Gen Z, with an rapidly growing $450 billion in spending power, is poised to revolutionize the financial sector over the coming decade. This tech-savvy generation (the tail end of which I technically belong to), born into the “domesticated” internet and mobile-centric communication, represents the new wave of the workforce.

By 2030, their spending is projected to soar to a staggering $12.6 trillion worldwide. However, beyond these predictions, it is essential to understand where Gen Z really stands today and what road is ahead for them. To do so, we must take a step back and examine their personal and professional origin.

Gen Z witnessed their families struggle through financial crises and socio-political turmoil, and as they embarked on their professional journeys, they faced the pandemic-induced recession and high inflation.

These economic challenges have increased the cost of living, raised housing costs, limited job opportunities, and eroded their purchasing power. Additionally, the rising cost of education has saddled many Gen Zers with significant student loan debt.

Today, 48% of Gen Z consumers report living paycheck to paycheck. Additionally, they rely on debt more than Millennials did at the same age, with average credit card balances 26% higher and higher delinquency rates compared to previous generations.

Given these circumstances, one could say that Millennials possess an “apocalyptic” view of the future. They experienced a relatively calmer "before time" and witnessed numerous socio-financial crises.

In contrast, Gen Z has a “post-apocalyptic” outlook, having grown up amid constant uncertainty, never experiencing a period of true stability. This generation generally deals with a profound sense of pessimism, shaped by their continuous exposure to economic and social challenges.

Understanding these formative experiences is crucial to comprehending how Gen Z is approaching their future, and how it will reshape the financial sector landscape.

Gen Z’s approach to money and spending

Given the turbulent period during which Gen Z began their professional journeys and started managing money, they are generally known for being financially prudent and pragmatic in their day-to-day spending.

They often prioritize savings and value-driven purchases through budgeting, financial planning apps, and cautious spending to ensure financial stability.

Gen Zers are proactive about their financial future, often starting to save early and showing a greater propensity to invest in stocks compared to previous generations. They are 45% more likely to start investing by age 21 than Millennials were. 

But at the same time, data from the GFLEC shows that Gen Z scores lower in financial literacy tests. Other data indicates that this view of Gen Z being more financially prudent is a myth as average credit card balances and delinquencies exceed those of Millennials at the same stage previously.

However, it is encouraging that Gen Z is highly self-aware and eager to learn more about personal finance, utilizing social media, family, and digital resources for education.

While relatively financially aware and forward looking, Gen Z exhibits some mixed spending habits, often referred to as the "Say-Do" gap, indicating a discrepancy between their intentions and actions. While they are generally cautious with day-to-day expenses, 43% of Gen Zers spend more than they earn. This behavior can be attributed to rising living costs and a higher reliance on debt.

However, digging deeper Gen Z might pose signs of wider issues of overspending, as over half of Gen Zers use BNPL services, which on one side helps optimize spending but also facilitates purchasing beyond their available budget.

A twisted example of frugality and extensive spending is that 80% of Gen Z actively use "recommerce" (second-hand marketplaces), with 64% citing financial savings as the primary reason for turning to second-hand goods.

On the other hand, the emotional toll of a precarious economic environment can lead to "doom spending," where stress and uncertainty drive impulsive purchases of luxury items for immediate gratification. 35% of Gen Z admit to spending more as a way to manage stress about the economy.

These tendencies combine to create a dualistic nature in Gen Z's spending habits - cautious financial planning with emotional spending. It's one I can relate to myself, and it highlights the complex interplay between being conscious of financial management and the need for immediate comfort. 

Deep personalization as a key driver for capturing Gen Z

Growing up in the Netflix, Spotify, Amazon, and TikTok era, Gen Zers experience hyper-personalization firsthand in almost every digital interaction - from recommended videos, suggested playlists, to tailored product recommendations that fit their style.

The impact of daily personalized experiences across various platforms has reached the financial sector. 

Today, 54% of Gen Zers demand unprecedented levels of personalization in banking (a number I expect to grow significantly), seeking financial services that not only recognize but also anticipate their individual needs and help meet their financial goals.

They also value discounts and offers from their favorite brands, showing a strong preference for tailored interactions that acknowledge their specific consumer habits. 

Gen Z thinks that the ability to personalize financial experiences based on their data is no longer a perk but a necessity. Financial institutions must heed these preferences, as 49% of consumers want their financial providers to truly "know" them.

But what does this actually mean?

In finance, personalization for Gen Z can take many routes, including:

  • offering tailored pro-active, financial advice and product recommendations (savings plans, investment opportunities, or credit card) based on spending habits, personal preferences and set financial goals,
  • providing spending management tools with real-time insights and alerts to support day-to-day finances,
  • delivering customized rewards and discounts relevant to shopping preferences,
  • ability to personalize cards and rewards,
  • seamless multi-channel experiences across digital platforms like Tiktok, Discord or Instagram, that leads to consistent and personalized experience across all digital platforms, including mobile apps, websites, and social media; or,
  • personalized educational content to enhance financial literacy, that matches financial goals and stage of life.

