Banking on the next generation

STATE OF THE YOUTH NATION
<strong>Banking</strong> on the
Next Generation
Gen Z’s attitudes to money
and how you should react
Originally produced by YouthSight*
SAVANTA.COM
m a k e b e t t e r d e c i s i o n s

Savanta is a full-service global market research and data insight
company that helps busisnesses make better decisions.
London
New York
Amsterdam
54 Bermondsey Street
London
SE1 3UD
UK
666 Third Ave.
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New York NY 10017
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Amsterdam
Netherlands
better.decisions@savanta.com
+44(0)20 7632 3434

B A N K I N G O N T H E N E X T G E N E R A T I O N
Who are Gen Z
in 2021?
We describe Gen Z as the generation
of young people born from 1995
onwards.
As of today (2021) the oldest are
currently 26 years old.
*This eBook was originally produced
by the YouthSight team - who are
now part of Savanta
1

B A N K I N G O N T H E N E X T G E N E R A T I O N
No other research agency
knows more about Gen Z
Our bespoke research is informed by
exclusive tracking data from the UK's
leading Gen Z insight tracker,
State of the Youth Nation.
Our clients frequently ask us how the
future generation of consumers are
managing their money, and what this
will look like in the future. Gen Z want
to access their money digitally and
informally, which a new breed of
cutting-edge businesses understand.
Money must integrate seamlessly
into young people’s lives and speak
their language.
Savanta was born when eight best-in-class agencies, all specialists
in their fields, joined forces to offer big agency benefits, while
retaining a refreshingly boutique mindset.
Since conception, we’ve expanded our sector expertise by adding
more agencies to our family.
The result? A full range of integrated intelligence services at global
scale, married to deep sector, issue and methodological expertise,
delivered with an entrepreneurial spirit and client-first mindset.
All to help our clients. Make Better Decisions.
2

B A N K I N G O N T H E N E X T G E N E R A T I O N
What's covered in
this eBook...
Gen Z's cautious attitude towards
money: What are their saving habits?
How much money do they really have?
What do they spend their money on?
How money seamlessly integrates
with young people’s lives: The young
and the cashless. Why is digital
banking so appealing to Gen Z?
How you can align with young
people’s evolving attitudes to money:
How can your brand react to Gen Z’s
changing financial behaviours and
attitudes?
3

B A N K I N G O N T H E N E X T G E N E R A T I O N
Gen Z’s cautious attitude
towards money
Gen Z in the UK are living in a time of
uncertainty.
With the UK due to leave the EU and
the future becoming much more
uncertain for Gen Z, the backdrop to
their lives is one of political, social and
financial instability.
Gen Z grew up in the post 2008 crash
period – a time of austerity and lessthan-optimistic
prospects for the
future. More recently, the housing
crisis and worries over job prospects
have increased uncertainty about their
future and specifically their finances.
DID YOU KNOW...
6 9 % f e e l t h e i r
f u t u r e p r o s p e c t s
w i l l c h a n g e f o r
t h e w o r s e b y
l e a v i n g t h e E U
Source: State of the Youth Nation Y1.5
Feb 2019 (N=1028), A_Y20_3
December 2018 (N=1030)
66 %
DID YOU KNOW...
6 6 % o f G e n Z a r e
w o r r i e d a b o u t
c o m m i t t i n g t o a n y
m a j o r f i n a n c i a l
d e c i s i o n s a t t h i s
p o i n t
SSource: State of the Youth Nation Y1.5
Feb 2019 (N=1028), A_Y20_3 December
2018 (N=1030)
4

B A N K I N G O N T H E N E X T G E N E R A T I O N
This uncertainty is reflected in their
surprisingly non-frivolous attitude
towards money
60% of 16-24s disagree that they
tend to spend money without
thinking
61% of 16-24s would be unhappy
to have short term debt to allow
them to buy the things they want
64 % DID YOU KNOW...
6 4 % h a v e s o m e
f r o m o f s a v i n g s
Source: State of the Youth Nation Y34.2,
Y42_2, Y26.1. Feb 2019 (N=1028), A_Y35
Jan 2018 (1053)
60% of 16-24s feel that they are
on top of their finances
15

