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How small financial institutions can attract Gen Zers

Jul 18, 2022

If you think Gen Zers are too young for small financial institutions to woo into their universe of services, you may want to think again.

This group already has a spending power of $44 billion and that will only grow as they become the largest consumer group in the next four years.

Yet less than half have an account with a traditional traditional financial institution.

What does this mean for small financial institutions? It means there’s a huge pool of potential customers that you can capture if you do more than just offer loan products and a checking account.

Here’s how to get started on building a strategy to woo Gen Zers.

Rethink how you think about Gen Z

It would be a mistake to just think of Gen Zers in terms of computers and social media.

This generation has been known to align with brands that value authenticity, transparency in communication and a clear value proposition. This generation also is the most ethnically diverse and is expected to be the highest educated in U.S. history.

They also tend to be financially responsible; 68% are considered more responsible than older generations. While this group is still young, more than a third have reported having more than $1,000 in savings and are the generation least likely to end up in debt.

Why does this matter? Because this generation is more discerning about how and where they spend their money. They are looking for financial products that not only have a higher rate of return on investment, but that also fit into their flexible lifestyle and social values.

Start thinking “digital first” financial products for Gen Z

When serving digital natives, it makes sense for small financial institutions to start thinking “digital first.” The pandemic has made it apparent that upgrading digital offerings makes banking easier for all customers, no matter their generation. And that demand for digital banking services is only continuing to grow.

Gen Z is the biggest adopter of online fintech services, demonstrating a high level of comfort and trust in online financial services. This poses a challenge to more traditional financial institutions who were leaning on their long-held, in-person relationships with older generations of customers. 

The younger generation is also highly accepting of trying out new ways of paying for goods and services using P2P apps and cryptocurrency. Gen Z is looking for opportunities to make money while they engage in other activities. These activities fit the Gen Z lifestyle and are much more attractive than traditional savings accounts that tend to have a low rate of return.

Tailor customer marketing to fit the needs of digital natives

One of the major challenges of marketing financial services to Gen Zers is digitizing the customer journey.

Knowing how and where to integrate human touch versus making a banking service completely digital can vary from one institution to another. Increasing digitization and automation in small financial institutions will enable choice and flexibility in the customer journey while still allowing space for financial institution employees to advise those who need more hands-on support as an option.

Big data will become essential to automating how customers access traditional financial institution products like checking accounts, mortgages and auto loans. Analyzing data like credit profiles, account information, histories of transactions and more can help financial institutions find trends among their customers and design services that are tailored to specific customer profiles.

Personalizing the customer experience across both physical and digital channels can also help small financial institutions to build trust and loyalty.

Personalization demonstrates that the financial institution knows their customers well and has the capacity to tend to their needs. Traditionally, customers valued smaller financial institutions because of the personal relationships they had with financial institution employees. Offering this higher level of customer service in a digital capacity can differentiate small financial institutions from their larger competitors who are often too large to know who their customers are.

Create a financial information strategy using social media

Gen Z is known to consume financial information from their peers on social media platforms. You’ll see discussions on TikTok and Instagram on topics like starting small businesses or side hustles, learning how to invest in the stock market or how to retire early. Gen Zers are trying out new ideas and sharing the results with their friends online, allowing them to reach their financial goals faster than previous generations.

Digital financial literacy media is expected to be entertaining in addition to being educational. It doesn’t have to only be about mortgages and applying for credit cards.

Younger generations of customers want to know how to get money back on purchases they make every day or easy ways to invest using the financial institution's convenient app. Creating smart digital content can be the characteristic that makes a small financial institution more attractive over larger financial institutions.

How Wipfli can help

Wipfli’s team combines deep industry knowledge with innovative digital services to help financial institutions overcome their biggest challenges so they can thrive while meeting compliance regulations. Learn more on our digital services for financial institutions web page or check out these additional educational resources:

  1. The metaverse is real for banks
  2. How financial institutions can use AI today
  3. Measuring digital transformation
  4. 2022 state of community banking research report

Author(s)

Billy Collins
Senior Manager
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