Gen Z and money
How Gen Z and its novel attitude towards life and money will drive a big shift in financial services.
As a member of the much-maligned millennial generation (albeit at the older end), I should start by offering a definition for what Gen Z actually is. Generation Z, or Gen Z for short, is roughly thought of as people born between 1995 and 2010. Meaning at the time of writing this article, the oldest is 26 and the youngest just 11. Despite this rather large age discrepancy, McKinsey found that Gen Z as a whole is anchored by one core characteristic — their “search for truth”.
This search for truth manifests itself in Gen Z’s resistance to labels and stereotypes, and instead, a dedication to radical inclusivity, to open dialogue with differing opinions and to absorbing information in non-traditional ways. Hardly surprising, when you consider the world Gen Z has grown up in — where technology, politics, social climates, and attitudes towards the environment are evolving at breakneck speed.
With this strong sense of identity and community, also comes strong commercial power; in 2020, Gen Z and Gen A contributed a whopping £95.7m to the British economy. Globally, Gen Z has a spending power of $143bn. This, combined with the fact Gen Z are the largest generation, making up 32% of the global population, means it’s crucial you successfully engage with them.
The first truly digitally native generation, Gen Z’s expectations of brand experiences are far higher than that of Millennials, Gen X and Baby Boomers. Not only that, traditional markers of success (getting an office job, buying a house, marriage, children etc.) hold less meaning than for previous generations. Therefore, providing for Gen Z (and eventually Gen A) is about a lot more than just existing in the digital economy; it’s about having a true understanding of their attitudes to life and money.
A growing wave of youth-focused fintechs is stealing a march on slow-to-move incumbents. And when I say incumbents, I’m including neobanks like Monzo, of whose customer base only 2% are under 18. Conversely, in the UK, the well-known youth bank, gohenry boasts 1.5m customers aged 6–18. As mentioned in our niche banking article Banking For All, self-described ‘messenger bank’ Zelf targets Gen Z and Gen A customers, with no app or physical card. Spanish sustainability fintech Mitto taps into the cause-driven spirit of Gen Z by positioning itself as the go-to choice for ‘conscious consumers’. These brands, and so many more, demonstrate exactly what it takes to appeal to Gen Z.
Engaging with Gen Z is not just a design task; you will need to understand the world as Gen Z sees it in order to authentically align with their values. Getting a clearer view of who they are and what matters to them when it comes to their money. However, it’s important to remember that Gen Z is not monolithic like every generation before it. What’s true for one member might not be for another. That said, we’ve pulled together some interesting themes for how Gen Z behave with and think about money:
1. They actually talk about money
Gen Z wants to learn about money and how to make the most of it. In fact, as many as 35% have attended a financial education seminar or lecture. This strong interest in all things financial has led to the rise of the ‘fin-fluencers’ — Instagrammers whose accounts are dedicated to educating young people on everything money, from cryptocurrency to mortgages. Finance trends regularly go viral on the quintessentially Gen Z platform TikTok, often with impressive results. The cryptocurrency Dogecoin saw its value increase by 40% in just two days after going viral. And all this talk leads to action. Gen Z invests proportionally more than any other generation, with a report by Halifax finding 16% of 18–24-year-olds invested for the first time in 2020, compared with only 10% of other age groups.
2. Gen Z put their money where their causes are
Gen Z is cause-driven and genuinely wants to have a positive impact on the world. According to gohenry’s Youth Economy Report, under 18’s increased their charitable giving by 59% during the first lockdown of 2020, recognising their money could help others. This combination of financial savvy whilst wanting to align actions with values means Gen Z is more attracted to decentralised forms of finance, such as cryptocurrencies and peer-to-peer finance.
3. They are surprisingly frugal
Learnings from the mistakes of previous generations, coupled with the economic uncertainty of the last few years (whether driven by politics or a pandemic) have made Gen Z more fiscally responsible, according to the World Economic Forum. As detailed in gohenry’s Youth Economic Report, with less to do, Gen Z increased their savings by 77% last year. And by saving around 12% of their income, Gen Z saved proportionally more than their parents.