B A N K I N G O N T H E N E X T G E N E R A T I O N
Long term goals
mostly drive Gen Z
to save money
35% of Gen Z plan to start saving
for retirement in their 20s. 12%
of them are already saving.
52% of prospective Gen Z home
buyers are already saving for a
house.
59% of Gen Z want to buy a
home within the next 5 years.
14

B A N K I N G O N T H E N E X T G E N E R A T I O N
However, sometimes spending money on
status symbols take priority
65% of Gen Z ranked travel as
the most important way that they
spend their money.
26% are saving for a new phone
or electronic device.
17% are saving for their own
cars.
Source: HAS Store, Booking.com
7

B A N K I N G O N T H E N E X T G E N E R A T I O N
What young people
are spending their
money on...
Food: Three-quarters of 16-24’s
spend money on eating out every
month – Gen Z love catching up
with their friends over a meal.
Beyond documenting their aesthetic food
adventures on Instagram, this tech-savvy
generation are inspiring innovative food
delivery platforms like JustEat and UberEats.
They are also driving the increase in alternative
food options such as the rise of meat and dairy
alternatives – all of which is challenging the
current culinary landscape.
8

B A N K I N G O N T H E N E X T G E N E R A T I O N
What young people are spending their money on...
Experiences: Gen Z have a
reputation of being
sensible, but they are more
discerning when it comes
to experiences they have. They demand
more – experiences need to be unique
enough for them to share with others
on social media.
67% of 16-24s would choose an
experience over a physical gift - young
people get more value out of making
memories – both real and digital – than
accumulating ‘stuff.’
We see this in the unstoppable rise of
festivals, pop-up shops and branded
experiences that young people are keen
to get involved in. If you are not already
doing experiential marketing, it’s time
to start!
Fashion: The only outlier
from this tendency to spend
time with others in outdoor
experiences is fashion -
Gen Z use fashion as a form of selfexpression.
As of June 2019, 59% of Gen Z spent
their money on clothes/shoes in the
last month, which is unsurprising as
clothing is central to how young people
present themselves.
Despite the popularity of fast fashion,
they are also conscious of the ethical
impact of fast fashion. Ethics are an
influencing factor, however price and
convenience is more important when it
comes to spending on fashion.
91

B A N K I N G O N T H E N E X T G E N E R A T I O N
Why should you
care what young
people spend
their money on?
It’s easy to think that young people
don’t want to spend their money on big
purchases such as a house or car
because it takes too long...
…However instant gratification isn’t the
reason why young people are spending
on smaller, easy access items…
Mini status symbols deliver
cultural currency and are
obtainable
Status is being redefined by
young people – for older
generations having a big house
and a luxury car symbolise status,
however because young people
can’t afford these things, they
turn to mini status symbols
instead.
These are things like going to
quirky food places, festivals,
branded experiences or keeping
up with the latest fashion. Status
for young people is far less
extravagant.
10

GB AE N KZ I NU G N LO IN K ET LHY E CNO EU XPT LGI NE GN E R A T I O N
The young and the
cashless
According to the
Manole Capital's
second annual Gen Z
Survey, 41% of Gen Z
say they rarely use
cash and
a third agree that
traditional wallets will
soon become
obsolete in 10 years’
time.
DID YOU KNOW...
2 3 % o f G e n Z p r e d i c t s
p h y s i c a l c a r d s w i l l s o o n
b e o b s o l e t e a s o p p o s e d t o
j u s t 6 % o f t h e o v e r 5 5 s .
Source: U.S Mobile App Report 2017
11

