Inside Gen Z: The Story Behind the Numbers
How financial institutions can best serve Gen Z accountholders is a popular topic in the industry. In this episode of The Purposeful Banker, we look past the buzz to unpack the data about this segment and talk about the gaps between expectations and behavior.
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[Podcast] Inside Gen Z: Lessons in Loyalty
Transcript
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.
We've been taking a break from our regularly scheduled commercial banking program to focus on a subject that is important to the whole bank: how to attract, satisfy and retain Gen Z account holders. This group is, after all, our future, and many financial institutions are prioritizing Gen Z as part of their long-term growth strategy.
So I've asked Jaime Dominguez into the studio to talk about this audience and help us understand them better. Jaime is a principal product marketer for Q2, but he and I go back beyond our Q2 years together. And he's been working in the financial services technology space for 20 years now, focused on product management and product marketing. So welcome to the show, Jaime.
Jaime Dominguez
Well, thank you, Cheryl, for having me. Although you say 20 years. That makes it sound like a long time.
Cheryl Brown
It feels long sometimes. So tell the listeners a little bit about yourself. How did you get to where you are today?
Jaime Dominguez
Like you said, yes, I have been in the financial industry for quite a bit now. I started my career, believe it or not, assisting Wells Fargo with developing a brand new call center solution for home mortgaging. So their entire self-service solution is what I was managing at the time. So that's kind of where my feet got wet in the financial industry. All right. So from there I ended up getting an opportunity to work at Fiserv, which I think most folks know who they are. And within Fiserv I ended up doing many different things. Got to travel the world. I got to speak to many different financial institutions there.
And then I ended up focusing my time quite heavily in the in the U.S. for quite a long time, running products for them and then ultimately strategy. And one of the strategic areas that I worked in was called digital channels. And it also included the branch. And then through that, I started to really get to have a better perspective of this, the younger generation and where things were headed. And not to mention that I also have kids that are Gen Zs. No millennials. So even though it sounds like I've been around for 20 years, I still do not have that much … my kids are not that old, so I do have a lot to Gen Zers in the house, so I've learned a lot from them as well.
Cheryl Brown
So to level set on this conversation, let's define Gen Z. These are people born between 1997 and 2012. So we're talking between 13 and 28 years old. And there's a lot of growing up that happens in those crucial years. So I assume we're focusing on the upper part of that span. People in their early 20s, right? What are some of the trends we're seeing from this group?
Jaime Dominguez
Well, I mean, the number one trend is that, you know, everybody is obviously utilizing a phone. They are digital natives. I think we all understand that. That's all they know. They know that anything or everything that they need or anything that they need to do is done via a device. And that device is their phone. That's what they understand.
They also understand that companies have done an interesting job with utilizing data, and by having the data, they're able to provide them with personalized experiences in ways that may be good for some or maybe not good for others, but they haven't had to do a lot of thinking or researching in many ways, because the Googles of the world have really done a lot of that for them, right? It's not like us where we didn't have any of that. So we really had to go do research when we were interested in doing something. All they have to do is log on to their phone, do a search, and a whole bunch of information comes at them. And a lot of that information is based on the way that they interact with that particular application, solution, or the data that they've been using.
So these algorithms behind the scenes start to get to know them. And so they start to feed them things that seem to be more relevant for them. Whereas we didn't have that. You know, we really had to understand what was happening so that we could make the choices, whether good or bad. And so I'd say that the key thing for them is the use of data and the digital ecosystem.
Cheryl Brown
So I know that there's been research done around this audience, pretty extensive research. What do you think are the top three pieces of data around this audience that's important for banks and credit unions to think about?
Jaime Dominguez
Yeah, I've actually been looking at a lot of that. And one of the big ones that I found interesting is we've always talked about primacy in the financial industry. Right? Which is your primary financial institution? Well, for them, the primary financial institution is the phone. And what I mean by that is the research is showing that most consumers across the board, especially in that age group, have more than one account across multiple institutions, some of which are not a financial institution.
