How Gen-Z are reshaping banking and payments

By Abe Smith, CEO of Paymentology

Gen Z has gained a reputation for being a demanding demographic with limited brand loyalty. The new generation were born into a digital world and see the technological innovation that changed the lives of millennials as the way things have always been.

But, much as Gen Z have inherited a ‘digital-as-default’ era, they are also driving it, across every sector. Payments and banking are no exception, and ‘zoomers’ are enforcing seismic, industry-wide change.

Hyper personalization

The single biggest change Gen Z is thrusting upon banking and payments is a relentless demand for personalisation. Although customer centricity has been of increasing importance for some time, the new generation has provided unprecedented impetus for ultra-personalised payment and banking experiences.

However, banking and payments are not changing in-step, despite being inextricably linked. The rate at which the banking sector is digitising remains significantly behind that of payments. B2C payments is a highly innovated sector with new offerings in abundance. Buy Now Pay Later, for instance, is seen as a touchstone of digitisation. But, fintechs capture nearly all the market value in Point-of-Sale financing as banks have been slow to respond – it is estimated banks have lost $10 billion in annual revenues to fintechs.[1]

Hyper-personalised, convenient services is something most banks are lacking, particularly the incumbents. Yet, the ability of banks to attract and retain customers – crucially, Gen Z – hinges on creating and delivering these highly personalised spending experiences.

To step up to the challenge, banks must provide products and services that match intuitively with customers’ payment experiences and enhance their payment journeys. For instance, product bundles tailored to past spending habits; incentive and reward programs that are tied to individual financial goals; fee waivers and cashback. These smart payment offerings that bring banks and retailers together are what Gen Z is driving and expecting.

The data opportunity

Key to delivering these personalised services will be analysis of customer spend data. Challenger banks have from day one been harnessing these datasets to provide competitive services and smart offerings. The meteoric rise of the likes of Monzo and Revolut demonstrates just how powerful data analysis can be in creating personalised services, and how it enables rapid growth.

Herein lies another fundamental change that Gen Z is bringing to banking. The new generation is creating fresh, almost unprecedented competition across the sector as the shortcomings of the incumbents are laid bare and exacerbated next to new entrants.

Banks must deliver on the chance to connect more closely with their customers if they want to stave off the rising threat and lock in the next generation. The clock is ticking for banks to create smart customer services and the sector is constantly innovating. For instance, Standard Chartered’s MOX bank allows one bank card to be used for customers’ Debit and Credit accounts, allowing the customer to switch easily between the two. This is all done via the bank’s app.

Gen Z is creating a cohort of consumers that want to be offered new products and services before they even know they need them or want them.

Integrated, seamless spending 

It goes without saying, but mobile-based solutions are best suited to deliver flexible, personalised banking and payments. For Gen Z, they know nothing else.

Customers’ payments journeys should be enhanced by their bank and products and services should be made available in real-time, along the spending journey. Partnerships between retailers and banks can complement this. In collaboration with certain fintechs, banks can benefit from payment processing platforms that enable them to receive a live feed of all spend traffic. This data allows the banks to formulate more meaningful partnerships with retail shopping brands. Offers by banks through retail partners is nothing new. But, understanding customers better means that banks can connect the consumer and the retailers far more efficiently.

With the financial independence of Gen Z on the horizon, they represent a crucial and lucrative demographic which banks must speak to for survival. While retailers are responding rapidly to the demands of the new generation, banking is still one step behind. But, with smart analysis of customer data, banks can step up and deliver. Gen Z won’t accept anything less.

About Author

Abe Smith is an entrepreneur and investor with a successful twenty five year leadership record in technology. He has founded, built and sold three fintech companies and helped drive the value of multiple other technology businesses participating in eight exits in total. His current role is as CEO of Paymentology – the world’s fastest growing cloud-native payments processor, powering a new generation of banks including Revolut, Standard Chartered’s Mox Bank and Natwest’s Mettle.