B A N K I N G O N T H E N E X T G E N E R A T I O N
Gen Z are savvy with where they spend
their money – but how do they access it?
Gen Z are rejecting traditional money
management for refreshing digital
alternatives.
We’re living in an increasingly
cashless society – where contactless
payments mean that money is digital,
rather than physical.
Services like PayPal and Apple Pay
allow young people to spend digitally
and feel secure in doing so – more
recently not-for-profit organisations
such as The Big Issue have even gone
cashless along with charities such as
Oxfam, Barnardos and NCSPCC.
DID YOU KNOW...
7 0 % o f G e n Z h a v e
m a d e i n - a p p
p a y m e n t s i n t h e p a s t
y e a r , w h e t h e r i t b e
o n a p a y m e n t a p p
s u c h a s G o o g l e P a y
o r A p p l e P a y o r o n a
r e t a i l e r ’ s a p p , m o r e
t h a n a n y o t h e r
g e n e r a t i o n .
Source: U.S Mobile App Report 2017
1

B A N K I N G O N T H E N E X T G E N E R A T I O N
Young people are blaming cashless
payments
Young people are blaming cashless
payments as they end up spending more
on nights out and at festivals than they
had planned. This suggests that the lack
of physical cash makes it hard for Gen Z
to keep track of spending. In fact, 1 in 5
say having cash on them makes them
spend less money.
But the slow decline of physical
money doesn’t mean that young people
can’t budget. A wave of new banking
apps are challenging the traditional
financial landscape to help Gen Z better
manage their money on a daily basis…
13

B A N K I N G O N T H E N E X T G E N E R A T I O N
Digital banks are
fun, practical
alternatives to
traditional highstreet
banks
Digital banks particularly appeal to
Gen Z - making paying, transferring
and saving money effortless…
DID YOU KNOW...
T w o - t h i r d s o f b a n k i n g
c u s t o m e r s s a y t h e y p l a n t o
c o n v e r t f u l l y t o d i g i t a l
b a n k i n g i n t h e f u t u r e
( r e j e c t i n g h i g h s t r e e t b a n k s ) .
Source: Finder
Convivence: Some digital banks offer
free foreign exchange payments, which
is ideal for a generation that loves to
travel. They also allow requesting money
at a few taps of your finger – perfect for
when Gen Z want to split the bill. More
recently, Monzo have announced its
latest innovation enabling you to get paid
a day early so now Gen Z can spend on
those experiences they crave without
having to wait until payday!
Seamlessness: They are seamlessly
integrating themselves into Gen Z’s lives,
notifying them immediately when a
payment enters or leaves their account,
informing them when, where and how
they’re spending and allowing them to
save money in multiple ‘pots’ for
different goals – like a trip away or a
new phone.
14

B A N K I N G O N T H E N E X T G E N E R A T I O N
Making money
management easy
More and more apps are emerging
from the fintech industry designed to
seamlessly integrate their financial
expertise into the lives of young
people. So, what are the functions of
these apps and how do they help?
BEN STANWAY,
CO-FOUNDER OF
MONEYBOX
Young people are changing the
way we invest. Most of our
customers are under 40 years
old and they’ve been telling us
they want a socially responsible
investment option for some
time.
15

B A N K I N G O N T H E N E X T G E N E R A T I O N
AI Bots
Investing
AI Bots are helping young
people to save by setting saving
targets, putting money aside
automatically, and even chasing
up friends that owe money. They
are making financial
management easily accessible
to Gen Z, seamlessly fitting into
their everyday lives via their
smartphones. Apps like Cleo can
let you know whether you can
afford that takeaway tonight.
Gen Z can be intimidated by the
idea of investing. By rounding up
your everyday purchases to the
nearest £ and investing the
difference, apps such as Moneybox
and Acorns are making investment
effortless – and ethical.
DID YOU KNOW...
M o n z o h a s e v e n r e l e a s e d a
f e a t u r e w h e r e y o u c a n
a u t o m a t i c a l l y s a v e £ 2 e v e r y
t i m e t h e t e m p e r a t u r e w h e r e
y o u a r e g o e s a b o v e 2 0
d e g r e e s
16 1

