- June 10, 2021
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FinTech, Gen Z and Millennials
You must have heard the terms “Millennials and Gen Z” over and over again. Well, if you have no idea what these terms mean, they are labels given to people of different generations. This segmentation helps marketers and industries better define their target audience and identify people of a certain age with certain common characteristics that help them better meet the needs of the majority of a generation group. Before we get into how FinTech builds a relationship with Gen Z and Millennials, let’s better understand these terminologies.
- Baby Boomers – Born between 1946 and 1964. Current age – 57 to 75
- Generation X (Gen X) – Born between 1965 and 1980. Current age – 41 to 56
- Millennials – Born between 1981 and 1996. Current age – 25 to 40
- Gen Z – Born between 1997 and 2015. Current age – 6 to 24
Millennials and Gen Z are a critical part of FinTech’s core market. Given their current ages, 6 to 24 for Gen Z and 25 to 40 for Millennials, it also makes sense why FinTech companies give them such importance. They are at an early age where money plays a big and active role in their lives. Therefore, FinTech must understand their individual needs in order to be able to remain in the competition and be profitable.
However, both of these age groups also have a significant age difference. Therefore, what one prefers may not be the preference of the other. Nevertheless, there is a middle ground in which Gen Z and Millennials may think the same. These similarities can serve as effective guiding points for FinTech organizations to better work with both teams.
Gen Z and Millennials both heavily invest in technology. The only difference between Millennials and Gen Z in terms of technology is that Millennials adopted technology as they grew older. Technology was not always there as a part of their lives. They had cellphones that were not considered smartphones, had normal, not touch, keyboards and dial-up internet was the latest exciting innovation. Millennials are constantly adapting to technological change and are using it to make their lives easier.
In contrast, the Gen Z generation has never seen a world without the Internet or a smartphone. They were born in the age of technology. Technology acts more like a routine feature in their lives rather than something they had to adapt and get used to.
The attitude and perception of each generation towards financing and the banking sector is mainly shaped by the financial situations they observe and experience while growing up. The same goes for Millennials and Gen Z.
Millennials are constantly pushing traditional banks away for newer banking options and alternative payment methods. A distinct advantage for Millennials that not all previous generations had is the opportunity of shifting to a different bank if they feel dissatisfied with their current banking institution. According to a research conducted by GALLUP (https://www.gallup.com/workplace/237734/ways-banks-win-keep-millennial-customers.aspx), Millennials are 2.5 times more likely than Baby Boomers and 1.5 times more likely than Gen X to change banks. Here are some of the key features or services that the Millennials are looking for when it comes to their finances and banking transactions.
Convenience and privileges
When it comes to Millennials, they are looking for smooth, easy and cost efficient business transactions. They rely on technology to help them with their banking needs. A study conducted by JUMIO (https://www.jumio.com/about/press-releases/millennials-abandon-mobile-banking/), stated that in 2018, Gen X and Millennials had the fastest mobile banking adoption rate at 47%. Millennials use the mobile banking function for:
- Transferring money between accounts
- Scheduling money transfers from person to person
- Checking their transaction history
The same study showcased the unwillingness of Millennials to leave their current mobile banking service provider if they come to experience minor problems while using it.
Another survey conducted by KASASA (https://www.kasasa.com/articles/generations/millennial-study) reported that the 83% of Millennials admitted that they would be willing to change banks in order to get a little more value for their accounts by earning benefits such as higher interest rates on deposit accounts, money refunds and rewards through their payments and other such added benefits.
FinTech companies or Neobanks get along well with Millennials as they focus on the latters’ banking and financial needs. This is because these newer generation banks and financing systems focus more on a technology-based banking and financing approach.
Neobanks have the ability to offer any traditional banking services such as saving or checking accounts, but they can also provide additional products and services such as:
- Payment and expenses tracking applications
- Online providers of personal or professional loans
- Money transfers and payments
Neobanks generally have no physical branches and many intend to compete with full brick and mortar banks. However, some Neobanks can also be considered as an extension of a traditional bank, a credit union or a financial institution. Neobanks have a more simplified and techno-centric approach than banking and have the potential to provide faster loan approvals and financing than traditional banks. They are cost efficient as they do not charge the same fees as a traditional bank and also have a wider ATM network.
On the other hand, Gen Z is the generation of people born into the age of technology. They had never lived in a time when there were no smartphones or the Internet. It is safe to call them the Internet Generation as well. Let us remember that this generation has experienced 3 major life-changing economic crises:
- The 9/11 terrorist attack.
- The global financial crisis between mid-2007 and early 2009.
- The COVID-19 pandemic.
These events would certainly have some impact on how financials change.
Surprisingly, the Gen Z generation is more aware of the new technological advances than Millennials, who want everything online and at their fingertips.
Gen Z is surrounded by technology and the Internet. They are always one step ahead and they recognize the latest technological trends – especially if it is something that catches their attention. Moreover, this generation has a larger student debt than any previous generation. These factors outline a generation that is more aware of their financial needs and the importance of managing their finances responsibly. Gen Z has also seen Millennials witness the struggle of purchasing a home or reshuffle their finances after the 2008 financial crisis. So they expect their banking institutions to provide them the correct banking services and to train them innovatively on important basic banking concepts.
Merchants have been around for centuries. The Gen Z has taken the know-how opportunities or experiences to a whole new level, probably because it is the first digital generation. They use their mobile devices for entertainment or purchases more than any other generation before. That’s why they want their mobile app experience to be seamless. Gen Z is also looking for emotional experiences through their online transactions. They want to make sense of their relationship with a specific brand, to consider the social good and to find innovative ways to interact with their digital experiences. Of course, FinTech companies must also take this into account, in order to offer a fascinating financial banking experience.
How can Fintech build a relationship with Gen Z and Millennials?
Both the Gen Z and the Millennials (the younger generations) are technology dependent and use technology in their everyday lives. They are more open and accept technological changes as they play a key role in their financial relationships and activities. FinTech organizations need to take this into account to make the web experience simple, easy to use and have a mobile – technological approach. A smooth customer support engagement is essential to interacting with these generations.
FinTech organizations cannot even rely on the traditional credit check database system as an eligibility barometer for these generations to open their bank accounts. These systems are slow and often discard newer generations with shorter credit histories. Therefore, FinTech organizations need to take action and find an alternative way to help companies streamline their digital experiences.
An interesting study by Salesforce Research (https://www.salesforce.com/research/) found that 71% of Millennials and 63% of Gen Z trust companies in general. In addition, only 55% of Millennials are comfortable with how companies could use their personal information, compared to only 44% of Gen Z. This study shows that there is a sense of mistrust between Millennials and Gen Z about how Fintech organizations or other companies treat consumers and their data.
Therefore, FinTech organizations must consider transparency and integrity as they approach the younger generations. The idea of offering new products alone is not enough to gain their trust. Treating them properly should be their first priority.
Gen Z and Millennials know and understand electronic financial transactions more than any other previous generation. They want practical solutions using technology to help them achieve their goals – this could include saving, investing or achieving financial independence. Consequently, FinTech organizations need to combine their packages and design their services with the latest FinTech trends in mind. There may be possibilities that warn customers not to make a decision that could lead to serious debt. Investing can be easy as a simple application – a tool within banking tools.
There is a lot of room for improvement in the financial sector to better meet the needs of these generations, which would help everyone to access better services and provide ease of financing. FinTech organizations may see this as a challenge or an opportunity, but one thing they cannot do is ignore it; they should better prepare for the future of finance.