By Abe Smith, CEO of Paymentology

Gen Z has gained a reputation for being a demanding demographic with limited brand loyalty. The new generation were born into a digital world and see the technological innovation that changed the lives of millennials as the way things have always been.

But, much as Gen Z have inherited a ‘digital-as-default’ era, they are also driving it, across every sector. Payments and banking are no exception, and ‘zoomers’ are enforcing seismic, industry-wide change.

Hyper personalization

The single biggest change Gen Z is thrusting upon banking and payments is a relentless demand for personalisation. Although customer centricity has been of increasing importance for some time, the new generation has provided unprecedented impetus for ultra-personalised payment and banking experiences.

However, banking and payments are not changing in-step, despite being inextricably linked. The rate at which the banking sector is digitising remains significantly behind that of payments. B2C payments is a highly innovated sector with new offerings in abundance. Buy Now Pay Later, for instance, is seen as a touchstone of digitisation. But, fintechs capture nearly all the market value in Point-of-Sale financing as banks have been slow to respond – it is estimated banks have lost $10 billion in annual revenues to fintechs.[1]

Hyper-personalised, convenient services is something most banks are lacking, particularly the incumbents. Yet, the ability of banks to attract and retain customers – crucially, Gen Z – hinges on creating and delivering these highly personalised spending experiences.

To step up to the challenge, banks must provide products and services that match intuitively with customers’ payment experiences and enhance their payment journeys. For instance, product bundles tailored to past spending habits; incentive and reward programs that are tied to individual financial goals; fee waivers and cashback. These smart payment offerings that bring banks and retailers together are what Gen Z is driving and expecting.

The data opportunity

Key to delivering these personalised services will be analysis of customer spend data. Challenger banks have from day one been harnessing these datasets to provide competitive services and smart offerings. The meteoric rise of the likes of Monzo and Revolut demonstrates just how powerful data analysis can be in creating personalised services, and how it enables rapid growth.

Herein lies another fundamental change that Gen Z is bringing to banking. The new generation is creating fresh, almost unprecedented competition across the sector as the shortcomings of the incumbents are laid bare and exacerbated next to new entrants.

Banks must deliver on the chance to connect more closely with their customers if they want to stave off the rising threat and lock in the next generation. The clock is ticking for banks to create smart customer services and the sector is constantly innovating. For instance, Standard Chartered’s MOX bank allows one bank card to be used for customers’ Debit and Credit accounts, allowing the customer to switch easily between the two. This is all done via the bank’s app.

Gen Z is creating a cohort of consumers that want to be offered new products and services before they even know they need them or want them.

Integrated, seamless spending 

It goes without saying, but mobile-based solutions are best suited to deliver flexible, personalised banking and payments. For Gen Z, they know nothing else.

Customers’ payments journeys should be enhanced by their bank and products and services should be made available in real-time, along the spending journey. Partnerships between retailers and banks can complement this. In collaboration with certain fintechs, banks can benefit from payment processing platforms that enable them to receive a live feed of all spend traffic. This data allows the banks to formulate more meaningful partnerships with retail shopping brands. Offers by banks through retail partners is nothing new. But, understanding customers better means that banks can connect the consumer and the retailers far more efficiently.

With the financial independence of Gen Z on the horizon, they represent a crucial and lucrative demographic which banks must speak to for survival. While retailers are responding rapidly to the demands of the new generation, banking is still one step behind. But, with smart analysis of customer data, banks can step up and deliver. Gen Z won’t accept anything less.

About Author

Abe Smith is an entrepreneur and investor with a successful twenty five year leadership record in technology. He has founded, built and sold three fintech companies and helped drive the value of multiple other technology businesses participating in eight exits in total. His current role is as CEO of Paymentology – the world’s fastest growing cloud-native payments processor, powering a new generation of banks including Revolut, Standard Chartered’s Mox Bank and Natwest’s Mettle.