Effective personalization combined with a superior user experience can greatly enhance Gen Z's loyalty to financial institutions, while also being a key factor in their decision to switch providers.

Community and trust - how does it impact Gen Z’s financial life?

Gen Zers are more open to discuss taboo topics - plastic surgery, mental health, and personal finance - compared to previous generations. This openness to new topics has fostered the growth of hyper-focused communities and "digital trust," where trust is built purely through digital interactions. These play significant roles in their lives and notably influence their financial decisions.

Unlike previous generations, Gen Z is not shy about discussing their financial situations, salaries or investments, and they actively seek advice and feedback from peers within a number of online communities. This openness reflects their broader cultural shift towards transparency and a strong desire for visibility and recognition in a digital world.

They leverage technology and social media not only for social interaction but also for financial education and advice. Beyond that, social media is also the king when it comes to attracting Gen Zers to purchase products and goods, where 71% use these platforms for shopping inspiration and 58% purchase items promoted by influencers. Gen Z primarily uses TikTok, Instagram, Facebook and YouTube for financial advice, significantly more than other social media platforms​.

This has led to the rise of "finfluencers", social media influencers who specialize in financial advice. These finfluencers cater specifically to the needs of Gen Z, providing guidance on budgeting, saving, investing, and more. Gen Z's preference for these platforms is driven by their upbringing in the digital age and a general distrust of traditional financial institutions. 

Gen Zers tend to rely on recommendations from peers and influencers whom they trust, rather than traditional financial advisors or institutions. 75% of Gen Z follow specific influencers for financial content, and 37% would take financial advice from these influencers without fact-checking.

Despite the widespread adoption of AI, 54% of Gen Z would never use ChatGPT or an AI-based tool for advice on how to manage money.

Gen Z heavily relies on social media for financial guidance, utilizing platforms like TikTok and Instagram to establish a financial advice feedback loop, and foster a sense of belonging through interactions with peers and influencers.

This digital engagement underscores their preference for transparency and community-driven financial decision-making over traditional financial institutions.

How to capture Gen Z’s attention? - brand, functionality and loyalty  

Gen Z's core values prominently feature authenticity, quality, and value, particularly in terms of perceived worth of products. Their approach to social and consumer behaviors stands out, with a strong emphasis on sustainability, social justice, and support for small businesses. This generation prioritizes genuine, high-quality products that reflect their ethical beliefs and social consciousness.

Half of Gen Z believes that brands should take a public stance on social issues, particularly on racial justice (69%), LGBTQ+ rights (50%), gender inequality (46%), and climate change (42%). Their commitment to eco-friendly practices is evident, with 68% identifying as eco-friendly shoppers and showing a willingness to pay significantly more for sustainable products.

Additionally, 60% of Gen Z prefer products made by small businesses, which I believe highlights the desire for relatability and uniqueness in products amid a sea of genericism. These trends highlight Gen Z's holistic approach to ethical consumption, and their influence on market dynamics​.

Gen Z values authenticity and transparency, driving companies to steer clear of overly polished and staged advertisements. Instead, they utilize user-generated content, influencer collaborations, and "behind-the-scenes" glimpses to cultivate an authentic brand image and build trust.

Gen Z is the most inclined generation to spend on brands they love, with 64% willing to pay a premium for brand loyalty. However, their dedication to a single brand is limited, as 71% are open to purchasing from competitors. This indicates that while brand loyalty is important, price and convenience, as always, play crucial roles in their purchasing decisions.

Beyond values and mission, functionality and user experience are paramount for Gen Z in financial services - possibly even more so than social issues or eco-friendliness.

Having grown up in an era of instant gratification, with conveniences like one-click checkout and same-day delivery, this digitally native and mobile-focused generation demands seamless, engaging experiences and excellent design in the products they use. This pragmatic approach to functionality underscores their desire for the best value for their money, contributing to lower brand loyalty among Gen Z.

A lack of certain features can significantly impact retention for financial institutions. For Gen Z consumers, tangible support with day-to-day finances, such as managing costs, budgeting, and maintaining a clear financial overview, is a top priority. Nearly 50% of them indicated they would switch to competitors for better financial tools and services, underscoring the importance of functionality and user experience in retaining this demographic.

The relationship between brand identity, vision, values, and functionality is a delicate balancing act that companies must master to stay relevant and resonate with Gen Z. This generation expects brands to embody authenticity and transparency, aligning with their core values and social consciousness.

At the same time, they demand exceptional functionality and seamless user experiences. Companies need to integrate their mission and ethical standards into their product offerings while ensuring that these products are practical, intuitive, and provide tangible benefits. Successfully navigating this balance can lead to sustained engagement and loyalty from Gen Z consumers.

My open questions for Gen Z

  • What clicks when considering the emotional and community aspect of finance?
  • What are the case studies of successful financial products appealing to Gen Z, besides Amex?
  • Given that third spaces are gone, and digital communities are getting narrower - How do we find new products? How do new products find us?