Track 3: How Gen Z is transforming the payments landscape

Transcription:

Lucas Elliott (00:08):

Well everybody. My name is Lucas Elliott. I'm the Head of Research at Rebel. Rebel is a Research and strategy firm that partners with banks and financial institutions to leverage consumer behavior insights to enhance the overall experience, product market fit and drive go-to-market strategies as well. My background is in behavioral psychology, specifically identifying differences between different demographics and other different types of behavioral influences and factors that may influence that. So I'll turn it over to Mike.

Mike Storiale (00:43):

Sure, thanks Lucas. Mike Storiale. I lead Innovation payments and R&D at Synchrony. Synchrony is the largest private label credit card provider in the country. We have about 70 million card holders and 400,000 merchants and partner providers that we issue credit cards on behalf of.

Erika Sanchez (01:01):

And I'm Erica Sanchez. I lead Venmo. Venmo is the largest peer-to-peer payments platform in the us. So we have 90 million users and 3 million businesses on our platform.

Lucas Elliott (01:13):

Awesome. So I'm looking forward to running this kind of conversation. I know it's a smaller group, so we'll try and have some fun here. So we're going to talk a little bit about how the Gen Z generation is transforming the payments landscape. We have a bunch of different statistics that we've kind of pulled to kind of bring in on this story. So I'll start kind of just an overview of what Gen Z looks like and we can kind of go from there. It's a really broad spectrum here, ages from 12 to 27. So there's various differences in between those ages as well. Obviously there's about 70 million Gen Z in the United States. They all grew up on phones and they are the last generation that is going to be the majority white. So currently it's at 51% and Generation Alpha I think is already at 48%. So the majority has kind of gone from there. So my first question for you guys is in what ways has both Venmo and Synchrony seen the digital differences between the generations of the ones that came before them and the Gen Z today?

Erika Sanchez (02:30):

So maybe should I just start with some observations on Gen Z and then we can go into the digital differences? So Gen Z really is focused on authentic individualism, and I think kind of that last point there about being the last generation to be majority white. It is a diverse generation, and so they're really looking for the businesses that they interact with to recognize and appreciate that authentic individualism and they're really conscious about their consumption. So a couple additional stats to add to that, 45% of Gen Zers are more likely to drop a brand for not being inclusive than prior generations. And 43% seek brands that acknowledge their unique cultural traditions. So I think for us, there's first how are we as a company? So I think obviously for a while now it's been table stakes to be looking at driving, building diverse employee populations, driving inclusiveness within your company, and then also obviously in any external communications, making sure that that inclusive ethos is showing up. But then I think self-expression and individualism has been just core to the ethos of Venmo actually from the beginning. And that starts with our payment notes, which are all about expressing your individuality through your payments. But then as we're starting to build more and more products beyond P2P, really thinking about how we can create products that can be flexible and help support individual desires and how you want to pay and being able to pay, whether it's online, through an app or physically through all through Venmo.

Mike Storiale (04:25):

Yeah, I think one of the things that's really interesting there is that we're seeing trends, and you touched on this a little bit, Erica, that Gen Z starts to vote with their wallet in a way that prior generations didn't, right? So when we think about things like ESG initiatives, prior generations often would say those are very important to me, but we wouldn't see behavioral changes because of the importance not on a large scale. Whereas Gen Z often starts with the behavioral changes. And so those things are really important to them. And it's funny, I want to comment on the payment notes. I can't tell you how many times, and I never expected this to be in Venmo looking at the payments my friend sent to each other. It's become a little microcosm social network on its own, but it's really interesting in the way that they are pushing trends in a way that's very actionable, which I don't think we saw from prior generations.

Erika Sanchez (05:15):

Yeah, totally agree. Can I make one more comment on this question of, I think the other thing is obviously this generation has grown up to be digital natives, so the expectations of how easy to use frictionless experiences, it's just that much higher. So it's on us to be constantly raising the bar as we're continuing to build for newer generations.

Lucas Elliott (05:40):

Yeah, for sure. I'm going to turn a little bit to our next topic here or data point. So we see that Gen Z is the least financially literate generation by all of the generations here, and including 29% of Gen Z are only very confident in their financial literacy. So really that confidence is super, super low compared to different generations. However, they do agree, the majority do agree that financial literacy is very important for their everyday financial decisions. So there is that appetite here for having financial literacy and they know it's important, however, their confidence in it is really holding them back from doing a lot. So my question for you guys is why does financial literacy really matter to financial institutions, retailers, and banks?

