo Wealth Management. “Early indications are that this generation is likely to face difficulties with employment savings and reaching milestones.”
Many Gen Zers' financial worldview was shaped by the financial crisis, Carreon added.
“Seeing their parents lose their jobs, watching older millennial siblings move home and the rise in higher education tuition and student debt has resulted in Generation Z having a more conservative view of finances,” she said. “They're even more conservative and worried than millennials were.”
They’re now called Zoomers, she said, because psychologically they have moved closer to baby boomers in their views.
“I think of them as super-technology-obsessed boomers,” Carreon said. “They have a tendency towards frugality and moderation.”
They are also entrepreneurial minded, she said: 72% say they want to own their own business.
“Think about Kylie Jenner building her [cosmetics] business on the back of social media,” Carreon said.
This generation is socially conscious. Greta Thunberg, the social climate activist who recently turned 17, led the largest climate strike in history in September.
“Sixty percent say they want to change the world,” Carreon said.
Products matter more to this group than experiences, Carreon said. She pointed to the example of Nike, which has been infusing its products with socially conscious messages that seem authentic.
“My favorite example is their signing of Justin Gallegos, the first athlete with cerebral palsy to get a contract with a major brand,” she said.
Nike ran a video of Gallegos running a marathon and then signing a contract with the company.
“My 14-year-old son is the one who brought that to me,” Carreon said. “So when you're thinking about the kinds of products that would appeal to them, understand that experiences matter and authentic experiences matter even more.”
But the most important thing to realize about Generation Z from a preferences perspective, according to Carreon, is that they are the first generation to be born with a smartphone, Carreon said.
“They've literally rewritten the book on being a digital-first generation because for many, their first memories are of playing video games on their moms’ smartphones when they were toddlers,” she said. “They're going to grow up expecting offline experiences to be as immersive and intuitive and visually rich as they grow up.”
The frugality of this generation could easily be appealed to with automated savings apps and help in keeping debt levels down. The idealism could be addressed with bank policies such as a commitment not to lend to companies that develop oil pipelines. Banks could tap into the entrepreneurial spirit of this segment with apps designed for very small businesses and gig economy workers.
Wells Fargo offers checking accounts to kids, teens and students with mobile and online account access and text and email alerts. For kids and teens, it lets parents review account activity and move money from their accounts to their children’s.
It’s also experimented in the past with virtual reality experiences for clients. For instance, it used to bring Oculus Rift headsets to public events like rodeos for consumers to play a virtual maze game.
Jeffrey Ruben, president of WSFS Mortgage, a subsidiary of Delaware-based WSFS Bank, said he thinks a lot about Gen Z — WSFS’s future customers — and their preferences. “This is a cohort that grew up on technology, so clearly that is a key to the door,” he said. “If you do not have technology, if you're not up on your applications and your online presence, you're going to lose this group of people. They will not go to the next step.”
His bank’s research also shows that Gen Z has a desire for and expectation of human interaction.
“They want that high touch,” Ruben said. “They want to speak to a person with knowledge in this area of finance when it comes to homebuying. So you need to have the right technology, but you’d better be able to meet them on a personal level as well. Otherwise you'll lose them.”
WSFS recently acquired Beneficial Bancorp. When the deal was announced in 2018 WSFS said it would spend $32 million over five years in a "delivery transformation" for all customers. Last year it accelerated the timetable to three years.
One of the ideals is to give customers a seamless experience between branch and digital banking. In 2019, the bank introduced several new digital products, including my WSFS, a messaging application staffed by local bankers. This app is similar to Umpqua's GoTo Banker. It lets users choose a human banker based on shared interests, such as music or college attended, and communicate with that person by text about any banking needs.
Ruben expects that with their interest in doing things by phone but still having human interaction, myWSFS should appeal.
"This is something that I think Gen Z would be very interested in," Ruben said. "It is a live banker helping you with your banking needs through the mobile app. We have seen use of this double during COVID-19 from all our customers and we have also seen a major spike in online and mobile use."
One thing WSFS is doing is recruiting younger professionals into the mortgage industry.
“The average age of a mortgage loan originator is in the mid-50s,” Ruben said of the industry at large.
The bank has developed programs to train college graduates to become mortgage loan originators who could talk in a relatable way with Generation Z.
“We think that will create more relevancy and reliability for our products,” Ruben said.