4. But they are also surprisingly susceptible to fraud
The desire for frictionless digital experiences can, at times, make Gen Z susceptible to being taken advantage of by scammers. Having grown up with tech, Gen Z are confident digital natives. But that confidence belies naivety when it comes to online scams. The Better Business Bureau reported that in 2020, Gen Z lost as much money as senior citizens to sophisticated scammers taking advantage of the pandemic.
5. They have a non-traditional approach to borrowing
The pandemic has shaped the way Gen Z feels about money. Already turning away from traditional forms of credit, such as credit cards, Gen Z now opts for fast and convenient credit offered in highly contextual moments. Good or bad, BNPL services like Klarna, appeal to Gen Z because they are an embedded part of the shopping experience and payment ecosystem.
What does this mean for financial institutions not yet speaking to younger customers?
When it comes to Gen Z and their finances, there is simply no one-size-fits-all approach. You’ll need to figure out the right approach for what you can offer. Start by asking yourself these questions:
- Who are your customers and what are their needs? 26-year-olds need vastly different things from banks than 11-year-olds. So, start by understanding who exactly you want to talk to. Then get under the skin of their needs and motivations — not forgetting their parents, who may already bank with you. Financial education often starts at home, so consider how you can become part of those conversations.
- What does good look like? It’s important to look at what’s new and successful in the industry. We’ve highlighted some to watch above, but don’t stop there. Immerse yourself in brands that resonate most with Gen Z and use them as your benchmark. If they can order and have a meal delivered within the hour with just a few taps on their phone, how do you think Gen Z will feel about protracted ID&V processes in your bank branch?
- What’s the low hanging fruit? Similarly, once you understand your target’s needs, look at your current features, services, and experiences. You’ll no doubt find some quick wins that make your existing offer more accessible to this audience.
- What’s your brand’s right to play? We know that Gen Z is cause-driven. And, unlike previous generations, Gen Z has far more options available to them. So, your brand reputation, values and ethics will be more important than ever. Be honest about how your brand can authentically connect and don’t discount partnerships with smaller brands as a way to reach this market.
- How prepared are you for change? There’s no full stop when it comes to serving this audience (or any other for that matter). So, it’s important to take stock of your business’s practical ability to stay open, adaptable and ready for inevitable change. Staying in the loop with what matters to your audience is vital, but it will only bear fruit if you have the resources and processes in place which allow you to quickly capitalise on that insight.
Want to better serve your younger customers but not sure where to start? Let’s talk.
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If like me, you’re passionate about experience and equity in financial services, and if you want to talk more about this particular space, please get in touch by dropping me a note at firstname.lastname@example.org.
Director of Consulting, Engine Experience and Innovation
‘True Gen’: Generation Z and its implications for companies, McKinsey, 2018. https://www.mckinsey.com/industries/consumer-packaged-goods/our-insights/true-gen-generation-z-and-its-implications-for-companies
Youth Economy Report, gohenry, 2020. https://blog.gohenry.com/uk/gohenry-news/youth-economy-report-the-legacy-of-lockdown/
The Power pf Gen Z Influence, Barkley, 2018. https://www.millennialmarketing.com/wp-content/uploads/2018/01/Barkley_WP_GenZMarketSpend_Final.pdf
Generation Z: The Kids Are All Right, Radon Research Insights. https://www.raddon.com/sites/default/files/genz-executive-summary.pdf
TikTok Crypto: How TikTok Sent Dogecoin Soaring 40% In Just 2 Days, Fanbytes. https://fanbytes.co.uk/tiktok-crypto-dogecoin/
Lockdown sparks surge in young investors, says Halifax Share Dealing, Wealth Adviser. https://www.wealthadviser.co/2021/04/14/298674/lockdown-sparks-surge-young-investors-says-halifax-share-dealing
Why Generation Z has a totally different approach to money, World Economic Forum, 2018. https://www.weforum.org/agenda/2018/11/why-gen-z-is-approaching-money-differently-than-other-generations-95032cb6-6046-4269-a38a-0763bd7909ff/
Consumer Attitudes towards debt: inc impact of COVID-19, UK, Mintel July 2020