Mike Storiale (06:45):

It's funny, one of the things we talk about a lot is how abstract financial literacy can be. So visualizing money is not a thing that people find to be terribly easy. So if I save this much, how much will that become? If I borrow this much, what would that look like if I pay it over time, what's that going to do to my finances? And so I think it's really natural to say that financial literacy is inherently pretty tricky. I'm actually encouraged by the fact that they're feeling so confident at a young age when you consider the fact that they go all the way down to 12 years old right now. I think inherently if they were coming up ahead of some of the other generations, I would be skeptical of that. But I think it goes back to a little bit of what Erica said before, that they are expecting authenticity from the brands that they work with. And so they're expecting that a Venmo or a Synchrony or any financial institution that they're working with understands that financial literacy is important to them and that we're going to make sure that that is baked into the products and the way that we do business with them every day.

Erika Sanchez (07:40):

And in terms of why I think it's important, I mean we obviously are playing a big role in their financial life, and so I think there's just a duty of caring about the financial literacy. I think if as a business too, we want people who continue to be financially healthy and will continue to have a relationship with us over time. So I think kind of a follow on to that is, oh, and sorry, before I go to the follow on, I would agree. I think I was encouraged by some of this data and just in some of the research that we've done at Venmo on Gen Z and having listened to actual folks talking about what this means to them, I actually think they have much more awareness and care about financial literacy than I necessarily even expected. So I think it's encouraging and I think the fact that maybe they're not confident tells that they're aware that they don't know everything yet and they have something to learn and they're still pretty early in their journey.

(08:48):

So I think that that makes sense and is encouraging. So what do we do about ensuring the financial literacy? And so a couple of things. So last year we launched our Venmo team accounts, which we've been really excited about. And a big goal of that is really to start driving that financial literacy and enabling teens to start practicing managing their money with the oversight of their parents. And a big part of our Go-to-market launch with that was actually financial literacy itself. And so we have a series called Money Talks as an example with multiple, it's like a mini series and it goes into all the different aspects of managing your finances and the last episodes talking about side hustles and what it means to have fixed versus variable costs as an example. So I think we take it very seriously and we see it as part of our duty, but then also part of just ensuring that we continue to drive ongoing relationships with our user base.

Lucas Elliott (10:01):

Very cool. Now I have a question actually about those financial literacy education. What forms are they in because Gen Z likes short snippets or videos where they don't really have to read and ingest too much time into it. So what types of content does that look like?

Erika Sanchez (10:21):

Yeah, we have all different forms. So the miniseries I was talking about, I don't know off the top of my head how many minutes it is, but it's in minutes. It's not an hour long series. And then we have shorter snippets, so we actually just got to a million followers on TikTok. And so through our influencers on TikTok, we also include, we call it education, so is education and entertainment on TikTok. And so that will be really short, but maybe a snippet of tips and tricks on how to manage your finances.

Lucas Elliott (11:01):

Very cool. Now Mike, in the innovation space, what does financial literacy look like in those products and services and how are they being built into it?

Mike Storiale (11:12):

Yeah, a lot of what we're looking at right now is how do we start to take some of the new innovations that are coming out and leverage those in ways that can meet the customers where they are. So one of the things that I'm sure everyone's been paying attention to over the last couple months is immersive reality. Apple's calling it spatial computing. But as we look at aspects like that in the innovation space, you start to think about what financial literacy means there. We were saying a second ago that money visualization is really abstract. So what types of experiences could I start to create for a consumer, probably especially for Gen Z, that would make it more easy for them to understand how different decisions are going to impact them and actually allow them to visualize that in that space? I think in other ways we're talking a lot about making sure that people understand their financial picture when they're about to make a purchase.

(12:00):

And so for years we've done that in places like a brand's mobile app or on their website, but now we've actually pushed into areas like live streaming because live streaming is where discovery is happening for Gen Z. There was a stat recently that nearly 50% of them will start a search on TikTok and not on Google. And that's really fascinating where you think about how they're getting their information, what that information needs to be, and then when we talk about product discovery, if they find a product that they want, how they can identify whether or not that's something they can afford or should purchase. And so trying to bring those things into the areas and meet them where they are.

Erika Sanchez (12:39):

And I would just add, I think it is all about meeting them where they are and then being flexible to be able to provide payment options in whatever way they choose. So similarly, we have pay with phone. We've recently launched on TikTok and TikTok shops to make sure that, I think the stat was three out of four and Gen Z have purchased something on TikTok. And so making sure that they can use a seamless trusted payment method when they do that.