B A N K I N G O N T H E N E X T G E N E R A T I O N
There is a stereotype
that cryptocurrency
like Bitcoin are the way
forward for Gen Z – in
reality they are too riskaverse
to invest in it.
Gen Z will have to work very hard to
attain economic security, and they’re
not willing to risk their funds to invest
in crypto. Money still needs to feel real
and safe – something crypto just
doesn’t offer to this generation yet.
DID YOU KNOW...
7 0 % o f G e n Z ’ s a r e
u n l i k e l y t o b u y
c r y p t o c u r r e n c y i n
t h e n e x t 6 m o n t h s
3 7 % o f y o u n g p e o p l e
d o n ’ t y e t t r u s t
c r y p t o c u r r e n c i e s
s u c h a s B i t c o i n
Source: Business Insider, Decrypt
17

B A N K I N G O N T H E N E X T G E N E R A T I O N
Facebook’s new and
controversial
cryptocurrency - Libra
14
%
Facebook could put a crypto wallet in
the personal accounts of billions of
people around the world, making
money transfers as easy as sending a
message or a photograph today. Gen
Z spend the majority of their time
online doing just this, which may make
crypto more accessible to Gen Z and
change the way they perceive crypto.
DID YOU KNOW...
1 4 % o f M i l l e n n i a l a n d
G e n Z p a r t i c i p a n t s c i t e d
a “ l a c k o f u n d e r s t a n d i n g ”
a s t h e i r m a i n r e a s o n f o r
n o t g e t t i n g i n v o l v e d w i t h
c r y p t o
Source: Business Insider, Decrypt
18

B A N K I N G O N T H E N E X T G E N E R A T I O N
How can you emulate
the successes of the new
wave of digital banks?
Digital money systems engage with Gen Z differently…
They engage with the user
just as if an advisor in a
bank would, and can even
provide helpful feedback
on spending.
They are informal –
money is a stressful
subject for young people,
so it’s essential to speak
in a familiar language.
They are personal– for
older generations the
wallet is a personal
space, but for young
people, their phones are
their personal space.
19 1

G E N Z U N L I K E L Y C O U P L I N G
B A N K I N G O N T H E N E X T G E N E R A T I O N
How to align with Gen Z’s
evolving attitudes to money
Help young people out
by acknowledging
when they decide to
spend their hardearned
money with
you.
Offer them little extras
(rewards) along the
way that are…
Flexible
Little & often
Non-monetary!
Relevant
Seamless
Advocative
13-15YO PANEL
MEMBER
If I'm buying things often from
the same place, I'd like to be
rewarded for being loyal
20

B A N K I N G O N T H E N E X T G E N E R A T I O N
FLEXIBLE
Taking a one-size-fits-all approach to
rewards is unlikely to be successful
Young people have flexibility in many
other aspects of their lives, and the way
they spend their money should be no
exception.
Take Sephora for example, who offer a
range of different options for how
customers can use their points.
Sephora offers customers more than just
a transactional rewards program – you
don’t just get to use points on products,
you can also develop your beauty skills!
Instore beauty services such as free
beauty classes are part of their loyalty
programme aside from actual products.
21

B A N K I N G O N T H E N E X T G E N E R A T I O N
RELEVANT
Provide Gen Z with offers and
rewards that are relevant to them
Getting this right can feel a bit hit or
miss, so brands should keep up-todate
with the evolving attitudes and
preferences of 16-24s.
VOXI, Vodafone’s mobile network
aimed at under 30’s, has announced a
new rewards programme that
encompasses both relevance and
regularity.
- food, fashion, music,
entertainment and festivals.
The first VOXI Drop is a free Time
Out More card, which would usually
cost you £29.99 – appealing for Gen
Z who are always on the look out for
new experiences.
It gives customers exclusive freebies
and offers every month. Freebies and
offers will be available on things that
matter to young people
22 1

