Helping Gen Z build responsible financial habits with Bank of America’s Holly O’Neill and Haim Israel

This conversation with top executives at Bank of America is about building good financial habits for Gen Z, this episode is part of a special podcast series where we explore the fascinating Gen Z deeper: their relationship with money, how they like to save, spend, and borrow money, their fears and aspirations, and their connections to social issues. 

Tearsheet thanks our sponsor Publicis Sapient for their support. Read more and download customer research about Gen Z and financial services at Steezlife.co

And on this episode, I’m joined by Holly O’Neill, President of Retail Banking at Bank of America. Holly is responsible for the growth of the Retail Banking business, which serves U.S. mass-market consumers. She’s also a member of the company’s executive management team. O’Neill also serves as the bank’s Chief Client Care Officer, overseeing a team that provides financial solutions to nearly 68 million clients each year, with a focus on helping clients wherever and however they prefer to bank, serving diverse communities, and supporting financial education.   

Also joining us for this discussion is Haim Israel, Head of Global Thematic Research, BofA Securities. For the past two years, Haim and his team have been ranked first in the Thematic Research and ESG –Integrated Climate Change teams in the Institutional Investor Extel Global Survey.  Prior to this, Israel was the head of Bank of America’s EEMEA Technology, Media and Telecommunication Research team. 

Here’s my conversation about building good financial habits in younger banking customers with Holly and Haim.

The big ideas

• Gen Z financial habits and priorities with Bank of America executives.
• Gen Z’s financial behaviors and how financial services companies can adapt.
• Financial education and outreach for Gen Z
• Gen Z’s financial knowledge and digital habits.
• Financial services for Gen Z with real-time payments and personalized experiences.
• Gen Z’s financial future and the gig economy.

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The following excerpts were edited for clarity.

Gen Z financial habits

Holly O’Neill: Gen Z is definitely a big target of ours as a company because they are the future. I’m sure Haim is going to talk about what they’re looking for and what they want. We are listening to those clients about what their preferences are — they like to do business with us digitally. We have a world-class digital platform. We are delivering every day, all day, to all of our clients, in particular Gen Z through digital, through our mobile app, and online banking. And then we’re further supporting that with physical presence across 3900 financial centers, primarily around advice. Our Gen Z clients enjoy the mobile app, to do transactions, to understand what their current picture is. But we also believe that supporting that interface is important with our specialists and financial centers, who are physically present in our clients’ communities.

Two ways why Gen Z matters

Haim Israel: We’ve been tracking this for quite some time, and we think it’s much more important now. Gen Z is at this inflection point now that they are not kids anymore. They’re actually in their 20s and even high 20s. We’ve been pounding the table for a very long time about the generation because we are big believers that this is the most disruptive generation ever in history. And it’s going to be nothing like we’ve seen before for two very simple reasons. The first reason is that this is the first generation who was born into an online world. By the way, Gen Z by definition was born between 1996 to 2016. So they’ve never experienced an offline moment in their life — they were born with a smartphone in their hand. Most of them were born after the first smartphone, so they can’t remember an offline moment. And as Holly will tell you, that is impacting every aspect of their lives on their consumer financials, and socialize everything around that.

The second thing that makes them unique is that this is a generation that for the first time in history, we are becoming more and more like them, not the other way around. When we were growing up, we adopted a lot of the behaviors and characteristics of our parents. And onward, every generation has its unique characteristics. But overall, the path was very clear. So, for the first time, we are becoming more and more alike. Think about how we’re more online, we are adopting a lot of their behaviors: we’re taking selfies over food and all this stuff. So the impact is actually much bigger than just a portion of the population with accumulated financial wealth.

What Gen Z needs

Haim Israel: First of all, I think that the question is a little bit misguided because to understand their financial needs, we need to understand their characteristics, who and what they really are. They don’t walk up and say, Oh, I had to go to the bank and see what I need. It’s the other way around. This is the online generation. This is the experience generation, — they want to live here and now. They understand that they can get everything online. They want experience. Now they have zero attention span — they don’t want to wait.

The second thing is that it comes down to their characteristic of being born into an online world. They want everything online. If it’s not on my phone, I will not use it. We did a lot of research on Gen Z. We did surveys, and published them. They will have fewer kids. They will get married later. Their values are very different. They are less about accumulated wealth and less about everything that will cap my living in the here and now. If I take a mortgage, it’s capping it. If I take a student loan, it’s capping it. I will think a few times if I want an experience — I will not have one career today for the rest of my life. Let’s say they enter the job market around their early 20s, like every other generation. Gen Z will live to be 100 years old, and in the Western world, maybe even more than that. It means that they will probably retire in their 70s. Some of them will retire even in their 80s.

