The Customer Effect

‘We don’t make that much money on them’: The opportunities and gaps in banking with Gen Z

  • While Gen Z is estimated to have $360 billion in disposable income, only 33% of them are using a financial provider. 
  • David Donovan, EVP of Publicis Sapient, talks about the opportunity Gen Z represents for FIs and why they are failing at capturing the demographic's attention.

Email a Friend

‘We don’t make that much money on them’: The opportunities and gaps in banking with Gen Z

Despite Gen Z’s growing spending power, the demographic continues to be underserved by banks. While Gen Z is estimated to have $360 billion in disposable income, only 33% of them are using a financial provider

This is concerning because there is a wealth transfer on the horizon as the demographic matures and banks have not been able to connect with this consumer base. 

What’s keeping Gen Z from banking on FIs?

Marketing: Perhaps the biggest friction point that banks have when it comes to Gen Z is getting their foot through the door. Gen Z is considered technically savvy and digital first, but that doesnt mean banks should consider this as a nudge to start marketing on Facebook or Instagram. Gen Z specifically has moved onto platforms like TikTok. The hashtag #PersonalFinance has 4.4 billion views on the platform. Only 15% of FIs reported being on all online channel, according to Tearsheet’s recent Steez survey

Perspective: “I was in a meeting with a bank executive at a big bank. I asked them what their strategy was for addressing Gen Z. And he spewed out some high level, corporate mumbo jumbo. But the thing that really took me aback was that he said, you know, we don't really make that much money on them right now. And at that point, I kind of sold all my bank stocks,” said David Donovan, EVP of Publicis Sapient, at Tearsheet’s recent The Big Bank Theory Conference.

For banks, building credibility with Gen Z seems like a problem for tomorrow, but other brands like Apple are targeting Gen Z today. This demographic chooses who they bank with based on convenience and value-alignment. If banks keep putting off building trust with Gen Z for 5-10 years down the line, the demographic may already be too entrenched with other brands that provide them holistic experiences. 

The success of Apple’s savings venture is a case in point. Apple’s biggest fans are younger, high income consumers, a demographic that would be ideal for traditional FIs like banks to target. But Apple moved in first.

“Goldman has Marcus but they are also promoting Apple, what does that tell you?” said Donovan. 

Targeting Gen Z

Marketing on the right channels is important, but it's only one part of the puzzle. Once brand awareness is built, FIs need to work on building the right products and value alignment as well. 

Gen Z has a debt problem and it is growing more quickly than other generations, rising 3.1% just in Q4 of 2022. Debt areas like auto loans and credit cards tell a similar story. This is why products like BNPL, which circumvent revolving debt, appeal to this generation. Offering convenient and affordable ways to make payments may be the key here. 

Another area is Personal Finance Management. 38% of Gen Z consumers don’t feel like they have enough money to warrant financial planning according to a report by Charles Schwab, which can in turn lock these consumers into a cycle of financial vulnerability. To younger consumers, money seems like a requisite to financial planning rather than a goal, and this feeling is closely related to inadequate financial literacy. It’s another area in which financial institutions can make a mark. 59% of Gen Z report following influencers that teach them about Personal Finance. “The people on these channels are not qualified to be talking about this,” said Donovan. 

And yet, Gen Z consumers flock to FinTok for their financial advice, which may prove to  be detrimental for consumers in the long term and a missed opportunity for banks. Traditional FIs like banks retain a position of trust in consumers' minds. As such FIs can leverage their positions in the industry to offer credible information and tools that enable financial planning, simplify the complexities, and make living financial healthy lives easier. 

Banks will have to cater to Gen Z sooner or later. But if the answer is “later”, then Gen Z may have moved on by the time traditional FIs are ready to really address their demands and needs. As the fintech and embedded finance space evolves and matures, it is likely that Gen Z would have become used to banking with neobanks and fintechs, while traditional FIs will have lost the chance to get their future customers early. 

0 comments on “‘We don’t make that much money on them’: The opportunities and gaps in banking with Gen Z”

The Customer Effect

How are consumer habits and spending changing due to economic turbulence?

  • Economic turbulence is changing consumer spending.
  • 66% of people say that the current economic situation is making them reconsider how much they put aside for their emergency fund, while others are pushing away travel plans and dipping into their 401k.
Rabab Ahsan | April 27, 2023
The Customer Effect

22% of Americans think ‘net worth’ only applies to wealthy people

  • American consumers are more aware of celebrity net worth than their own.
  • Younger consumers, those heading towards retirement, and women are the most likely to not keep track of their net worth.
Rabab Ahsan | April 20, 2023
The Customer Effect

Trouble in paradise: How layoffs are affecting consumer relationships

  • The recent wave of layoffs is impacting consumers’ relationships.
  • 80% of those who were laid off themselves would consider leaving their spouse if they got laid off, too.
Rabab Ahsan | April 14, 2023
The Customer Effect

Quick Take: Scrutinizing the impact of inflation on consumers’ finances

  • Troubles in finance paradise continue. With passing months these anxieties have been growing and are reflected in other parts of customers’ financial habits as well.
  • With rising inflation, how are increasing rents, embedded finance, & layoffs affecting consumers' financial anxieties?
Rabab Ahsan | April 05, 2023
The Customer Effect

The White House is proposing an increase in the capital gains tax. What will non-white groups gain?

  • The White House is proposing a hike in capital gains tax as part of a deficit reduction plan.
  • The taxation system in America needs another look, so far the balance has been tipped in the favor of investors and white households. Will the capital gains tax rebalance the scales?
Rabab Ahsan | March 15, 2023
More Articles