Lucas Elliott (13:06):

Awesome. Well that leads us into our next stat. So I'll kind of move along here. So like.

Mike Storiale (13:12):

Oh sorry.

Lucas Elliott (13:13):

No, you're good. You knew where we were going with it. Perfect segment. Thank you for teeing that up for me. So from product discovery and purchase decisions, we see that three out of four Gen Z individuals have purchased something on TikTok after seeing it in a video, whether it's kind of been after seeing one of their favorite influencers, somebody who's educating them on a practice or a service or product, and they are researching those products online. So my question for you guys is how has Venmo and Synchrony really utilized social media to make the purchase journey super accessible and streamlined for this Gen Z consumer?

Erika Sanchez (14:04):

So I think as we were just talking about medium, where they are, a lot of them are on social media, and I think that's just going to continue even as the platforms evolve. And so we have pay with Venmo as one of the options where you just pay directly in that app. You don't need to do anything else. We also have debit card, credit card where they can use those as well. But I think the other big piece is we work with influencers quite a bit, both on the marketing side, but then also as I shared for education as well, both about our products and financial literacy. And as we partner with influencers, for us it's really core that they are actually indeed true users of Venmo and are authentic to our platform so that as they're sharing, it's really building trust versus feeling forced.

Mike Storiale (15:04):

And I would just add onto that, I think for us as the company that builds a lot of the technology rails that allows payments to flow for our partners, it's about making sure that we continue focusing on embedded finance in areas that the consumer is, right? So if that's TikTok today, making sure that people can access their payment options there, they can access, whether that's credit paying for or installment, they can find that in the space that they need it. But it's also about other areas where discovery is happening. We're starting to see more and more brands bring live streaming into their native apps because they're finding that that is an authentic way to connect with their customers. I don't know if anyone uses a Nike sneakers app, not a partner of ours, but the Nike sneakers app goes live multiple times a week and they do a phenomenal job with it. And so that is a totally different method of discovery from what we were seeing even five years ago. And so making sure that as people are discovering products and services in new places, that the payments embed into it.

Lucas Elliott (16:04):

Awesome. Now I'm going to put you both on the spot here and kind of look five years into the future, everything is so accessible now for users and pay as you please in different types of channels. Where do you see this trend pushing forward and in the next five years? Where are these kind of payment accessibility features going to land us for the younger generations?

Mike Storiale (16:34):

I keep seeing it as embedded wherever the customer is. So like I said a second ago, there are more and more opportunities. And so as we've talked with our stakeholders about things like immersive reality, I think there are some eye rolls when you talk about what's it going to be like when payments happen in an Apple Vision Pro or in a MedQuest or something like that. But at the same time, if that's where a customer wants to discover something, then we've got to make sure that we are in there and serving them in the point of discovery. I think as we keep moving forward, we are really curious about other places that embedded finance is going to happen. There's been this long tail probably for seven plus years, wondering whether payments was going to happen in a connected vehicle experience, in an infotainment experience, and we haven't seen that come to fruition yet, but it's a trend that won't really go away. So I think there are still enough people that are trying to solve that one. So that's an area we're really focused on making sure that wherever that discovery is happening, we're going to be.

Erika Sanchez (17:31):

Yeah, I would agree with that. I think on the embedded finance piece, and then I think depending on where regulations go, et cetera in the us, but I think more and more emergence of super apps, I think they've been very popular in other countries and I think it's been more of a regulatory framework that's kept that from happening. But I can imagine a continued push towards, again, having more end to end, whether that shows up via embedded finance options across multiple different platforms or if it starts pulling platforms closer and closer together.

Lucas Elliott (18:09):

Alright, awesome. I'm going to move along to the next stat here. So this was a recent study that we had conducted and we found that although product discovery from specific retail, whether it's clothing, technology or things along those lines, they are found and discovered on social media, so are financial products and services, which is especially for Gen Z, it's a huge jump. They're kind of along the lines of millennials, but kind of really drops off after Gen X, the discovery of those financial services. So I'm interested to kind of hear a little bit about how reaching them through all these different channels has helped Synchrony and their partners as well as Venmo through whether it's the influencers or what types of other type channels.

Erika Sanchez (19:06):

Yeah, I think I've kind of already jumped into this a bit, but for us, social media is a big part of how we connect with our users and a big part of our marketing mix. So we do have several influencer partnerships. We're very active on many social media channels, and TikTok being one of the biggest, and as I mentioned, we're the number one financial app on TikTok. And so we're pretty excited about our presence there and the engagement that we have with users there.

