Inside Gen Z: A Fintech Playbook That Works
Gen Z is redefining loyalty, purpose, and primacy in banking, and fintechs are leading the charge in creating experiences that resonate with the Gen Z audience. In this episode, Spiral CEO Shawn Melamed joins The Purposeful Banker to share a fintech playbook that helps banks and credit unions attract and engage Gen Z through gamified, purpose-driven experiences that grow deposits, deepen relationships, and make banking feel personal.
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Cheryl Brown
Hello and welcome to The Purposeful Banker, brought to you by Q2, where we discuss the big topics on the minds of today's best bankers. I'm Cheryl Brown. Welcome to the show.
Today I've invited Shawn Melamed to join me in the studio to continue a series we've been doing on how Gen Z banks and how financial institutions can attract and retain them as active account holders. Shawn is the co-founder and CEO of Spiral, an award-winning platform that creates personalized banking experiences, which is definitely something the Gen Z audience has said is super important to them. So Shawn, welcome to the show.
Shawn Melamed
Well, thank you Cheryl. Thank you for having me.
Cheryl Brown
So let's get started with just, tell us a little bit more about yourself and Spiral. What inspired you to build it and what problems were you trying to solve?
Shawn Melamed
Sure. So just quickly, my background, I guess I'm a serial fintech entrepreneur. I built and sold a couple of companies before that, and I spent about five years in Morgan Stanley as a managing director, where I led this development and innovation. And I just got a chance to work with the world’s most cutting-edge technologies and startups.
And through my tenure there, I looked a lot about our digital transformation and Morgan Stanley where we had to figure out how to move from relatively aging demographic because we were focusing on wealth management into a younger generation and how to do that for 4 million households. So as I was thinking about it and kind of getting to my tenure five years at Morgan Stanley, I realized that a lot of banks look at—and financial institutions look at—their customers more of as a number versus really trying to look at the human at the center. And I know now it may sound back five, six years ago nobody talked this way, but now we understand that we actually have to understand the human.
So for me, the mission was if you could build a bank or financial institution that's solely looking at the human as a human and try to solve all their problems and putting the heart of the center, helping them build strong financial foundation. And if that's a strong financial foundation, it may help them also help their communities in variety of ways. How a bank like that or a credit union like that look like. So for me, that was a lot of the motivation.
I also spent a lot of time in the nonprofit space and trying to volunteer various causes anywhere from homeless shelters to helping underprivileged kids find a path in life. And so for me, the mission side of, "Hey, we as financial institutions can help people.” We sit at the juncture of meeting them through their entire life journey since they're very young to later and see all the things that they're struggling with. Of course from the financial side, but if we understand the human in the middle, can we help them actually grow their financial foundations, which namely is how do you save money? And then if you do that, how do you give back and how do you help your community at large? And that was kind of my motivation.
Cheryl Brown
So a lot of the things that you've touched on make so much sense when you look at what Spiral is offering, which we'll dig into here in a minute.
So this episode of the podcast is one in a series that we've been running on Gen Z. And so we've talked to some Gen Z consumers and we have asked them what is important to them. So here are just some of the perspectives that have come out, and I want to see how these resonate with you:
So first of all, they have multiple banking relationships, and their primary relationship may not be a financial institution at all. They consider banking to be a serious relationship, but they're more prone to quiet quit when their needs aren't met, rather than closing an account which they consider to be a big deal. They're looking for guidance and transparency and they crave help with financial literacy.
And even though they're digital natives and do most things on their phones, they see branch access as a trust anchor, and they're strongly motivated by incentives and purpose, getting back to what you were just talking about. And they're attracted to a banking relationship that helps them meet goals and give back to their communities.
So how does that correspond with the basic understanding of Gen Z that you had when you developed Spiral’s strategy for this segment?
Shawn Melamed
Yeah, for sure. I think what's interesting about the Gen Z is that a lot of the things that you mentioned really comes to the root of what is the environment they grew up in. And you have to take a very broad look at the fact they grew up in a world where social media was the predominant way that you can learn about things and you can communicate with your friends and you can observe what other people are doing, you can follow them and create the whole “followers” mentality.
