Gen Z and Covidpreneurs

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Digitally native customers are no longer the future of banking – they are the present. Gen-Z and Covidpreneurs have significant influence on the market, so what do they seek from their banking services?

The young adult generation across is waking up to a wide array of economic, social and environmental issues which have changed their consumer behaviour and they desire to do away with how their older counterparts did things.

Meet the Gens

Millennials (25-39) stepped into adult life at a time of economic recovery and adult Gen-Zers (18-24) entered the workforce during the Covid-19 pandemic. Both factors help accelerate the growth of Neo-banks and digitisation by traditional players. However, it is not a one size fits both approach when it comes to these consumer groups.

The rise of digital tribes

One of the biggest changes experienced during Covid-19 is the way in which young consumers now shop. The majority (61%) of consumers globally say they have made greater use of online or digital banking and frequently use social media, mobile apps and even livestream platforms instead of brick and mortar stores on the high street to do so. The most popular form of payment online is debit card.

Yplulse revealed that 87% of  Western Europe 13-39 year olds were interested in contactless payments and alternatives such as  Buy, Now, Pay Later (BNPL) are a growing trend for these consumer groups. In a comprehensive survey by Student Beans, a staggering 42% of Gen-Z reported to have used BNPL services in 2020. The option of spreading costs over time at no additional fee is an attractive feature of the payment method, especially considering both generations have inherited uncertain financial security through a financial collapse and a pandemic.

In addition, they are  generally more open to technological change than their older counterparts. This is evident in the uptake difference of mobile payments across age groups. Over 50% of 16-39 year olds in the U.K were registered for mobile payments in 2020 compared to a small 11% of those aged 65 and over.

Another contribution to the acceleration of mobile payments is the concern of cash notes acting as a potential virus spreading instrument during the pandemic. Leading to less vendors accepting cash payments and customers switching to digital alternatives.

Values above all

Neo- banks have proven popular with millennials due to the convenient user-friendly interface, the speed of service, and perhaps the hip and cool branding associated with brands such as N26 and Zest to name a few. However, nifty branding is not all it takes to sway the younger generation – they carry their own expectations from providers.

Generation Z are more concerned with lifestyle fit, brand trust and environmental impact when choosing a good match. The choice of provider is also driven by societal expectations, individual moral code and the need to support a number of causes. An Equiniti poll revealed Gen Z expressed frustration when companies whose shares they own do something they deem as unethical. This not only drives what shares or products they purchase but also what bank providers they choose and the type of services they align with.

For organisations to win this generation over, they must be authentic in their ESG efforts and take a stance on criteria that impacts society. A Mastercard survey of Central Eastern Europe Gen Zers showed that almost half (45%) donate to a number of foundations and NGO, whilst 34% are involved in volunteering initiatives and 46% also show concern for the state of the planet.

Rise of the covidpreneur

Covidpreneurs are individuals who have started their own business during the pandemic, or intend to start one in the near future. Often this is a result of both push and pull factors, including new opportunities created by COVID-19, furlough or redundancy. Many adapted to remote working which influenced them tapping into their entrepreneurial side and considered moving out of urban areas to step on the property ladder. Some also discovered the importance of planting investment seeds now to hopefully reap the benefits at the later stages of their life instead of relying on personal savings and their pensions.

It is reported that one year from the first national lockdown 30% increase in millennial incorporated businesses compared to 2019. These new business owners skew the youngest of any tribe and are in need of always-on, easy to use and reliable banking services, with favourable terms for their business. New digitally native SME lenders can capitalise on these growing demands from this emerging entrepreneurial tribe. We are seeing examples of this growing trend already in Europe. Mambu-powered New10 for example was created to meet the demands of the rapidly emerging covidpreneur that is digitally native and looking for an alternative to traditional lending. They offer online loans to SMEs and entrepreneurs seeking to borrow loans ranging from € 5,000 and €1 million. Applicants go through a quick 15 – minute process and can get a decision as quickly as 48hrs.

In summary Gen Z is a group that is much concerned with aligning themselves with brands that meet their societal and environmental values. They are keen to pay with their mobiles and are increasingly embracing contactless payments. Covidpreneurs look for favourable business services including tailored SME support and lending packages. The banks that understand these two consumer groups and authentically meet their needs will have the upper hand for years to come.

Article by Mambu

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