They make up 40% of global consumers, and by 2030, they’re projected to represent 31% of the workforce. Their current purchasing power is around $450 billion, which is expected to soar to $12 trillion in just five years.
This digitally savvy generation seems to favor fintech platforms over traditional banks. A recent survey from PYMNTS indicates that 54% of Gen Z rely mainly on non-traditional financial service providers, particularly those offering real-time payments and valuing social responsibility. In light of this, financial institutions are adjusting their strategies—whether they’re fintech startups, established banks, or credit unions—to more effectively engage Gen Z.
“They want their products to exist digitally, reflecting their values and lifestyle,” said Gavin Michael, CEO of Varo Bank, during a panel hosted by PYMNTS with Karen Webster.
For Varo, catering to Gen Z means offering flexibility and transparency. Their product, Varo Advance, provides short-term cash advances, and Michael noted that they base underwriting on cash flow rather than traditional credit histories, which more closely aligns with Gen Z’s needs.
Similarly, Arijit Roy, Executive Vice President at US Bank, pointed out that connecting with this generation demands new marketing approaches.
“They consume marketing differently,” Roy noted. “They’re not watching linear TV; they’re on Instagram and YouTube Shorts.”
Banks are responding by focusing on targeted, personalized communication and offering product bundles that streamline services like checking, savings, and credit cards into a single application.
Roy also mentioned how Gen Z seeks immediate validation and highlighted certain features that have boosted customer engagement.
Credit Union Angle
Travis Credit Union, according to Grady Bond, their Senior Vice President, faces the challenge of reshaping perceptions around brand awareness and credit unions.
“There’s a general perception issue,” Bond said. “We need to bridge the gap between who can participate and what we can offer them once they become members.” To address these misconceptions, Travis Credit Union showcases its digital capabilities and affordable options to resonate with Gen Z’s budget-conscious mindset.
Bond noted that while this generation is digitally inclined, they use multiple channels. “They have the opportunity to take advantage of our local benefits,” he added.
Meanwhile, Sophie is observing Gen Z’s increasing expectations for investment. They now offer access to alternative investments and private company stocks, which were traditionally reserved for wealthier clients.
Kelly Kee, an executive at Sophie, emphasized the importance of providing opportunities at a low digital entry barrier, paired with financial education for informed decision-making.
“Gen Z expects access to products that wealthy investors have and doesn’t understand why they can’t get them digitally,” Kee remarked.
Education plays a crucial role for Gen Z. Chris Haraschek, Chief Innovation Officer at Greenlight, pointed out a unique chance to engage families.
“Trust in finance is inherited,” Haraschek told PYMNTS.
Greenlight’s platform attracts younger users through interactive financial education tools, creating early and lasting relationships.
“We believe banks that connect with parents stand the best chance of acquiring their children as customers,” Haraschek added.
Get, Maintain, and Grow
Acquisition and retention strategies must evolve with Gen Z’s digital-first preferences and demand for convenience. For SOFI, direct deposit incentives have proven significant.
“Members who sign up for direct deposits tend to be our most loyal,” Kee said, emphasizing the importance of bundling products to strengthen customer relationships. “32% of new products opened were by existing SOFI members.”
US banks find engagement through immediate satisfaction, with quick reimbursements driving customer behavior changes.
Varo utilizes ongoing underwriting and advanced machine learning to incorporate cash advances and credit lines into daily financial management.
“We take on customers daily,” Michael shared. “We continually adjust their lines to fit their cash flow.”
Even conventional marketing methods, like direct mail, surprisingly engage Generation Z effectively. “Direct mail stands out amidst all the digital noise,” Kee noted, agreeing that personalized emails can foster trust.
Important Gen Z Metrics
The panelists discussed key performance indicators (KPIs) that track success with Gen Z. Greenlight adjusts its ratings by age segments to monitor engagement metrics like chore completions and allowances earned. According to Bond, Travis Credit Union primarily tracks the percentage of new Gen Z members in their overall mix.
Varo measures “product progress,” as Michael stated, keeping an eye on how customers deepen their relationships by utilizing multiple products.
Sofi is focusing on “non-adjusted brand awareness,” using partnerships with sporting events and visibility initiatives involving celebrities like Taylor Swift and Beyoncé.
Roy pointed out that US banks monitor stability to measure account engagement and digital activity within Generation Z.
When it comes to becoming a “Bank of Life for Life” for Gen Z, the panelists stressed the importance of continuous adaptation to meet their evolving economic needs.
Michael expressed, “We aim to deepen our engagement in the habits we’re cultivating. Once our customers progress, they’re eager to explore additional products.”
Keough echoed this sentiment, highlighting a personalized financial journey.
Bond stressed the importance of trust, arguing against seeing Gen Z merely as a means to profitability. “We must truly enhance their financial lives to earn their loyalty.”
Halaschek explained that Greenlight’s approach will streamline transitions to partner banks as users mature.
Roy concluded by underscoring the need for breadth and adaptability. “To remain relevant, we must evolve alongside them and ensure a diverse range of products to meet future needs.”
“Gen Z sets the rules,” Keough summarized. “Our role is to help them realize their ambitions.”