B A N K I N G O N T H E N E X T G E N E R A T I O N
LITTLE & OFTEN
Gen Z aren’t spending on big flashy items
and therefore don’t expect extravagant
rewards - a little goes a long way!
Superdrug’s loyalty card lets
customers spend as little as 100
points, which is £1, on their purchase
at the till. £1 off may not sound like an
exciting rewards, but to Gen Z who are
money-conscious, a little goes a long
way.
Customers can even pay partly with
points and partly with cash - this
means they don’t have to wait too long
before they start seeing the savings.
DID YOU KNOW...
6 6 % o f t h e 1 3 - 1 5 y r o l d s w e s u r v e y e d
w o u l d p r e f e r r e g u l a r , s m a l l e r o f f e r s
c o m p a r e d t o l e s s f r e q u e n t , b i g g e r o f f e r s .
Source: State of the Youth Nation, May 2019
23

B A N K I N G O N T H E N E X T G E N E R A T I O N
SEAMLESS
Gen Z have busy lives –
make it easy for them to remain loyal
Starbucks has the most regularly used
loyalty rewards app (48%) among a list
of major restaurant chains. Why is the
app so popular?
The answer is seamless digital
integration.
In order to earn loyalty points (or stars,
in their case), customers must order or
pay with the Starbucks app –
something that is very familiar to Gen
Z and part of their every day lives.
This makes claiming and using
rewards an automatic, seamless
process.
24

B A N K I N G O N T H E N E X T G E N E R A T I O N
NON-MONETARY
Reward doesn’t have to be monetary. Can
you align to Gen Z’s values and encourage
them to pass the reward on instead?
Gen Z are a very passionate and aware
generation – they have many
concerns about the future of the world
with the most important political issue
being the environment stated by 49%,
as well as healthcare – particularly
mental health – and equality (State of
the Youth Nation).
Toms are a shoe brand, renowned for
its One for One approach, in which the
brand donates a pair of shoes to a
child in need for each pair of shoes
purchased.
WEEWOOD, a watch brand,
understands Gen Z’s concerns about
the future of the planet.
They plant a tree for every watch
purchased and have planted 442.246
trees across the globe so far since
the programme began in 2010.
As a result, spending on fashion – a
seemingly unethical act – rewards
Gen Z by making them feel like they
are doing good for the world.
25 1

B A N K I N G O N T H E N E X T G E N E R A T I O N
ADVOCATIVE
Can you reward
Gen Z for advocating
your brand?
DID YOU KNOW...
7 3 % o f G e n Z ’ s s p e n d
t h e m a j o r i t y o f t h e i r
t i m e o n l i n e o n s o c i a l
m e d i a .
Source: Source: State of the Youth Nation A_W61
June 2018 (N=1037)
Gen Z are highly digitally connected,
spending most of their time online on
social media. Therefore, rewarding
Gen Z when they share your brand is a
win-win – they save money and your
brand reaches a wide network of
people.
Some examples of brands using
advocacy as a form of reward are…
Airbnb rewards you with money off
when you invite your friends to Airbnb
via email or by sharing your invite link
on social media - Gen Z love to travel!
Uber lets you earn free rides by
inviting friends to sign up and ride
with Uber using your personal code,
making life even more convenient for
this zero-effort generation.
Bulb are a renewable energy brand
that will give you and your friend £50
each, to say thanks when they join
through your referral link.
26

B A N K I N G O N T H E N E X T G E N E R A T I O N
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company that helps busisnesses make better decisions.
London
New York
Amsterdam
54 Bermondsey Street
London
SE1 3UD
UK
666 Third Ave.
7th Floor
New York NY 10017
USA
Weteringschans 165
1017 XD
Amsterdam
Netherlands
better.decisions@savanta.com
+44(0)20 7632 3434

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