Millennials and Gen Z: A New Era Requires a New Strategy
Move over baby boomers. With millennials set to become the largest generation in the U.S. by the end of the year, you'll no longer be the biggest kids on the block. This new era requires a new strategy for financial institutions – one based on understanding consumers of every age, their needs and how they want to access financial services.
For the past decade, everyone has seen the same demographic and economic charts showing wealth, from real estate to 401(k)s and savings accounts, concentrated in the hands of boomers. There's no need to make a pie chart; the boomers are the pie. So understandably, most financial institutions have focused their marketing efforts on those born between 1946 and 1964.
But now, millennials are coming into their own. They don't yet command the wealth, but they definitely have the numbers – an estimated 81.1 million by 2036 – to command our attention. Boomers remain important, but if they're your sole focus, you're working from last decade's strategy.
Every generation is exposed to different things as they come of age, and that exposure has a meaningful impact on the way they see the world. Financial institutions must be ready to understand these differences to effectively engage consumers at every stage of life.
Different Approaches to Financial Services
The 13th Annual Fiserv Consumer Trends Survey found significant differences in how millennials – the generation born from 1981 to 1997 – and other generations approach financial services. Millennials require a suite of banking products, from credit and debit cards to mobile banking, car loans, and checking and savings accounts. They are more likely to carry a higher balance in their checking accounts than older generations, and nearly a third have relationships with two financial institutions.
More than other generations, this group wants budget management help, including real-time feedback, alerts, push notifications, benefits and rewards, content aggregation and consultative insights. Millennials, who may be struggling financially, want guidance about how they can save more based on their spending habits.
Not surprisingly, mobile banking is especially important to millennials, who are more likely to use the channel for daily balance notifications, statement analysis, savings, local deals and mortgage tools, according to the survey. Although mobile banking usage is spreading across older generations, among smartphone owners, millennial adoption of mobile banking outpaces boomers' adoption 2 to 1.
Make Way for Gen Z
And what about Gen Z? Representing 25 percent of the U.S. population – and growing every day – those age 17 and under control $44 billion a year, just in allowance. They are smart consumers from a very early age and in many ways are an extreme version of millennials – overall more mature and in control than their predecessors.
Gen Z's only interaction with a physical bank was probably opening an account with their parents; they likely see little reason to visit a branch again. Financial institutions can expect Gen Z's preferences to be similar to those of millennials, but Gen Z's tolerance for financial institutions that don't grasp their need for fast, easy, intuitive and personally relevant communications will be very low. Prepaid cards, which limit exposure if a card is lost or budgets are forgotten, are a hit with Gen Z and their parents.
Together, millennials and Gen Z are a force – 127 million Americans or more than a third of our entire population. Financial institutions should prepare now for the coming transition, as boomers start to age out of the system and younger generations take control of the economy. For financial institutions, it's not about ignoring demographic segments. Instead, it's about understanding generational differences in order to better reach a diverse audience and make products and services relevant to them.
Interested in learning more about generational profiles and how they impact financial services? Attend the Forum session Hello, I'm Your Member at 11 a.m. Thursday, Oct. 8, at Fiserv Forum.