Younger consumers expect more from their banks – here’s how brands can catch up
Following The Drum’s Deep Dive into the impact that buy now pay later brands are having on the finance industry, Ogilvy’s Clare Lawson examines how consumer expectations of banking brands are changing.
Gen z consumers want more from their banks in 2022 / Unsplash
To date, much of the digital progress made by large banks or financial services companies has focused on creating online versions of their brick-and-mortar services – in other words, they’ve put traditional banking on to digital screens.
Progress yes, but arguably not transformation.
Our needs as consumers of financial services are changing, spearheaded by the changing buying and service behaviors of gen Z. And so many providers are simply not delivering adequate immersive experiences that offer a two-way value exchange. No one is going to expect a business to not make a sustainable profit, but in return businesses must give the customer something of value. Increasingly in financial services that’s an experience that works for how they live their lives. As a result, gen Z are flocking to neobanks and new ways to manage personal finance.
The winners will be those that make financial services an integral part of young people’s lives; on social media, in gaming – those things are part of growing up. They’ll unlock the role that their organization plays in the culture of a generation – one of empowerment. We are in the era of empowerment, and to succeed financial services companies need to empower young people in all aspects of their lives.
It’s now empowerment over engagement. Previously, financial service providers focused on digitizing their customer engagements and making transactions seamless. The next generation demands a rethink to make financial planning and management as relevant to them as possible.
I’m sure we can all picture today’s gen Z consumer. I think about our babysitter – for data protection let’s call her Chloe. First main job in HR on the outskirts of London, living with mum and dad. Not stuck with the burden of housing and family expenses at a young age – there are no structural commitments. We now favor flexibility; in-the-moment decision-making and freedom.
Perhaps the first iteration of this was the concept of buy now pay later (BNPL). There isn’t really a catch if you pay installments on time, and the ability to spread your payments – without the interest that a credit card would attract – brings previously unobtainable luxuries into play.
The convenience and transparency of the process is what is winning over the younger audiences, and as a service it meets several key needs of this demographic.
Firstly, it manages against the post-pandemic financial situation. With rising inflation, softening job markets and lack of certainty, we know we won’t hit the standard milestones that older generations did. We must find ways for in-the-moment decision-making to enable us to afford the luxuries that suit the life stage – enter BNLP.
Secondly, we are in a subscription generation. We are used to products and services that we pay monthly for. Take Amazon and Netflix, which have shaped our expectations of staggered payment for immediate service benefit.
And finally, transparency is key. Younger generations seek transparency in pricing, and simple fee structures where they can choose and pay only for the service they use. Credit cards are being ditched in favor of the adoption of BNPL apps. The service is growing at 39% a year, with transparent flat late fee charges being the key driver of this growth.
But there are other trends that are driving the change to financial service provision.
We now expect banks to act like financial advisors. We want banks to give us a holistic outlook on our financial wellbeing and standing in real-time. We understand that brands hold data on us, and this will be used to personalize the experience – frankly it’s expected. Based on the data, we anticipate banks to predict how much we will save each month in real-time, and how to shape our financial future. And not with reports or consultations at your local branch. It’s more interactive challenges and experiences that gamify the experience – and when we meet on the right platform, engagement increases two-fold.
Those already doing it well are fintechs and premium banks such as Citibank and HSBC, which encourage customers to save more through weekly challenges and missions. Osper also has a budgeting wealth management system built right into its app so kids can save up for what they want over time.
We now also want financial services to deliver a shorter, better, more embedded experience. Digital app user experience was considered one of the top three factors that improved positive banking experience in 2021, quoted by The Financial Brand in its digital banking report. And it’s easy to see why more gen Zs are migrating toward neobanks – it takes five times as many clicks to open an account with First Direct than it does with Revolut.
We, especially gen Z, are now engaging in philanthropic spending and charitable giving as we gain financial independence. We patronize financial institutions and invest in companies that mirror our goals for sustainability, social justice and other causes we deem important. We will invest to make money but also to support societal good. 50% of Brits don’t want their money to support the fossil fuel industry. Yet leading UK banks have poured billions into financing fossil fuels since 2015.
Undoubtably, the next era of digital transformation in financial services is about understanding the behavior of a generation and using this to meet our needs with empowering experiences. But who’s ready?
Clare Lawson is chief executive officer of experience at Ogilvy UK.