Bank Financial Advice Could Win Gen Z, Millennial Loyalty

Young consumers’ financial avoidance may represent a loyalty opportunity for banks to create novel account analytics.

A Wall Street Journal article earlier this week (April 17) said the youngest generation of adult consumers’ preferred method of facing mounting debt is to ignore it. This less-than-healthy strategy that psychologists call financial avoidance has led to millennials’ average credit card debt increasing 29% year-over-year and Gen Z’s going up 40% during the same period. While this behavior may be common among young consumers of any generation, the unsteady economy compounded by inflation has put extra pressure on millennials and members of Gen Z. 

However, U.S. consumers are seeking help to gain the tools they need to change this and other undesirable financial habits. This search for assistance is indicated in the PYMNTS collaboration with PSCU, “Credit Union Innovation: Product Development Slowdown Tests Member Loyalty.”

Source: PYMNTS 

Credit Union Innovation: Product Development Slowdown Tests Member Loyalty, January 2023 N = 3,227: FI account holders who want product innovation, fielded Oct. 17, 2022 – Nov. 7, 2022

From Q4 2020 through Q4 2022, a not-insignificant share of account holders say they would be willing to switch their primary financial institution (FI) for better innovation in financial account analytics. This implies that some consumers, who may include millennials and members of Gen Z, want guidance in getting rid of their mounting debt. 

In an interview with PYMNTS, strategic marketing director of NCR Eric Brandt explains how banks may shape these consumer literacy tools aimed at Gen Z and millennials. “There are two components here: financial literacy and financial proficiency. Interactive tools such as quick, on-demand videos and gamified content, as well as simplified terms and conditions that are easier to understand, will go a long way in building financial literacy and impacting these consumers’ financial well-being. When it comes to financial proficiency, that’s a whole different animal. But providing financial management solutions to help set and manage a budget or easily calculate when a loan will be paid off, for example, will be critical to building proficiency among less financially savvy consumers. Providing these solutions and services will build trust, loyalty and ultimately, more engagement.”

Financial advice tools may seem like a clear winner for banks seeking to enhance their loyalty-driven offerings, especially now that Americans demonstrate a 4% basic financial literacy rate. However, financial institutions lagging on these offerings are now finding themselves facing stiff competition from FinTechs and other firms also seeking loyalty through financial wellness tools. Klarna, for example, recently rolled out a “Money Feature” through its app enabling core users to track their spending behavior better. Cash App, too, launched a feature earlier this year allowing its customers to save with separate balance lines, set savings goals and round up their purchases to top up their savings.

The FinTech making the most strides in the consumer-facing financial wellness space so far seems to be Greenlight. In January, the tech firm launched Level Up, a gamified financial literacy curriculum aimed at kids and teens and accessible through the Greenlight banking app. Level Up features content meant to develop both real-life financial skills and core knowledge through challenges and rewards while enabling parents to monitor their children’s progress. Greenlight has since rolled out its first job-centric financial literacy tool. The employer-offered benefit perk allows participating employees access to Greenlight family finance and education products. As well, Greenlight is now allowing integration with FIs by allowing banks and other institutions to add its app to their financial service offerings. 

Consumer demand for financial wellness tools, especially among younger generations, is especially high these days. However, without innovative offerings to meet this demand, FIs may find themselves crowded out of millennial and Gen Z market share.