Gen Z is coming. Here’s how to get ready

Step aside, millennials. There’s a new kid in town. Actually, there are about 69 million of them—and they’re going to need banking services too.

By Kelly Pike

Call them Generation Z, post-millennials, iGeneration or Homeland Generation. Born roughly between 1995 and 2012, these up-and-comers have never known a world without smartphones, social media or Google. Practical, hardworking and culturally diverse, this post-9/11 generation is poised to overtake the millennials—creating opportunities for community banks able to nurture eager learners and meet them in the digital world.

Unlike millennials, who were raised during rosy economic times by baby boomer parents who instilled high self-esteem, Gen Z has seen firsthand that the world isn’t a predictable place. They’ve seen their parents struggle during the Great Recession and watched millennials become trapped by student loan debt. Raised primarily by Gen X, the first generation to work without an expectation of a future Social Security check, Gen Z-ers are competitive and responsible.

“They were told there are winners and there are losers, and you are more likely going to lose,” says David Stillman, generational expert and co-author of Gen Z @ Work along with his 18-year-old son, Jonah.

Although the oldest members of this cohort have just graduated from college and the youngest are in kindergarten, there are already signs that Gen Z is financially conservative with more realistic expectations for the workplace, says Jason Dorsey, president and lead researcher of the Center for Generational Kinetics. Twelve percent of Americans between the ages of 14 and 21 have already begun saving for retirement, and 21 percent had a savings account before the age of 10, one of his studies found.

“Gen Z basically said, ‘We need to save money,’” says Dorsey, adding that their savings rate is on par with millennials who are 10 years older. “Part of the way they do that is they are not going to buy expensive brands, they avoid overpaying and they put more money in the bank. We believe they are intentionally choosing to attend less-expensive schools for less debt.”

That makes them alluring customers for banks, says Dorsey, especially since they aren’t willing to put themselves at credit risk and are likely to delay car or home purchases until they feel they can afford them. They are highly price-conscious, wary of hidden fees and may be more open to credit cards than millennials, because they have learned they are necessary for building a credit history.

As a whole, Gen Z tends to be risk averse. They drink less and wear their seatbelts more than any generation before them. They also value their online privacy, having learned from their elders that nothing ever disappears from the internet, Stillman says. While this pragmatic outlook has brought some comparisons to the Silent Generation that grew up during the Great Depression, Gen Z is quintessentially modern.

Digital natives
Gen Z is growing up in a world of information overload. As a result, its members are adept at switching tasks quickly. They abhor clutter and prefer things to be streamlined. If a video, product, article or idea doesn’t grab their attention within eight seconds, they’ll drop it and move on, says Stillman. This gives community banks a much shorter window to make a good impression than they have with millennials, who had a 12-second attention span at the same age.

That leaves little room for error, especially on mobile platforms. For Gen Z customers, there’s no line between the digital world and physical branches.
“Banking today with Gen Z is online or mobile banking,” says Dorsey. “That’s banking.”

If a bank’s mobile website doesn’t immediately make sense or connect with Gen Zers, they’ll move on. That doesn’t mean they don’t care about brick-and-mortar locations, but those visits are reserved for important decisions.

“When other generations look at a bank branch, they think of it as a place for transactions,” says Dorsey. “We predict Gen Z will see it as a place go to when they need to have a conversation or make a more complicated financial decision.”

That creates an opportunity for community banks, including those with small branch networks. Benchmark Community Bank in Kenbridge, Va., is working to retain customers between the ages of 18 and 25 with its Bridge Account. The account keeps college and trade school students who leave the community connected to the bank by offering them electronic and mobile services as well as refunds on ATM fees—something Benchmark otherwise offers only to adult accountholders who fulfill minimum usage requirements.

“We don’t want them to ever have to leave us as a bank,” says LeAnne Emert, executive vice president—retail banking at the $577 million-asset, 14-office bank. “We want to start them young and give them tools as they grow into adulthood.”

It begins with the Yes Club, a bank account for children between the ages of 5 and 12. Children who open the account are given a piggy bank, a transaction register and a membership card and are entered into a Saver of the Month drawing with each deposit. The winner gets $10 deposited into her account and her photo in the local paper.

“It used to be we were talking to parents more, because they were the ones who wanted to open the account,” says Emert, who promotes the program with personal appearances by mascot Save More Squirrel. “The shift became also focusing on the child and having the conversation with them.”

Teens are invited to move up to a $mart $tart account, which comes with a debit card with parental controls. It also draws in other teen customers who see a friend’s debit card and want one of their own.

Evolving outreach
Reaching Gen Z early is a wise move for community banks competing against fintech companies and other upstarts. In a world where anyone can drive an Uber or rent their home with Airbnb, Gen Z is open-minded, with 41 percent of 18- to 21-year-olds saying they’d bank with Google or Amazon, according to a survey by Accenture. That’s one reason why Monroe Bank & Trust in Monroe, Mich., is piloting a digital component to its MBTeach School Banking program for fourth and fifth grades in several elementary schools. The bank has run in-school branches and taught financial literacy at local elementary schools since 1989, but it wanted a fresh, modernized approach. Having offered an online, gamified program in high schools through its financial literacy partner, EverFi, since 2011, the community bank thought this approach could also work for younger students.