So when you think about they have multiple banking relationships is because they grew in a world where there's abundance of options for everything, hundreds of apps on their phones and the ability to download an app and try it for a little while, see if I like it, not even relating to banking, it could be anything. And then if I don't like it, I don't need to close anything. I just stopped using the app and maybe my phone would remind me in a year from now, you haven't used it, let's archive it and delete it.
So you always live in a context as an institution. And I think what happened to banking is it's easy to forget the context we live in because everything is so regimented and so regulated. So it's easy to do the same things over and over again under the guise that, yeah, that's just the way we work and that's just the way it works, but the world has moved on.
So I think that when we started Spiral, the first thing we've done is exactly what you mentioned. We interviewed dozens of different people and we would show them completely different user interfaces, we'll see what are the things that they liked and what they didn't like. And a lot of the innovation in our product, we kind of learned it from other experiences that they're used to in their day-to-day life. So it could be completely outside of the banking context.
So it could be how I'm used to ordering things on Amazon and how easy things are, which was the one-click famous innovation, or on Netflix and the fact that it analyzed my personality and kind of tell me what I'm likely to binge watch next. So yeah, so I think that what you're mentioning is all of this is true.
The ease in which they consume information, that's the other thing. So using YouTube and TikTok, and that's another reason why considering something as a serious relationship, it's more about an emotional loyalty. I'm following this person, I trust what they're saying. There need to be enough content there that is giving me that level of trust and level of appeal, right? To be honest, banks and credit unions—until not very recently—were kind of boring and not the sexiest thing to follow. So there's this big disparity.
So I'm just kind of thinking about the points you mentioned on the multiple relationships is a lot of it is lended from the fact how do you use apps and how they use different services. They could be competitive to one another and just evaluating one versus the other. And the whole silent quitting is exactly a derivative of that behavior. When it comes to what works with Gen Zs, and what's really interesting about them, is they're very sophisticated.
So the flip side of what I said is because they consume a lot of information because of everybody putting their experiences out there, whether it's a YouTube video about something I'm interested in or TikTok, I can really quickly understand, become relatively sophisticated. A great example is even just in trading and crypto. At one point, every person, Gen Z they talked to became this field expert and would talk with so much conviction about those things.
So for them, they have a belief that they can easily get things, but they need to be easy. So if they see a product that somehow is not bad, it's such a stark kind of difference than what they expect and they automatically tainted and color you and label you as like, "Oh, this is an archaic, this is something my dad would use, this is not for me." So yeah, those are I think the whole point of they're trying to bridge what is a bank to their world. That's why branch access is a physical thing.
It's something that anchors it in reality, but they understand that 99% of what they're going to do is going to be on their phones and they need to be a seamless experience. Yeah, I also mentioned something about obviously incentives and purpose is a big thing and when we design our product, we've seen that through their other behavior, especially social media, gratification is a big thing.
So they've been trained since they're very young to receive likes and on, I just posted something, so that's a like, I'm a little bit further. There's always gamification in other apps that tells you that you're on the right track and you're doing well. So being motivated by incentives, by goals, by their ability to achieve those goals. It's things that they're used to anywhere from games on phones to Xbox to all the other things they grew up in life.
Cheryl Brown
So Shawn, you guys at Spiral, you talk a lot about experiences people love, and you've talked about some of those, but let's dig into some of your products like the Saving Center, the Roundup Center, and the Giving Center and how those combine gamification, automation, and purpose. So why are those elements so powerful in engaging younger customers? You've talked about this a little bit, but can you just be a little bit more specific about the actual experience that Gen Z loves?
Shawn Melamed
Yes, absolutely. Well, let's start from the first one, Roundup Center, for example. So Gen Z loves things that are simple, and they like to feel accomplished at the same time. So those are the two key ingredients. They want gratification and they want something to be easy. Roundup in many, many ways is probably the first chance that you have to start saving money.
I remember when I was in my 20s and discovered the roundup capabilities was really my first savings. And so for them when they see something that could be easy, very easy to enroll into, and the fact that it's going to help them save money, which is aspirationally something that they want—the recent studies showed that 51% of Gen Zs effectively are saving right now, which is a great indicator on how much that matters to them. So that's an example of the Roundup Center.
