Customers now expect a personalised experience that gives them a great deal of control and customisation when it comes to their spending and saving. This is happening across all demographics as Australians seek rich digital-led experiences that have traditionally been beyond the periphery of an incumbent banking sector far too entrenched in its legacy systems and infrastructure. The rise of near field communications and contactless mobile payments has meant that the next generation of customers (generation Z) is able to categorise their purchases and monitor their spending habits in ways previously thought impossible.
Customers today are more informed than they have ever been using services like Raiz, Stake and Spaceship to wrest back control of their investment portfolios and manage their superannuation in a way that would allow them to access non-conventional assets and diversify their portfolio into buckets of exchange-traded funds or international stocks all in a matter of minutes. The possibilities of instant engagement and hyperconnectivity have created a new paradigm for traditional banks and financial technology (fintech) disruptors when it comes to providing the tailored experiences for customers of tomorrow. And we are only at the tip of the iceberg in terms of what this means for customer engagement moving forward.
Who are generation Z?
Generation Z (customers born in the late 1990s to early 2000s) is entering the workforce, giving them a disposable income for the first time, and the ability to shape the narrative on the future of financial services. This digitally savvy customer base will dominate the way in which banks and fintech start-ups look to conduct conventional forms of financial services such as payments, asset monitoring and spending insights – particularly in a climate where trust in our most esteemed financial institutions is no longer a certainty.
This new generation of customers is one with a heightened social and ethical awareness, perceptions characterised by dwindling levels of trust in Australia’s big four banks following both the fallout of the landmark royal commission into Australia’s financial services sector as well as economic headwinds stemming as far back as the global financial crisis of 2008-09. Consequently, this is a generation that has risen with a concrete set of expectations and preferences for engagement, a new series of implicit demands when it comes to traditional means for interactions, particularly around basic services like payments and financial transactions. Market participants, banks and fintech start-ups alike, can no longer afford to assume passive roles as a conduit between their customers and these traditional financial services. They cannot sit back and assume that they will be trusted by a generation who has fundamentally changed the rules of engagement.
The challenge of customer engagement: What’s changed?
This all poses a series of challenges for market incumbents. They must adopt new attitudes and approaches for bridging the divide and genuinely engaging with this new cohort of customers. With greater spending power than any generation before them, generation Z has the world’s knowledge readily accessible at their fingertips, they are growing to be an increasingly influential customer segment and it would be remiss of the current crop of financial technology start-ups to overlook the significance of this demographic when it comes to shaping the world economy.
Amazon, Facebook and Google were the mainstay of millennials (customers born in the late 1980s to early 1990s) who were old enough to see the steady rise of these technology giants. What this has meant is that this is a generation not opposed to using technology to help them make complex decisions, especially financial ones. Generation Z, however, is far more conservative than millennials so they are less excited about financial products from technology giants like Amazon and Google. To engage this customer, the next wave of banks and fintechs must understand their preferences and understand that they are more likely to use a debit card than a credit card as they want to avoid the debt millennials currently face.
As gen Z starts to enter the workforce, we can expect the rising prevalence of the gig economy to take hold. For a gen Z Australian, flexible working will be a priority and many are choosing to run their own businesses or work as freelancers. They enjoy the freedom of working for themselves, launching their own start-ups and doing all their business activity on the go. This new mindset creates a whole different host of financial needs among generation Z as well as opportunities for fintech companies that cater to their small businesses.
Companies like Nod seamlessly allow you to automate any workflow documentation used in the provision of financial advice, reducing the process of advice provisioning to a matter of minutes. Transferwise makes it easy to send and receive international payments, a neat solution for freelancers working across borders, while neobanks like MyMy in Malaysia leverage financial transaction data to build a customer profile, and using revolutionary KYC approaches to simplify the process of opening a bank account.
Moving to a frictionless future
As gen Z increasingly expects frictionless digital experiences for their daily banking needs, fintech companies will need to provide excellent multi-channel support services (across Twitter, Facebook, Instagram and the company pages) as well as a superior online experience to help create a seamless customer journey that will allow them to appropriately tailor their solutions for this generation. Fintech companies that provide seamless integration with their communities on social media platforms will also have a pointed advantage because generation Z customers will seek to not only interact with these brands but make sure that they can share more and more with their large networks dispersed across the channels. Finally, fintech companies must take an active role in advocacy and education when it comes to this new generation. Those companies that can build an authentic voice through regular content, financial literacy and education around financial wellbeing among the gen Z segment will begin to see real dividends when it comes to building a bridge with this increasingly important demographic. Only those prepared to change their approaches away from conventional methods of engagement will survive as the next wave of disruptive fintech solutions begin to emerge.
Dirk Steller, founder and managing partner of Seed Space, an Australian and Swiss fintech-focused VC firm