When it comes to their financial lives, many consumers – especially younger ones – are seeking guidance and help to achieve financial well-being. Research from Fiserv shows many Gen Z and millennial consumers were struggling to manage finances and lack confidence in overall financial health even before the economic fallout from COVID-19.
According to Expectations & Experiences: Household Finances, the consumer trends survey conducted by The Harris Poll on behalf of Fiserv, 42 percent of millennials (ages 23–38) say managing finances is a burden, compared to only 27 percent of older generations. Millennials also spend far more time managing their finances than older generations. And, while half of people age 55 or older are satisfied with their financial health, only 40 percent of consumers under the age of 55 say the same. Just 33 percent of Gen Z (ages 18–22) say they're satisfied. The survey was conducted before social distancing measures were in place.
For most traditional financial institutions, millennials can be an elusive customer segment. However, helping younger consumers improve their financial health is an opportunity to grow new relationships. Financial institutions have an opportunity to provide next-generation financial well-being support and tools while creating and strengthening relationships with younger consumers. Here are three ways to make that happen:
1. Make Savings Simple
As a group, younger consumers tend to have less discretionary income, making it more difficult to save. The Household Finances research found 70 percent of Gen Z and 44 percent of millennials say it would be difficult or impossible to pay back $500 today, compared to only 32 percent of people age 39 and older. So, while it's essential people learn about the importance of investing for the future, the more immediate need is to help those generations save for a rainy day. Experts often suggest savings sufficient to cover six months of expenses.
Most financial institutions have the financial products and technologies to make it easier for younger generations to save, such as automated savings accounts. By leveraging a digital banking solution, for example, financial institutions can create digital piggy banks that automatically divert funds into high-yield savings accounts. Making that kind of feature "opt-out" instead of "opt-in" can positively impact savings rates.
Alerts are another way to encourage savings while promoting accountholder education. For example, a financial institution has data on consumers' direct deposits, regular bill payments and average expenses. That makes it relatively easy to use digital banking platforms to let people know how much they should aim to have in their rainy-day fund, how far they are from their saving goals and what they can realistically save based on current deposits. Artificial intelligence will only help make saving even more intuitive.
Financial institutions have an opportunity to provide next-generation financial well-being support and tools while creating and strengthening relationships with younger consumers.
2. Focus on Credit – Early and Often
According to the research, about half of Gen Z consumers and two-thirds of millennials have credit cards. As they get older, those percentages are likely to rise. Based on historical data, we can also assume they'll become increasingly likely to turn to their financial institutions for vehicle, business and home loan products as those needs arise. Helping accountholders – and their children – understand credit will be a critical part of a positive financial services experience in the future.
The necessary education extends well beyond understanding interest rates and payment terms. People also need the information and tools to monitor changes to their credit scores and report discrepancies, especially now. This is where technology can make a big difference. For example, credit-scoring technology integrated with your digital banking solution can provide consumers with on-the-go, on-demand access to their credit scores.
Financial institutions have an advantage over newer market entrants when it comes to trust and integrity, which creates an opportunity for banks and credit unions to differentiate themselves. To safeguard their financial futures, younger consumers will appreciate understanding exactly what information they're sharing and how to protect their data and passwords. Digital platforms can help to identify accountholders who might benefit from information on biometrics, two-factor authentication or third-party permissions, for example.
3. Use Technology to Stay in Step With Consumers' Needs
There's a lot of room for financial institutions to make younger consumers' financial lives easier. Banks and credit unions have the benefit of being able to offer one-stop access to a lifetime of financial services and products – something stand-alone apps and tech companies can't effectively replicate.
The key is to simplify and automate tools that enable savings accounts, college planning, credit reporting, alerts, real-time money movement, borrowing, investing and retirement planning. And, for best results, it all should be embedded in intuitive technology that anticipates what people need when they need it, no matter what the device or channel.
Younger consumers often want a degree of technology integration that was once out of reach for regional and community banks or credit unions. Now, open banking and APIs have introduced new possibilities, enabling institutions of all sizes to offer the kinds of information and support people need in real time.
The world is changing quickly and accountholders, especially younger ones, likely need the assistance and guidance of their financial institution more than ever. Ensure your organization is ready to help with the products and services people need now.