As Gen Z Comes Of Age, Banks Explore New Social Avenues
Opening a checking account has, historically, been a rite of passage. Families might open a savings account for their young children, or give their teens access to a debit card linked to a parent’s account, but most young people didn’t open their own checking accounts until they got their first job or moved away for college. Today’s young people – members of Gen Z – view banking differently than the youngest Millennials just a few years older than them, though.
As a direct result of the rise of fintech companies, Gen Z tends to eschew traditional banks in favor of applications that let them transfer funds and make payments with ease. This presents a challenge to banks, who are turning to social media in an attempt to attract the next generation of investors.
Where The Kids Are
Social media has been an integral part of marketing for years now, but to reach Gen Z, communications and marketing teams need to take their outreach in a new direction. That’s because Gen Z isn’t on Facebook and has been steadily decamping from Instagram. Instead, the banks and fintech brands that have been most successful in reaching young clients have found they need to move their campaigns to TikTok to reach their future clients. Other critical platforms include Snapchat and YouTube. Advertisements on these platforms are most likely to reach Gen Z.
It’s not enough for banks to be on the same platforms as Gen Z if they don’t understand those platforms. Young users want to work with brands that are as digitally savvy as they are, so they won’t bank with a company whose ads stick out like a sore thumb. They want to see ads that blend in with their feeds, and that means banks need to level up their social media literacy.
A Rate-Based Advantage
Social media may go a long way when it comes to reaching Gen Z, but it has to work in concert with traditional appeals. That’s why a lot of banks – and new fintech companies – offer high introductory rates on savings accounts. Meant to lure in new users and even encourage them to withdraw funds from another bank, these rates typically only last for a few months, and since young users are typically looking for checking opportunities, not savings, this may not work well. This may be why so many fintech brands give new users a financial incentive, instead, such as issuing a $5 credit per referral.
While checking accounts may have been the mark of adulthood for young people in the past, Gen Z may set a new precedent by taking out loans before they even have paper checks. That’s because fintech has democratized lending in the form of microloans through its applications. Initially, such lending was an indicator of underemployment, with Millennials using such platforms to stay afloat between paychecks, but for Gen Z, those loans are just as likely to go towards luxury purchases. They’re billed as a safe way to start borrowing money, but they carry their own risks and parents should be careful to talk to young adults about borrowing carefully.
Mastering The Market
Fintech has certainly complicated the banking landscape at the same time that Gen Z is building wealth. Still, while Gen Z is doing its best to make sense of these tools, it expects financial marketers to show an equal commitment to learning their language – the language of social media. Gen Z runs the gamut from those skeptical of new technology because they’ve seen so many brands fail to those committed to market disruption, but across the board few opt for community banks or credit unions. The reason: marketing.
Fintech companies built their businesses on social media, unlike traditional banks, and so far, that has given them an edge in reaching Gen Z. The question is whether young investors will remain loyal to them as they become more knowledgeable about their financial needs. It’s too soon to tell, but whatever the outcome, the battle for market share will take place on social media.