4 challenges to consider when targeting millennials and Gen Z
Unlike those before them, Millennials and Gen Z are more tech-savvy and have different customer experience expectations, as well as unique financial circumstances. Take a look at the 4 challenges financial institutions should consider when attempting to turn Millennials and Gen Z into long-term customers.
Content Marketing Manager, North America at Backbase
Now that more than half of the U.S. population consists of Millennials and members of Generation Z, financial institutions are focusing their efforts on how they can not only attract them, but also retain them as customers. Both of these generations are reshaping the finance industry as banks and credit unions re-architect their modelsaround addressing their challenges and meeting their needs. Unlike those before them, both generations are more tech-savvy and have different expectations around customer experience, as well as unique financial circumstances.
Take a look at the 4 challenges financial institutions should consider when attempting to turn Millennials and Gen Z into long-term customers.
Challenges Worth Considering
1. Financial Hardships
Today’s economic challenges have Gen Z and Millennials overworked, overwhelmed, and financially stressed. Between high inflation, skyrocketing home prices, and the unceasing burden of student loans, retirement plans and investment options are not a priority for these young adults. In fact, research shows that nearly half of both Millennials (47%) and Gen Z (46%) say they live paycheck to paycheck and are in constant fear they won’t be able to cover their monthly bills. Many have taken on low-wage jobs that don’t align with their career goals – and in some cases even second jobs – just to make ends meet. Unlike their parents at this age, buying a house and starting a family aren’t on their short-term goal list. Instead, they’re focused on saving money and managing their debt. This means the traditional credit card or low-interest-rate mortgage offers won’t be enough to gain their loyalty.
2. Lack of Financial Literacy
A recent TIAA Institute report showed that financial literacy is the lowest among Generation Z and Millenials. Only two-thirds of Gen Z and less than half of Millennials could correctly answer 50% or less of the index questions. While some may attribute these results to age or financial experience, it’s also important to consider where they’re getting their information from – their parents. Studies show that 84% of Gen Z still rely on their parents for financial understanding, and this group grew up in a different era and may not be familiar with today’s financial options and information. This lack of knowledge leaves young people unprepared to handle financial decisions or face what may be their first financial challenges. However, the uncertainty and disruption caused by the covid pandemic lit a fire under both generations, driving them to improve their financial knowledge and providing banks and credit unions the opportunity to attract them with valuable financial knowledge and guidance.
3. Market Competition
It wasn’t long ago that community banks or credit unions only had to concern themselves with competing against other local financial institutions or national banks. Unfortunately, the same can’t be said today. These mid-market institutions are losing ground to online-only banks, neobanks, and even non-banks who have made their presence known in the finance industry and successfully caught the attention of younger generations. The pandemic motivated these groups to get creative and start experimenting with their services and products, keeping one goal in mind – to make banking as quick and convenient as possible. Their lack of branches and low operational costs have allowed them to provide more personalized digital experiences than traditional banks, putting an extreme amount of pressure on these banks to prioritize digital transformation and more innovative, valuable features. EY teams surveyed 12,000 consumers and found that 27% have a primary relationship with these new market entrants. Unsurprisingly, these numbers are higher among millennial and Gen Z consumers.
4. Customer Experience is Priority
Millennials and Gen Z are considered digital natives, as they’ve been immersed in mobile apps and online capabilities in every aspect of their lives since they can remember. While Baby Boomers and Gen X were impressed with brick and mortar locations and little to no fees, these later generations are more likely to do business with a company based on the experience they can provide. And they’re just as willing to leave their bank or credit union due to being unhappy with an experience. Research shows that 60% of Gen Z and millennials admit they would ditch their financial institutions for better mobile apps or digital experiences, compared to 42% of Gen X and only 22% of Boomers. The ability to have access to information anytime, the speed at which they can get their questions answered, and the feeling that their bank can solve their individual financial needs are the key to catching their attention and gaining their trust.
How Can Backbase Help
The Backbase Engagement Banking Platform gives financial institutions a banking experience that’s built around the end user. Our platform enables banks and credit unions to captivate customers at every stage – from onboarding to loan application and everything in between. Backbase is the ultimate platform, with ready-to-go apps you can build on to make your bank truly stand out. The results? Higher conversion, lifelong loyalty, and boosted share of wallet.