They’re not going to do the same job for 60 years. They will have two, three, or even four careers during their lifetime. We’ll start seeing that job migration, which is a big thing of the Great Resignation. They are moving not just between different lines of business, they are moving between businesses. They’re moving between completely different careers.

Banking products and services for Gen Z

Holly O’Neill: Our goal as a consumer financial services company is to provide the tools our clients need for financial health. Knowing what Gen Z’s behaviors are, how are we adapting to that? I think it’s very clear — we’re trying to give them all of these tools in the digital space. First and foremost, whether it’s financial education or the tools they need to use to manage their financial lives, plan, and budget. It is all digital. So we should start there. Because as I said, that’s where they start. That’s where they want to stay, if at all possible. And so knowing what our goal is in terms of creating a framework for financial health, we do all sorts of financial education online primarily through our Better Money Habits platform where we offer resources, advice, and tips for them. That launched a decade ago in 2013. Since 2013, we’ve had three and a half billion interactions in Better Money Habits. So it’s become very popular. So that’s number one: education and tips.

Second, we’re trying to get out to our clients in the channels where they are: Instagram, Snapchat, and YouTube with some of these tips, talking to those clients eye to eye, in Gen Z terms, trying to be modern and current. We have a current campaign out there in those channels, which is talking directly to Gen Z. It’s tips on how to spend a budget. For example, if you’re on Instagram, and I’m taking this to heart, don’t immediately fill up your cart during the course of the week, and then review it over the weekend. Give yourself time to think, does it fit in my budget? Do I really want to do this?

So we’re really trying to reach them where they are talking their terms, and then you know, also provide the guardrails they need. We know they need to have a solid financial future. So life plans, setting goals for themselves and making a plan to achieve those goals. The life plan is digital — it’s a way for our clients to set goals for themselves and a path from a financial health future perspective.

Erica, digital assistant

Holly O’Neill: Erica is also very interesting and speaks right to Gen Z. It’s a virtual assistant that sits right on our app, gives them answers to questions, helps them plan, and gives them the information they need. We kind of chunk it out for Gen Z clients, so that they get what they need along the way in the channel that is most relevant to them.

Education for Gen Z

Holly O’Neill: So I will go back to better money habits, which is a free online platform. It’s available, actually to everyone, not only our clients, but everyone. It’s a tool that is able to address a topic like budgeting, saving, paying down debt, and homeownership retirement. And it’s meant to demystify some of the things in the financial world that can seem challenging and complex. So we try to make it simple, put it on their terms, and they can do it at their own pace. Our goal for our clients is to feed and personalize those better, the better money habit content, at moments where we think it’s relevant to our clients. So you know, if we see our client shopping for a credit card, we will tee up for them information around managing credit, paying down debt, how to use credit responsibly, so we have the content, it’s available to everyone. We personalize it and use it in experience for our clients at moments that we think are relevant to them, to give them the information they need. And oftentimes giving them the information through these channels online with video. So we’ve recently tried video with some of this content that makes it more impactful for them, but it’s so important to meet them where they are and to give it to them in really simple terms. So we spend a lot of time simplifying, meeting them where they are, and giving them the information that they need.

‘Citizens of the world’: Knowledge and experience around living financially

Haim Israel: This is a generation that will take in and consume this knowledge from very different places. It’s not like what we’ve done before. We’re seeing plummeting enrollment at universities because universities are behind. We need to remember this generation was born with a device, the iPhone or with smartphones — meaning, he has access to all the information just by moving a finger. And now we have generative AI. And that’s extremely important. It means that I don’t even have to look anymore, actually — all I have to do is ask and get all the information in the world and compare it, digest, slice, dice, and do whatever I need with it. So it’s becoming less about getting the information, it’s really what I’m doing with this information, helping them with information.

They’re going to be much more about life experiences, and much more creative in life. So the way that we are, we need to look at the education market in general, of course, financial education, specifically, because it’s getting very different. The other thing is, we need to remember that those guys have zero attention span. There was a fascinating survey done by Microsoft that checks that an average Gen Z has an attention span of eight seconds, a goldfish is actually at nine seconds. I have no idea how Microsoft measures the goldfish’s attention span, but this just shows you that even when we’re addressing them, they can’t be bothered with very long text and information — they need everything here now.

The third point, which I think is very important, is about about data consumption. It’s one thing that differentiates Gen Z that I don’t think we spoke about enough: they are the generation of the citizens of the world, they are not citizens of our country. This is very, very important. Our survey blew our minds a little bit. When we asked them, “What are you?” — a very simple question asked of 15,000 people all over the world. 50% of Gen Z said they’re either citizens of the world or nothing. They are not American, Japanese, Chinese, or British. They are not. So their consumption of knowledge and openness for others, as with other stuff, other cultures, other ideas, we’ve never seen something like that. Some other research suggested the boomers are one out of 10, millennials are roughly two out of 10 — Gen Z gets five out of 10, which do not recognize themselves as citizens of a country. So it just shows how open they are, to all the information, all the cultures, all the ideas. They are just consuming the information from everywhere.