Mike Storiale (19:45):

And I would just add that I think that the benefit here is that this is more people discovering financial literacy or financial products in new ways. And I think we tend to see this thing happen every generation. So what would that be? Luke is every 10 years or so where we all kind of disparage the youngest generation for the new way that they're doing something, which I actually feel really encouraged by the way Gen Z is doing this. You mentioned Erica earlier, how authentic they are and the idea that they're discovering financial products in a place like social media, which in a lot of cases is a much more authentic discovery experience as opposed to a targeted ad or a billboard or something else that they used to see where they would discover those products. This is a new referral source for them, and I like that What it lets them do is learn about the products at the same time.

(20:34):

And so in a lot of cases what we see is that generations have very different views on things like credit. It's not that one generation is ProCredit or one generation is anti credited, but it's that as you move through the life like your own lifecycle, you're going to see things like pay in for or installment loans or revolving credit or debit or prepaid, all come to you at different points in your life. Those things are going to be valuable to you in one season and not be the thing that you're looking for in the next. And I think discovering on social media allows people to learn into that a little more differently.

Erika Sanchez (21:09):

And just to build on that a bit, again, kind of in our research, gen Z is really looking for influencers that really resonate, that they resonate with. And so they're looking for who is somebody that have some sort of connectivity with that I feel organically and therefore I feel like this is somebody that I can trust their recommendations. And that goes back to why I think it is so important that influencers that you work with then truly do understand your products so that I can speak authentically about it.

Lucas Elliott (21:43):

And Gen Z consumers specifically can kind of see through that disingenuous nature, especially if influencer that they're used to hearing about starts talking differently about a product, they're like, that's not the same person. That's obviously scripted or something along those lines.

Mike Storiale (21:59):

Yeah, you'll see those comments fill up fast.

Lucas Elliott (22:02):

Yeah, for sure. Awesome. Well, I know this stat comes from a Synchrony research report as well, so I wanted to touch with you, Mike, it's 49% of Gen Z state that the buying experience is as important as the product itself. So I know I've heard Synchrony and you talk a lot about this and I love consumer experience. So let's hear how Synchrony is kind of attacking this consumer experience nature. Yeah,

Mike Storiale (22:36):

So I've touched a little bit on the embedded payment experience, embedded financing experience, but we think of this starting all the way up at Discovery. And so for the last six or seven years, we focused really tightly on how do we make sure that this is the least painful process possible. So we're proud to say that we're the only financial institution in the industry that can get you an application approved in three fields, which is really amazing. But at the same time, we want to make sure that it feels authentic to the brands we support. So if you go and apply with one of our retail brands and then you go and apply with Venmo, they will not look anything alike. And the reason for that is that Venmo has a totally different experience that we want to feel authentic for them. I think what this is though is all about making sure that that experience is in the spot that they want it to be when they need it, and that they get clear and transparent answers along the way.

(23:30):

I think back to my own journey is either applying for credit in the past or even filling out other types of applications. A lot of times, I don't know how far I am in the process. I don't know whether or not I've wasted too much time already. And the dropoff rate from Gen Z, the ability you have to win them back is so low, the dropoff rate is high, and the ability to win them back is low. And that's because they grew up in this experience. And so if you can't get on board with the customer experiences that they expect, then they're not going to get on board with you and your brand and your product.

Erika Sanchez (24:06):

Yeah, a hundred percent. And I think what me and my team do all day every day is look through our experiences where we've seen any friction points and what can we do to reduce those with the goal of minimizing clicks as low. Ideally it's one click to do any action you're trying to do and really creating a lot of self-serve capabilities as well.

Lucas Elliott (24:32):

Yeah, once the Gen Z population specifically kind of hits that friction point, they typically just bounce right off the journey.

Mike Storiale (24:39):

I would say. It's not to say though that, and I don't want it to get confused, that they don't care about in-person experiences. What we're finding is that Gen Z actually cares a great amount about in-person experiences. I think that was partially because they have always been a generation that cares about experiences more than the product itself, or at least as much as the product itself. I think there's also some trailing impacts of the pandemic, and a lot of them came of age in that time, and so they put a huge emphasis on doing things in person and together now. And so as much as we focus on what this looks like digitally, we're seeing the same thing happen in person as well. And I mean, I've seen some of the products you guys have rolled out at Venmo that more and more are about in-person experiences with Venmo also.