Now what's interesting is they're also, we didn't talk about it until now, but Gen Zs are people with values. And again, it is derived a lot of it from the fact they grew up in social media and they saw people that were very authentic became influencers, and they just speak their mind. And so this idea of authenticity is really important for them. And the way you express authenticity is I pick and bank with institutions that stand by my values.
So the uniqueness of our Roundup Center, for example, is not only it enables the customer or member to save money, but it also enabled them to donate to local causes through the roundup. A small portion, it could be 10% or 20% of whatever you're rounding up. But for Gen Z, that's really important. The idea of a community, I'm part of a community and within that community I may have values, I may personally care about helping people that don't have enough food or people that don't have shelter or just helping kids with education.
So a roundup enabled them to, when they enroll to say, "Oh, I want to save money, and I want to do that as well." And that's a big reason why it resonates so well on so many level. It's easy, it's helped them save and it extend with their value and feeling like they're giving back.
The second product you mentioned, the Saving Center, is interesting. What resonates there is when you think about Gen Zs, they are in the stage of their life where saving is the most important thing. You basically start with nothing. So you just graduate from college and all of a sudden you realize, "Well, I need to start attaining things to actually build my life." And depends on where you are. It could be your car, it could be your first home, it could be that you're just expecting your first kids. Funny talking about Gen Zs like that, but they're getting close to 30s, so expecting your first kid.
So all of a sudden, there's a lot of things that you need in your life and you need to plan ahead for them. And our Saving Center, which enables you to set up a goal and enables you to find gamified auto-saving rules, which are automatic ways to save money in a way that fits your lifestyle, again, resonates a lot with mapping to very specific things. So we can have people saving for, say, a new car or just even a vacation they want to take with their loved one.
Cheryl Brown
So Spiral integrates directly into Q2's Digital Banking Platform. You guys are part of our Q2 Innovation Studio. How does that partnership expand opportunities for a financial institution? What's the value prop there?
Shawn Melamed
Yeah, absolutely. I think that Q2 has this incredible infrastructure that enables us to basically build a solution that is fully embedded, and from the bank or credit union that implemented, they can see our products like the Roundup Center, the Savings Center, the Giving Center emerge inside the Q2 experience. And it's not a separate app. It doesn't require additional logging from the customer or member. So it's a completely native experience.
What it means from the opportunity for the financial institution is that the installation is extremely fast. It's basically like flipping on a switch. Typically, takes us about 92 days from the moment we sign a contract to the moment it's live in front of all of your customers or members. So that’s just a testament of how well an integration like this plays into your ability to get to market with a new solution.
And of course getting to market with a new solution means you get to harvest the ROI and achieve the impact you're looking for as to whether it's attracting the younger demographics, the Gen Zs and so on, or it could be other things like retaining your existing customers and so on. So the fast installation leading to a fast ROI.
I would also mention that there's no technical risks. So because the integration has already been done, there's no questions of what might happen with my specific online banking or with my specific core. All of this we've done for you. And again, as an evidence, we have tens of customers that join customers with Q2 where we have so many different cores they're running on and so many different experiences and there are no technical challenges. There are no core integrations required.
The last piece I would mention is the continuous innovation. So the integrator we've done with Q2 and with the SDK that is offered by Q2 enables us to constantly innovate and improve our product and work in collaboration with Q2 to do things that actually work both ways. So sometimes it could be that we collect great data that would enable Q2 to help you personalize the things that you want on online banking and vice versa.
Cheryl Brown
So you mentioned ROI, and Spiral has reported results like 16% higher deposits and 31% more card transactions. Do you have any anecdotes? Either anecdotal or actual case studies? Do you have any examples of how community banks or credit unions have used Spiral to differentiate themselves locally, attract new demographics, and achieve some of these results that you guys have seen?
Shawn Melamed
Yes, absolutely. As I said, I think we have close to 15 different Q2 customers specifically. And what you see is that the reason we can drive those types of metrics of the increasing deposits in the card transactions is because you take an account that traditionally hasn't been that interesting—kind of the beginning of our conversation, Cheryl—and you add capabilities that make it very easy for somebody to engage with. Let's say a roundup, very easy to say, yes, I do want a roundup.