Holly O’Neill: That they’re citizens of the world feeds right into this — the digital capabilities for our clients — because they are not going to be tethered to a location. They want mobility, they want access anywhere all the time, 24/7. The digital approach here really feeds into that trend, and that characteristic of Gen Z. It’s something that we see often in Gen Z: they are the highest users of our digital capabilities. 90% of our Gen Z clients are digitally active. Compare that to the broader population just under 70%, so they’re much more digitally active. It gives them a lot more freedom and capability to manage their financial lives and not be tethered to a location.

How Gen Z makes money and servicing them

Holly O’Neill: We are obviously looking at how Gen Z works quite a bit because the sources of income and employment do impact how we interact with our clients — direct deposit and minimum balances and so on. We are course-correcting and adjusting along the way to accommodate a changing infrastructure in how people make money, earn a living, and how their cash flows shift and adjust.

There are some examples I can provide in terms of getting real-time payment capability through Zelle. That is huge. People want to exchange cash in real time without actually exchanging money or checks. I call it the biggest innovation since the ATM — the person-to-person real-time payment mechanism with the consortium of banks in the US with Zelle, which is embedded right in our app, so really getting to the heart of what they want.

They’re absorbing information every day, all day. One of the things that we’ve been very focused on is, looking outside of financial services, the experience that Gen Zers are having, because they’re bringing it back into the financial services space, and setting the expectations for us. For example, they order their coffee online, zip by, and pick it up, right? Whether it’s Starbucks or Dunkin Donuts, that is their expectation. So we are using those experiences to raise the bar for ourselves. One example, which is one of my favorite capabilities, is ordering foreign currency. If you’re traveling to a foreign country, you can order foreign currency in our mobile app and either have it delivered to your house, or you can swing by a financial center, and it will be ready for you at pickup, similar to the coffee example.

Gen Z and the gig economy

Haim Israel: When we’re analyzing how the changing nature of work impacts Gen Z, we need to remember one thing. We need to understand how much accumulated wealth they have. And right now Gen Z, according to our research, is not that big, give or take around $7 trillion worldwide, which is, by the way, 4% or 5% of all accumulated assets in the world. It’s not a lot. But before the end of this decade, because they are right now at this inflection point, they are gathering more and more assets. They’re going to get to $33 trillion, jumping almost seven times by financial assets. And that number is also misleading because this is only the accumulated wealth — not joining the job market. Every day 10,000 people retire in the United States every day, and five thousand are moving their assets to younger generations — there could be $50 trillion by the end of this decade, bigger than the Millennials bigger than the Boomers, bigger than any other generation on the planet. So you have to start thinking about them.

I know that everybody right now is focusing on Gen Z as the gig economy generation, but that’s not that accurate. This is the gig economy at this stage of their lives. I think when it comes to a slightly later stage of their lives, the gig economy is going to transform towards school, meaning that they’re going to start moving between different professions and different experiences. The next stage of the gig economy will evolve for me thinking after three, or four years in our profession, in a line of business, what I want to do next, what I want to experience next, and that’s going to change the entire job market.

Holly O’Neill: The implications for Gen Z and the gig economy, I think it changes a few things financially, that make it even more important for Gen Z. Think about three things. First is making sure they’re aware of their income, and they set a budget, because they’re very independent, compared to people who may have started with a company and spent their whole career there. So budgeting and income understanding are important. Emergency savings also become more important as they transition from one career to the next, having that cushion and that buffer becomes even more important for them.

The third thing is big, and it’s retirement investment. So whether they choose to retire as Haim set in their 70s, maybe even 80s, they have to think about that. They have to think about that more independently than somebody who joined a company and spent their whole career may have because they’re going to have to create that retirement cushion and buffer investment, so that they can, retire when they want to. So I think that makes financial education even more important to them, teeing up the information at the right point in time so that they actually hear it, listen, and take action.

Haim Israel: When we looked at the job market and tried to ask Gen Z, what’s important for you in a job? Salary and financial stability came as number six. Number one was culture. That tells you a lot.

Financial advice and Gen Z

Holly O’Neill: With my kids, I often will send them information instead of talking to them, because sometimes Gen Zers can tune the parents — I’m not exempt on that. But I focus on three things with them: first, setting a budget and a plan and trying to stick to it. Understanding the ins and outs. Inflows outflows. Start saving early. That is so critical. My oldest is graduating from college this year. And I said to her, you have to start your retirement savings the minute you step off that college campus, whether it’s $10 a week or $100 a week, you have to start early. So that’s number two. And then number three, and this is a constant balance, don’t spend the money you don’t have. You have to use credit responsibly, and understand where it’s a positive, but don’t spend money if you don’t have it.