Customized Council Guidance: Custom-Tailored Prosperity: Delivering Financial Health Exactly as Gen Z Prefers It
A decade ago, individuals belonging to the Generation Y were in their early 20s and grappling with the impacts of the Great Recession. Presently, Generation Z is enduring financial hardships due to the economic repercussions of the pandemic.
Nonetheless, Generation Z is tackling this situation differently by leaning on credit.
New findings from TransUnion reveal that Generation Z is more inclined to use credit cards to manage their expenses compared to Millennials at the same developmental stage. Moreover, the debt burden and delinquency rates of Generation Z consumers are higher than Millennials at the same age.
These trends signal a significant prospect for financial institutions to develop personalized financial wellness programs and instruments specifically tailored for the Gen Z customer experience.
Gen Z is proactively seeking financial guidance.
Desiring to move beyond the era of inflation and transition towards a brighter future, Generation Z is receptive to financial wellness counseling. They are actively seeking this advice in unconventional platforms, such as online sources.
In fact, research indicates that 57% of individuals between the ages of 18 to 29 seek online guidance for investing, while 62% claim to feel empowered by the accessibility of this advice.
However, the advice provided by online finance influencers can sometimes be ambiguous, misleading, or even fabricated. For the most straightforward path towards financial freedom, Generation Z requires unbiased financial guidance from reliable resources.
Personalization is crucial for engagement.
To increase the popularity of financial wellness offerings, financial institutions must adopt a personalized approach. Off-the-shelf, conventional financial advice is not engaging for a generation that has grown up experiencing customized experiences - from personalized children's books to tailored content on their social media feeds.
Generation Z's preference for tailored experiences is evident in various sectors. They prefer subscription-style clothing boxes, enjoy customizable gaming platforms, and opt for flexible payment options.
Financial institutions can leverage this behavior by integrating hyper-personalized financial wellness tools and features into the digital banking experiences that attract Gen Z consumers.
Three scenarios for personalized financial wellness.
Thanks to the advancements in big data analytics and the prevalence of APIs, even smaller financial institutions can provide a customized user experience. These include:
1. Credit Score Simulators
These interactive tools help users comprehend the impact of their decisions on the financial opportunities available to them. Since Gen Z and Millennials make up more than half (53%) of the active credit monitoring consumers, financial institutions that include a credit score simulator within their digital banking dashboards can empower Gen Z users to explore various options and see how each might impact their credit scores.
2. Identity Risk Scores
Providing Gen Z users with an in-depth look at their data breach history is another method to offer hyper-personalized insights. Identity risk scores, derived from a person's unique exposure history, highlight the most significant risks to the individual. By integrating risk scores with tailored action plans, banks can educate consumers on the necessary steps they can take to minimize their unique risks. Although it might appear contradictory, research shows that Gen Z users are particularly concerned about the security of their digital identities. Nearly three-quarters (74%) of Gen Z consumers are anxious about having their personal information or data stolen.
3. Personal Financial Management
Dashboards that track transactions and categorize spending are helpful, but solutions that transform personal data into tailored financial advice are exceptional. Gen Z will be more inclined to follow recommendations for optimizing their spending, saving, and investing when the advice is tailored to their individual needs. Keeping recommendations within the digital channel is crucial because Gen Z is more likely to engage with money advice that arrives online.
Strengthen financial health while establishing a niche.
As Gen Z advances financially, financial institutions must carve out opportunities to demonstrate their value to a generation that is less dependent on traditional financial institutions.
By utilizing data and personalization to increase the adoption of financial wellness tools, financial institutions can maintain their positions as trustworthy financial experts while also establishing a strong presence among financially inclined young people. The outcome: a healthier financial future for Gen Z and loyal customer bases for financial institutions.
The information provided here is not investment, tax, or financial advice. You are advised to consult with a licensed professional for advice specific to your situation.
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Lindsey Downing, an influential figure in the financial sector, emphasized the importance of personalized financial wellness for Generation Z. Recognizing the unique financial challenges faced by Gen Z, Downing suggested that financial institutions should tailor their offerings to cater to the preferences of this generation.
In line with this, Downing highlighted the potential of using credit score simulators, identity risk scores, and personal financial management tools to provide hyper-personalized financial advice to Gen Z users. She emphasized that by leveraging data analytics and APIs, even smaller financial institutions could offer a customized user experience, thereby strengthening their position in the market.