From there, a whole new window opens into that customer or member life. You see what they're rounding up. They can set up a goal, they can donate a portion, and you see what they care about in terms of values. So what we've learned is that through adding those capabilities, what happened is the customers or members start choosing that account as their primary bank account. And that's what leads to an increase of deposits so much, because if maybe before they were using you as a secondary account and, all of a sudden, those capabilities push you now to use that as a primary account.
And other statistics that we like to share is that we've seen that 18% of the people that enroll, for example, into the Roundup previously had a dormant debit card. So what does it tell you? It tells you that you have a long tail of dormant customers. They're not necessarily using you as a primary institution. And if you add capabilities that appeal to their generation, as we mentioned the Gen Zs, and it's something they want to do, they want to save and all of a sudden it's available to them, you will be able to win some of them back as a primary customers.
And I can give some examples of one customer we have, Credit Union of Texas, they rolled out our solution and within, I think, an hour, eight or nine months already have 15% of their members using it on a daily basis. And their differentiation was, "Hey, we want to reward you." So remember you mentioned earlier that in your study on Q2, you saw the Gen Z care about incentives. They created this great incentive where you reach a certain milestone in roundups, which means you're using the debit card as your primary payment option. They're actually going to give you an annual reward, and that's worked tremendously well for them.
Cheryl Brown
So moving on to the future. What do you see as the next big opportunity or even the next big risk for financial institutions trying to capture Gen Z loyalty and let's, frankly, Gen Alpha loyalty because those guys are, the oldest Gen Alphas are like what? 11, 12 years old now? So trying to capture the younger audience loyalty over say the next five to 10 years.
Shawn Melamed
Yeah, I think it's funny because I do have both Gen Z daughters and one Alpha. So I see their behavior. I would say it's helped them win things in their lives. The way they orient themselves is the world and life is complex and they're just, the reality is hitting them, right? They're going to college and they want to buy their first car. So I think the big opportunity is how you can create attachments into things that they care about in their lives and on a daily basis? Not as a one-off. Don't be transactional.
So for example, my young daughter, as of tomorrow, we're going to a Knicks game and I've been saving and she knew that I created a savings goal for her Knicks birthday, her 12th birthday. It's a big thing for her. She's a huge basketball fan. So for her, she's oriented herself into, "OK, I need a goal."
My older daughter, she cares about her first car, and she's been putting money aside for that car. And so they like when they see that the app they're using—thinking about the bank or credit union as an app—is helping them get there and continuously they're going to have the next thing and the next thing that they wanted. So I see the opportunities is personalize and understand who they are in terms of people and what their cares and needs and optimize for that.
Cheryl Brown
Great. Well, real quick, before we end, I want to just do a lightning round with you. Here's a few questions just real quick. Off the top of your head, one word that describes Gen Z's financial personality.
Shawn Melamed
Demanding.
Cheryl Brown
The most surprising thing you've learned about this generation.
Shawn Melamed
Authenticity matters to them.
Cheryl Brown
And one fintech trend that's over-hyped and one that's underrated.
Shawn Melamed
Over-hyped, I think crypto. It's an asset class and that's it in my mind. The underrated is personalization. It sounds maybe something soft, but then just think about ChatGPT and how much that knows us now so deeply and that changes our lives, that's the key.
Cheryl Brown
I couldn't agree more. Couldn't agree more. Well, Shawn, thanks for coming on the show and sharing your perspectives and Spiral's playbook on serving Gen Z. If someone wants to learn more about Spiral, where should they go?
Shawn Melamed
Our website, spiral.us. And yeah, would love to obviously help Q2 banks and credit unions target the Gen Zs and make them happy.
Cheryl Brown
Excellent. I'll add that link to the show notes, as well.
And that's it for another episode of The Purposeful Banker. A reminder to share your feedback on our podcast content at Q2.com/podsurvey. And there's a link in the show notes on that one, too. You can subscribe to the show wherever you listen to podcasts, including YouTube, Apple, and Spotify. And you can see our archive of podcasts at hub.q2.com/podcasts, with an “s” on the end. Until next time, this is Cheryl Brown, and you've been listening to The Purposeful Banker.