They also see the financial industry as a big purchase. It's something that's really important to do. OK. Which initially when you're thinking about a digital ecosystem, you would have thought that they'd look at the financial industry as just another app, but they actually don't. They see it as something that is very important to have. But they also do understand that if you don't give them what they need, they're going to go elsewhere. And they're not the kind of people that are just going to cancel things out with you because they do see that as a big … again, it's a big purchase. They don't want to, you know, all of a sudden let go of something that big, but they have no problem going somewhere else and opening another account that can help them do what they need.
And you know, my kid is a great example of that. I think I mentioned this a while back where he opened his first account, and the institution just was not engaging with him. And so based on what he heard from other friends, because the social aspect does play a lot with them as well, he ends up opening an account with a fintech. He did not close out the banking account. He actually just kept it, which is what we're seeing a lot of them do. So on average we're seeing about five accounts across multiple institutions.
And so those are some of the key things that I think the industry needs to understand is only because they're there with you does not mean that they're actually with you.
Cheryl Brown
So like you, my kids are in their early 20s, and I know that some of today's economic realities really do shape their thinking. For example, my 22-year-old son said to me, rather matter of fact, recently he's like, “Mom, you know I'll never be able to afford to buy a house.” And that was kind of a sobering statement for me. So how are things like student debt, housing affordability, inflation, and the job market shaping the way this generation thinks about their money?
Jaime Dominguez
Yeah, it's a great question. And to be frank, everything that I'm reading, everything that I'm seeing is, you know, they're kind of freaked out by it. And I think one part of why they're freaked out also is because they don't understand it very well either. Like they don't understand banking very well. And so they're not quite sure how to manage it. They're not quite sure what to do with it. And they also are seeing a generation ahead of them struggling, which, you know, as your son coming to you and saying that he doesn't think he can afford that. They're seeing some of that happening in the market today. So I think it’s definitely freaking them out.
And so what they need from a financial institution, number one, is trust. They want to make sure that they can go to somebody that can help them understand what to do. And that's one thing that I feel we don't do a really great job with in our industry. We do a great job in helping them maybe open an account, but beyond that, we don't do a great job in helping them to understand what they need to do with this relationship.
They are also very goal-oriented, which is kudos to them. I do give them kudos for that. They do want to save for things, whether it's I'm saving for maybe something that I want to purchase in three, you know, for my birthday or I'm saving for my mini vacation or I'm saving ... They are very goal-oriented, and so they do look for things to help them manage those goals. And so financial institutions do need to provide them with means to help them gradually achieve their goals, whatever that may be. Trust is so important, right? They want to make sure that they're with somebody that they can trust.
Cheryl Brown
Yeah. In the in the last episode of the podcast, I did a replay of a panel discussion that Q2 hosted recently with three Gen Z consumers on the panel, and that theme definitely played out. They all talked about how critical financial literacy is for them at this point in their lives. And so it sounds like this is a big opportunity both digitally and in branches. So how can financial institutions take advantage of this?
Jaime Dominguez
Yeah, that's a great point. And as a matter of fact, there's a stat that just came out not that long ago where it said that 65% of Gen Zs value physical branches as a trust anchor, which is something that was very eye-opening for many people, even for myself. Because in my previous life I also was doing the future of the branch at one point in time, and we were trying to figure out what did that really mean? You know, were branches going to go away, especially with this younger generation? Well, it turns out—and which is something I said for a long time—is they're not going to go away, and they haven't gone away.
They actually, the younger generation see this physical location as a place for them to entrust that the institution that they're working with is solid, OK? That it's a real institution. However, they don't see it as a place for them to go to just open an account. Like it's obvious they're using digital. They want to be able to do as much of it as themselves, but when they need help and assistance, when they need consulting, they want to go somewhere at times to talk to an actual human being who can help them, especially around the financial industry.
Cheryl Brown
Yeah, that's a fundamentally different expectation for traditional banking from like our Gen X segment. Are there other things that Gen Z—and even their older millennial brothers and sisters—are there other expectations that they have that are a bit different from the previous generations?
