By Shabnam Wazed, the founder and CEO of AGAM International More than one third of the world’s population is Generation Z. To give you an idea of what this means in figures, the UK has approximately 12.6 million (19%) Gen Zers entering the workforce, whilst the world’s eighth most populated country, Bangladesh, has well over […]
By Shabnam Wazed, the founder and CEO of AGAM International
More than one third of the world’s population is Generation Z.
To give you an idea of what this means in figures, the UK has approximately 12.6 million (19%) Gen Zers entering the workforce, whilst the world’s eighth most populated country, Bangladesh, has well over 58 million Gen Zers – a staggering 35% of the population, around 27% of whom live in urban areas.
With larger numbers of young people entering the workforce at one time than any generation before it, what legacy will these digital natives leave on the banking sector?
Interestingly, wherever they are from, whether the UK or Bangladesh, Gen Zer’s have common behaviours and common challenges for the banking sector.
Every generation approach money and personal finance in a different way. Millennials discovered the road to adulthood was paved with financial difficulties including slow pay growth and uncertain economic conditions. This environment contributed to the development of the group’s spending patterns and views toward debt.
Millennials made their fair share of financial blunders along the way (as most generations do), but evidence is already accumulating suggesting the “next generation”, Gen Z, is already learning lessons from their elders. Some of Gen Zers’ older acquaintances struggled to reach high-paying professional roles while simultaneously taking on significant debt. As a result Gen Zers seem to be approaching personal finance with a level of caution.
Financial institutions offer services to customers of all ages, but many focus their marketing efforts on the youngest group, timed to coincide with the time when they complete college and begin to enter employment. Building a solid, enduring relationship with youthful customers can be profitable and result in many years of business. Many people stick with the same retail bank they joined as a college student for life. Institutions have the chance to develop and maintain its brand with each new generation whilst balancing the needs and wishes of older, existing customers.
Digital innovation and customer engagement is becoming fundamental to banks’ ability to differentiate themselves to customers. Gen Zers, as digital natives, demand different approaches. They are forcing the banking system to enter the innovation of technology.
There’s a proverb that says you can learn a lot about someone’s worldview by looking at how it was when they were in their twenties.
Few generations in recent times have experienced pandemics, transformational digital change, recessions, inflation, and global instability. Digital-first customers are no longer the future of banking but the present. Unlike millennials, who came of age during the 2008 global financial crisis, Gen Z was expected to inherit a strong economy and record-low interest rates. The Covid crisis changed all of this.
Keeping Gen Zers motivated and interested in their financial futures will require creativity. Around 40% of Gen Zers use TikTok over Google for search. Fun and educational, video led, banks’ communication needs to ensure it reflects (and demonstrates an understanding of) the interests and concerns of this group.
But what of credit?
In order to further promote economic accessibility, fintechs across the world are working to make credit inclusive, making way for the younger generations to be able to step out of the credit paradox and qualify for their first loan.
Gen Z has recently entered the banking industry, and they are upending it. The 2008 financial crisis impacted this generation’s parents, and they took lessons from it. Gen Z have a new relationship to credit. Despite having access to credit and the possibility of debt, Gen Z does not necessarily make use of it. Even though the majority of this generation has at least one loan account and is credit active, they handle their money wisely. The majority of Gen Zers who use credit are managing their debt better than Millennials did at the same age.
Spending
Gen Z are the obvious target for fast growing e-commerce brands. Gen Zers’ inspiration comes from aesthetic Pinterest boards, and TikTok highlights are used to capture their every move; therefore, it only makes sense that their methods of purchase are online first. And, e-commerce brands were quick to embrace fintech solutions for part payments or delayed payments. Such benefits previously were only limited to a smaller segment of customers having credit cards.
Historically, to be eligible for this credit customers had to earn the ‘right salary,’ with the right amount of transaction histories to be considered credit-able for the banks. Younger shoppers were almost always excluded from that group. The Klarna Generation have been granted access to credit in huge numbers. But, are these customers getting the ‘right’ credit? With little access to Gen Z to date, banks’ are missing out on the opportunity to service these customers.
And, with limited financial education, are Gen Z making the best financial decision for themselves? This is where next generation UK fintech, AGAM International, comes in. AGAM is the answer to the real-world financial problems faced by the unbanked community. It provides lenders with the information and access to those who have previously been denied a credit score. With the creation of a more sophisticated credit scoring method known as ‘Individual Independence Index’ individuals with limited credit histories, but who the data show are suitable borrowers, are able to receive access to loans – instilling a sense of financial confidence and security in many individuals without previous financial knowledge.
In order to further promote economic inclusivity, fintechs across the world are working to make credit accessible and it can only happen with digital innovation in every step of the way.
To remain in business, let alone thrive, financial institutions must embrace Gen Z’s digital native sensibilities and respond – and that means accelerating their digital transformation, adopting more sophisticated credit scoring and payment systems and communicating with Gen Zers in a language and format they understand.
Shabnam Wazed, the founder and CEO of AGAM International