“When it’s time to get their first checking account, save for college, talk about student loans or get a first job, and they need to decide how much to save, spend, give and invest, we don’t want them to be Googling that stuff. We want them to come in and have a conversation.”
—Jennifer Tucker, Monroe Bank & Trust

“I did a business plan with a traditional school banking model I knew was outdated and hard to sustain as a 20-branch operation,” says Jennifer Tucker, AVP, financial and marketing outreach officer at the $1.3 billion-asset bank. “We wanted to take it one step further.”

Trying to reach them? Try YouTube

Want to be where Gen Z is? Then you may want to be on YouTube.
Among young adults ages 13 to 20, 95 percent say they use the platform, and half of them report that it’s the platform they couldn’t live without, according to an AdWeek survey with digital media firm Defy Media. Instagram, Facebook and Snapchat are distant seconds.

Two-thirds of Gen Z report they use YouTube for how-to videos, the survey finds, making it a potential opportunity for community banks.
“Gen Z loves YouTube,” says Jason Dorsey of the Center for Generational Kinetics. “They want to get a sense for your bankers, your teams and your purpose. YouTube is the way to do that.”

It’s also increasingly trusted. Thirty percent of survey participants between the ages of 14 and 21 believe YouTube ads are more trustworthy than those in television, print, radio and social media, Dorsey found.

—Kelly Pike

The six-part program teaches financial literacy through online games and tasks. Students get examples of hands-on mobile banking experience, including checking balances and transferring money from checking to saving. They also discover how automatic payments can simplify a car loan and how it can sometimes lead to a discount on the rate, Tucker says.

“We want them to know that community banking is an important part of lifelong learning,” says Tucker, who oversees financial literacy programs for people of all ages. “When it’s time to get their first checking account, save for college, talk about student loans or get a first job, and they need to decide how much to save, spend, give and invest, we don’t want them to be Googling that stuff. We want them to come in and have a conversation.”

Learning opportunities
Monroe Bank & Trust also provides project-based learning. For elementary school classrooms, it offers a 10-week, choose-your-own-adventure lemonade stand project. Each week, students make decisions about the business and discover how those choices affect profit and sales.

As with every group, Gen Z is made up of individuals from a wide range of socioeconomic backgrounds who learn about and understand the world in different ways. To help reach different kinds of learners, $525 million-asset Simsbury Bank in Simsbury, Conn., supplements its traditional financial literacy programs, including Junior Achievement, by sponsoring a financial literacy program run by Hartford Stage Company. Sixth graders in Bloomfield, Conn., act out skits, role play and improvise with topics like saving, budgeting and checking accounts with the help of the theater group.

“It really helps kids cement what they are learning and makes them more likely to remember,” says Martin Geitz, president and CEO.

Meanwhile, $2.7 billion-asset CNB Bank in Clearfield, Pa., promotes a mobile app, C.N. Bear Savings, with interactive games to help children ages three to 10 save and track goals. In Renton, Wash., $1 billion-asset First Financial Northwest Bank coaches the local high school football team on financial literacy for the hour between school and game time, bringing in a local food truck to feed them.

No matter the method, it’s essential to start now.

“This is a generation that thrives on community,” says Stillman. “They are very entrepreneurial and independent minded. Community banks have a really good value proposition.”

Seven ways to attract Gen Z

Generation Z can’t remember a time before online banks, but that doesn’t mean they aren’t open to independent community banks. Jason Dorsey of the Center for Generational Kinetics offers these tips for connecting with Gen Z:

1 Highlight your local connection and stability. The word “bank” does not have a negative connotation for Gen Z, so they are open to your message. They crave stability because stability creates options. Emphasize your experience with different market cycles.

2 Invest in your digital experience. Gen Z has no tolerance for clunky websites or mobile experiences.

3 Make them feel welcome and celebrated.
Show you’re approachable by engaging with them on social media, and invite them in to meet your bankers. Encourage them to share your bank with friends, but don’t pretend to be a tech company if you aren’t.

4 Have an Instagram account. Use it to tell local stories and show you are up on social media. YouTube is also a good route (see sidebar, page 44).

5 Understand why they come to your branch. Gen Z handles transactions online or on their phones. Branch visits are reserved for bigger conversations, like student loans.

6 Be prepared to bank online businesses. Gen Z’s businesses are less likely to have storefronts and far more likely to exist solely online.


7 Start early.
Some institutions held off on engaging with millennials and are still playing catchup. Reach out to parents and grandparents who want to set up savings accounts, and don’t be afraid to run small tests to see what works.


Kelly Pike is a writer in Virginia.

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