Jaime Dominguez
Yeah, I'm going to say maybe not so different, but in the way in which financial institutions actually provide it might be different. And that is the personalizing aspect of it, right? Older generations—and I'll put myself on that because you just said I was here for over 20 years—our expectation was that our relationship grew through an individual. So we would go to the branch. We'd have a branch person that we would work with. And that's how our relationship grew with a financial institution. For them, the personalization aspect for them and the growing of the relationship really happens through the digital ecosystem. And so it's being able to take that concept of how do I, as a financial institution, do what I did in my branch, right?
Personalizing meaning they’ve got to know you. And so they knew, hey, Jaime, you've got, you know, your kids. How are they doing in school? I see one of them's going to go to college. Have you thought about this? Have you thought about that? Well, there isn't that interaction on a day-to-day basis, and really a lot, for that matter, with a younger generation. So you have to be able to personalize and engage and grow the relationship through a digital ecosystem while ensuring that these individuals can trust that what you're giving them, the data that you're providing them, the products and services that you're offering them are there to help them, right? And so that's a component to that whole personalization that once happened in the physical channel, now really needs to happen in the digital ecosystem so that they can feel good about really engaging and growing the relationship with you.
Cheryl Brown
And yeah, I mean, and they're completely good with that, right? I mean, they have no suspicion around personalization the way some older generations do. You know, they're like, “Oh, it's creepy. It's Big Brothery that they know me.” The Gen Zs are not like that. They're like, “Yeah, they better know me. They should know me. There's no reason they shouldn't know me and don't feed me stuff that's not personalized for me, because you have all the data that you need to know me.” And they have a completely different perspective about personalization, don't they?
Jaime Dominguez
Yeah, absolutely. As a matter of fact, there was a recent study that was done and about 72% of Gen Z consumers said that personalization affects where they bank, right? And now when we speak about personalization, too, it's interesting because there's a lot of … That word—I may be a little controversial here a little bit—but that word means a lot of things. I mean, what does that really mean? Personalization. Right? It's kind of like when we used to talk about CRM. CRM was like all these things. Well, personalization has really become all these things. And I think it's really a matter of, number one, the financial institution needing to understand what are the goals of that in terms of how they want to grow, what market do they want to go after, and how do they want to do that? And then focusing on how do we personalize that experience for the individuals that we want to bring across.
Now another component about that statistic is also that, believe it or not, personalization from a digital point of view isn't something that's just expected anymore just by the Gen Z, but it's really across the board. And that really has to do with the way that we now interact with apps and other digital solutions. Everything is personalized in many ways for all of us. The one clear component, though, of the Gen Z: For them, personalization isn't something that they have to see in front of them happening all the time. For them, it's the algorithms that are happening behind the scenes that are understanding who they are and then offering them things that make sense, right? Helping them with content that makes sense. It's not always also about selling.
Cheryl Brown
Yeah, and it has to be genuine, right? You can't plug in their name and expect that to be … that seems disingenuous, right?
Jaime Dominguez
Absolutely.
Cheryl Brown
You can't say they know my name, but they don't know what I need. That's not genuine personalization. And that will turn them off right?
Jaime Dominguez
One hundred percent. It has to be genuine.
Cheryl Brown
Yeah. It's like they can, you know, they know AI when they see it. They know disingenuous personalization when they see it.
So speaking of that panel, another thing that caught my attention was that every single one of them said they know someone their age who has a side gig. And I would be remiss in this commercial banking podcast if we didn't at least touch a little bit on the business side of things. So I've heard that before about Gen Z, that they're very entrepreneurial, and it makes perfect sense considering their attitudes around the economic climate that we're in right now. And earlier this year, I had Caroline Vahrenkamp from Filene, who we knew, you know, in our Fiserv days and her Raddon days. I had her on the podcast, and we talked a lot about how credit unions, specifically, they have an opportunity to grow with Gen Z members as they go from consumer over to business owner. So what are some things that banks and credit unions could do to identify those account holders who may be moving from side gig to full on microbusiness or small business and take advantage of that opportunity?
