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These days, observations of generational differences are everywhere — from news reports to jokes on social media, it seems like everyone has something to say about how Generation Z (born 1997 to 2012) is starkly different from other generations. It should therefore come as no surprise that the young adults of Gen Z bank differently, and institutions must react and engage appropriately if they wish to attract this key population as customers. Bankers might benefit from thinking about strategies that will allow them to tap into the Gen Z population and offer this age group quality financial services.

The need to cater to Gen Z is evident by examining the widespread problem of underbanking. According to Forbes, “Gen-Z & Millennial consumers make up 61% of the underbanked and 60% of the unbanked. Said differently, roughly 30% of Millennials in the US are underbanked. That percentage is even higher for Gen-Z’s who are just beginning their credit journey.” On top of this underbanking crisis, the arduous compliance obligations associated with offering banking services on college campuses limit banks’ ability to engage students at a critical point in their financial education and development. As a result, the university-age population leans heavily on services such as Venmo and CashApp, which often do not require a traditional bank account, and which are rarely FDIC insured. In fact, according to a 2022 Bankrate survey, 63% of Gen Z uses Venmo and 57% use CashApp. According to a Chase study, 38% of Gen Z reported they had not used an ATM in the past year, preferring instead to go cashless. Clearly, Gen Z is embracing convenience-focused digital payment systems, and financial institutions must adapt to these preferences if they wish to attract and maintain younger customers.

Pulling Gen Z away from these apps and into traditional banks will require effective marketing, which is a problem in itself for financial institutions. Gen Z is notoriously advertisement averse, either paying for ad blockers or premium subscriptions to listen to music, watch TV, and consume online content ad free. And, when ads do pop up, nearly all will hit “skip” if it is an option.

So how are banks going to capture the attention of this demographic? It will most likely require an online presence on the social media platforms so heavily used by Gen Z, such as Instagram and Tik Tok. The problem, of course, is the multitude of regulatory requirements and restrictions that prevent financial institutions from engaging with social media in the same way as other brands. Since entering this space at all will likely bring much more recognition and consumption than other marketing methods, bankers should start putting their collective heads together to figure out how to leverage these opportunities.

The key here is to break away from traditional information-driven advertising and lean further into entertainment-based advertising. Take, for example, the Tik Tok trend “when Gen-Z writes the marketing script,” which involves older corporate higher-ups jokingly using Gen Z slang to promote products and services. Creators range from car dealerships to zoos, and from casinos to law firms. The most popular marketing video at the time of this writing is by the Royal Armouries Museum in Leeds, which boasts 9.5 million views, 1.5 million likes, 11,100 comments, and over 310,000 shares. This type of entertaining engagement not only helps companies build a brand, but also allows them to do so in a way that is not as alienating or annoying to the consumers.

However, simply transferring to Tik Tok marketing is insufficient to maintain Gen Z as customers. Unlike prior generations, Gen Z’s do not show strong brand loyalty and are more likely to switch brands out of dissatisfaction. Therefore, service providers should not underestimate the importance of speedy, easy to use, and aesthetic websites and banking apps. After all, the average attention span of this demographic is now a mere eight seconds, meaning that significant website delays will not be just an annoyance, but could be the reason these young adults leave for a more reliable option. Moreover, if a website or app is too confusing to navigate, lacks strong branding, or has visually unappealing content, Gen Z will simply switch to another service.

On top of quality presence online, it is essential that institutions have quality customer service available. Recent market research reveals that Gen Z has high service expectations, and that 52% of Gen Z consumers who couldn’t resolve an issue through self-service would not buy from the company again. Additionally, according to a 2023 publication by Forbes, “Gen Z is notably less satisfied with current customer experiences, with just 50% satisfaction compared to 71-72% for previous generations. This highlights the need to better understand and address Gen Z’s unique needs to close the satisfaction gap and enhance their experiences.”

The takeaway here is that Gen Z is in need of quality, FDIC-insured banking options, but getting them into the world of traditional banking may be tricky. However, if institutions can find a way to properly leverage social media marketing, develop web platforms with quality user experience and user interface, and provide top notch customer service, it is possible for Gen Z and financial institutions to develop mutually beneficial banking relationships.

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