By Andrew Vahrenkamp, senior research analyst, Raddon
Move over Millennials. Gen Z is on the scene and ready to leave their own mark on banking and payments. This latest generation, born after 1999, view the world completely differently than those who have gone before. Gen Z is more comfortable than prior generations with digital methods of moving money, and many anticipate supplementing traditional banking services with solutions from technology companies.
In its study, Generation Z: The Kids Are All Right, based on a survey of more than 2,500 high school students from 16 to 18 years old, Raddon, a Fiserv business, found that Gen Z is already in the payments space. Sixty seven percent of these students currently have a bank or credit union account, either in their own name or with their parents.
Somewhat surprisingly, Gen Z don’t all fit in a digital box. About a third of Gen Z (34 percent) are Conventionals, who prefer to conduct business face-to-face with traditional banking providers. Another 37 percent are Digitals, who also prefer traditional providers but who favor digital or virtual communication. And then there are the Pioneers, the 28 percent who want to bank in a way that is most convenient for them, no matter the provider. These Pioneers are the ones most likely to push the revolution in payments.
The presence of technology as an integral part of daily life will play a significant role in how Gen Z interacts with their finances. Members of Gen Z have grown up in the world of the smartphone and touchscreen. Seventy three percent use their smartphone at least once an hour.
Smartphones are not the only screen you will find a member of Gen Z viewing. Fifty percent of those surveyed have a tablet, 75 percent have a laptop computer and 50 percent have a desktop computer. Taking these numbers into account, it is not unreasonable to picture a Gen Z individual consuming content on three or four screens simultaneously. This multiscreen viewing demands constant and unique content and also makes capturing attention more difficult, as the choices available are virtually unlimited.
Consider their use of mobile banking, accessing a bank or credit union via app or mobile website. Currently, only 48 percent of Gen Z consumers with banking accounts use mobile banking, compared to 57 percent of adults. We expect that as Gen Z moves into college and the job market, their use of mobile banking in particular will exceed that of Millennials (currently 85 percent). With smartphone ownership outpacing laptop or desktop ownership, mobile banking appears to be more likely than online banking to win this generation in the long run.
With such robust ownership of smartphones and appreciation for technology, one might expect Gen Z to mirror their Millennial counterparts in using their phones to purchase things at a retail establishment. In fact, Gen Z is already outpacing Millennials in their use of mobile payments.
Just as with mobile banking, attitude toward technology has a strong relationship with mobile payments usage. Only 15 percent of Conventionals have paid for something with their phone, compared to an impressively high 45 percent of Pioneers, with Digitals in between at 24 percent.
The survey revealed members of Gen Z use their phone to make purchases at a wide variety of places: 44 percent at a department store; 41 percent for coffee, tea or snacks; 33 percent at convenience stores; and 28 percent at supermarkets.
By embracing new payment technology, Gen Z has become open to a world where they might turn to disruptive technology firms or other non-incumbent firms for future banking needs. Gen Z is much more likely to say they envision a future where technology companies supplement the financial services they might receive from traditional banks or credit unions. Forty four percent of Gen Z anticipates supplementing traditional banking services with solutions from technology companies, compared to only 37 percent of Millennials and 26 percent of Gen X.
Among the three attitudinal segments of Gen Z, more than three of four Pioneers were willing to conduct their financial business with tech companies. The threat to traditional providers does not end there. As many as 31 percent of all of Gen Z agree that they will not have to rely on banks for financial services in the future.
Disruptive technology companies are targeting the payments space more than any other portion of the industry, and Gen Z seems more willing than other generations to give them an opportunity. Keeping on top of trends in order to deliver the payment capabilities and experiences consumers expect will enable financial institutions to retain transactions, revenue and ultimately accounts and balances as the next generation comes of age.