Jaime Dominguez
Yeah, I'm going to be honest. It's a little tough sometimes to try to identify them because a lot of them act like consumers. And so they do expect that on the business side of the house, as they begin to grow their business or start a business, they expect the same kind of engagement, personalization that they're getting on the consumer side to also be there for that business side of the house, right? And it goes back to the knowledge of what does it mean to start a business.
So I'm going to back up for one second, because really it comes down to a couple of things. No. 1 is knowledge. We talked about that earlier, right? They don't really understand a lot about banking. And so, therefore, while they understand and they have the easibility of starting businesses, especially with AI today, they can start a side gig fairly easily. OK. But they don't understand, though, is what does that mean? What does it mean for me to start a business? And they do need knowledge. They need people like the financial industry to provide some of that knowledge for them. That's one of the first things.
And why that is important is because if they can't engage with them when they are a consumer, or they can't make them feel like these individuals are somebody that the FI knows and understands, they won't stay with you for the business side of the house. So that's the second piece. We need to make sure that FIs are engaging them when they are just a member or a customer from the get-go so that they can earn their trust, and then ultimately be able to then earn the business side of the house.
Now it is difficult to identify them, but there are some signs that they can use, right? Transactions is one of them. Be able to see the types of purchases that are being done by them, and maybe utilizing that initially to try to identify that somebody is maybe starting a business and/or already have started a business, right? Because certain transactions are going to grow or expand. For example, there are companies that specify specifically and focus on, you know, starting an LLC. Well, they can definitely look for data that can tag those kinds of companies to help them see that, oh, maybe this person is thinking about starting a business initially. Ultimately, obviously, if somebody does open a business account right off the get-go, they're going to know that, yep, these guys are obviously doing a business. But as a Gen Zer, you don't see that very often right off the bat because they don't understand that either. So they use their own personal accounts as sort of a business account, at least initially.
Cheryl Brown
So let's talk about loyalty. Everyone is after that sticky relationship. But what does loyalty look like when it comes to Gen Z? And how can banks and credit unions even know they're building loyalty, or recognize that quiet quitting that you talked about earlier, how they'll just, like, slowly drift off and stop using you because, you know. And then, you know, they're using somebody else. How can banks kind of keep an eye on that and do something about it before it's too late?
Jaime Dominguez
Yeah, that's a great question. There's one component that I've been seeing, or at least that I hear a lot from Gen Zs, is that they do actually love rewards. So understanding loyalty is a part of making sure that you're offering them things that they are going to use. So it could just be a single product that offers some sort of reward that they can utilize over and over again. And you know, that's number one in terms of maybe starting to build loyalty.
A second or a primary component of loyalty is also helping them with the knowledge. I can't stress that enough. It is so important for financial institutions to really provide guidance and knowledge about what they do and how they do it. I'm going to say that's probably the primary. Second one is rewards, man. They love rewards. So figure out how to incorporate that into it. And hopefully you’re offering rewards that they can actually use, which will start creating loyalty or at least expand the loyalty.
Number three, make sure that what you do is, in their eyes, is something that is trustworthy for them, and that you're offering things that make sense to them. I still have a hard time to this day as to why we … 80% or 90% of the financial institutions still offer a checking account, as an example. Like they don't, they have no clue what that means. I understand from a core perspective why we have that, but from their point of view it's like, what the heck is this? Why do I need this? So start offering things that make sense to them in order for them, for you to start building loyalty. Otherwise they’re going to go somewhere else.
Cheryl Brown
However, I will call this out because, you know, again, I have a 25-year-old daughter, and recently—she's had her same bank account since she was 13 and started babysitting—but recently she had to go get checks because she had an apartment manager who only, well, they accepted checks in the office or she could pay online for an exorbitant fee. And she's like, to heck with that. I'll walk down there and hand them a check. So she went and ordered checks for the first time. So I would say there's a reason that we still have checks, and that's small businesses because they keep using the checks.
Jaime Dominguez
I'm not saying that checks go away, but what I'm saying is start to utilize lingo and provide them with products and services that fit the way they live their lives, you know, versus …
Cheryl Brown
It’s their debit account and not their checking account.
Jaime Dominguez
Right. Versus the way that we use the lingo in terms of how we used to live our lives. I think we need to switch that around a little bit, right?