Erika Sanchez (25:21):

Yeah, absolutely. I mean, we just launched our group's product, which is all about how to make it really easy to split your payments with a group. But what we want is we want the Venmo part of that to be super, super easy so that people are spending their effort and their energy on that experience, not on clicking through a bunch of screens on our app.

Lucas Elliott (25:47):

I actually used the group

Erika Sanchez (25:48):

Yeah.

Lucas Elliott (25:48):

Function last weekend pretty, it was perfect. It just paid one person. That was it. It does all this calculation that I don't even know how it works, but it worked. Everybody got paid.

Mike Storiale (25:57):

You don't need to know how it works.

Lucas Elliott (25:58):

I don't. That's the point. Exactly. That is the point. Awesome. So some key final takeaways specifically to Gen Z. Three major things that are kind of important for finance brands here. Really driving that accessibility for financial products and services and payments, and also being present within social media and where they are just in general. And then personalization is a big thing that we talk about in the industry, and that goes back to a lot of the diversity piece of it as well. And lots of different cultural, social behavioral nodes there. They've really grown up on Netflix, TikTok, where everything is personalized to them, so they insist and they need and crave a personalized experience even when it comes to financial services. And then finally, education, the financial literacy piece of it, kind of embedding that education piece of it is really critical to drive overall engagement with your own products as well as other payment types. So I don't know if you guys have any other closing thoughts before we get to some questions, but yeah, go for it.

Erika Sanchez (27:17):

No, I am fine.

Mike Storiale (27:18):

No, I think we can open the floor.

Lucas Elliott (27:19):

Awesome. Any questions?

Audience Member (27:26):

Does the Venmo application is the one that.

Mike Storiale (27:32):

So the application that we do with Venmo is actually fully customized in the Venmo app. So we help power the Venmo credit experience. And so that's fully powered in there. I would say the three field apply is really customizable based on what our partners want. It's funny is when we talk about personalization and knowing your customer, we did market testing five or six years ago when we first launched Three Field Apply, and Erica mentioned getting it down to single button. And I don't know if you guys remember the big lender that had the ads for a while that was push button, get mortgage was their tagline. Customers didn't like that they needed some sense of security that they were telling you some of the information. And so what we found was that there are certain fields that they need to make sure that they feel like they're doing a gut check with you and having a little bit of a handoff.

(28:19):

But what's remarkable about it is that that three field apply gives them that really quick feeling and then we take care of some of the stuff that used to be upfront in the process and we take care of that after. Because in a lot of cases, the example that we were hearing with the talk prior to this is that I want to get my new card and I want to immediately be able to purchase with that. And I have lots of other stuff I'm going to do later on, but I don't want to spend time on that right now.

Erika Sanchez (28:45):

And so for us, one click also doesn't mean it's not the three fields. So there's fields, you have to, but you have it on one page. But it goes back to the personalization conversation, which is we should know you, we should know if you've already applied for something else on Venmo and we already have your credentials, we shouldn't need to have you repeat those to us. So it's really about personalizing the journey for each of our users.

Lucas Elliott (29:15):

And simplifying it too. Yep. Taking away the steps that aren't really needed. Any other questions?

Audience Member (29:29):

Underwrite that experience?

Mike Storiale (29:38):

I will say that, I mean, you always have somebody who is just coming of age to get credit for the first time. So low file or thin file or in some cases no file is not uncommon. We had that with the generations above them. I would say what's special about Gen Z is that oftentimes they are going to be making these applications on things like a phone where I have some unique authentication that I can do that I couldn't do with prior generations if they were applying in store. We've been away from paper for a long time, but that doesn't mean that they weren't on a point of sale terminal. And on that point of sale terminal, I could walk up right now and the next person to walk up is Erica. And they can't know anything about either of us in that experience because Gen Z is doing it on their devices. We can do some really unique things. And I mean, Erica, you mentioned with Venmo, you guys have a wealth of information that you know about your customers, and so we can make those experiences better. And sometimes we can take those things into account, so there might be a credit aspect, but if we know you because you've been interacting with our partner for a long time, then that might impact the ability to underwrite.

Erika Sanchez (30:41):

And I would add to that is also given Gen Z has actually a preference towards debit card, that's another opportunity to have more experience in history with Gen Z and then as they're ready for credit, be able to use that information in underwriting.

Lucas Elliott (31:03):

One more question. I know there's one out there. All right, well thank you everybody. This concludes the conference.