Cheryl Brown
Yeah, definitely. It was interesting. I had to show her how to fill that check out.
Jaime Dominguez
Yeah, well, I hear you with that. I could totally see that.
Cheryl Brown
Yeah, they taught us that in school. They don't teach them that.
Jaime Dominguez
No, they don't. They don't teach you how to Venmo. The kids already know how to do that.
Cheryl Brown
The kids are teaching the teachers these days on stuff like that.
Jaime Dominguez
That's right. That's exactly right.
Cheryl Brown
So thinking about that younger segment of Gen Z, you know, they're 13, 14, 15 years old. And then also their Gen Alpha younger siblings. What do you think the future looks like for those younger folks when they grow into adulthood? What do you anticipate their relationship with traditional banks and credit unions will be? How are we going to evolve from here, in your opinion?
Jaime Dominguez
Interesting question. I think that AI is definitely going to play a big part of this, because these guys are growing in that world of AI and the advancements that AI is making. Again, this is my personal opinion, so take that as it is, but I'm thinking it is going to end up becoming is they’re going to be interacting with an AI banking chatbot concept. I'm going to call it like a concierge where they could actually ask it questions about, hey, I want to be able to reach a point by this many years to be able to afford X, Y, and Z. Can you lay out a plan for me that can help me sort of start to save my money and or invest in ways that can help me reach that goal? And the entity will be able to provide it with information by asking them for information like, first, help me understand, where are you today? What are your plans for doing X, Y, and Z? So there's going to be a lot of interaction and it's going to be able to build out a plan.
I mean AI does it now. I use it for, you know, I'm actually using it right now to help me build out a plan for our garden. Uh, I used it to help me paint my house, which was crazy, but it worked and so I could totally see that, you know, I could totally see having a conversation with, hey, here's what, here's my goal. Can you help me figure this out? And it'll come back and be able to provide a step-by-step process of what they need to do to reach that goal. Right. And the bank needs to be a component of that. They need to be at the center of making that happen.
Cheryl Brown
Yeah. I mean, imagine if it was integrated into all your financial accounts and you didn't have to feed it the information. It just already knew what you spend your money on now, you know. This is how much your income has increased over the past three years, and you can expect it to increase by that much. Or if you have this goal, you need your income to increase by this much. I mean, imagine if that was just all already available.
Now from a security standpoint, that's scary me as a Gen Xer. But for maybe the Gen Alpha, they're going to be less scared of it. You know, after growing up with it, they'll be less scared of it.
Jaime Dominguez
Yeah, I think they're definitely going to be less scared of working with the technology, but I don't think they're going to be any less scared if there's a leak or there's some sort of security problem. Right? Because the moment that happens, every single person starts to, you know, it's scary for all at that point in time. And you see that even with Gen Zs, like, they're cool with everything. Use my data. Take my data. Do whatever you need with my data. But the moment there's some sort of security breach, at that moment in time, you lost their trust and they're out, right? So security is definitely a key component in all of this. And financial institutions definitely need to invest a lot in it, especially as AI grows.
Cheryl Brown
Great conversation Jaime. I mean, thanks for joining me today. I love when we get to chat about, you know, these interesting topics. Gen Z and how they do everything in the world has always been super interesting to me because, you know …
Jaime Dominguez
You mean our kids?
Cheryl Brown
Yeah, as a mom, right? But thanks for joining me and bringing your perspective.
Jaime Dominguez
Absolutely. I really enjoy doing it. I always enjoy having a chat with you. I really appreciate you having me on your podcast. It's great being here.
Cheryl Brown
Yeah, maybe we can have you again. Let's think of another topic.
Jaime Dominguez
I'd love to be there anytime. Anytime you let me know. There's a ton of topics we can talk about.
Cheryl Brown
Well, that's it for this episode of The Purposeful Banker. A reminder to share your feedback on our podcast content at Q2.com/podsurvey. You can tell me what you want to hear from Jaime, and there's a link in the show notes. 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. Until next time, this is Cheryl Brown, and you've been listening to The Purposeful Banker.