YouthSight eBook - Banking on the next generation

<strong>eBook</strong>
<strong>Banking</strong> on the next generation:
Gen Z’s attitudes to money and how you should react
October 2019

The <strong>YouthSight</strong> Take
Our clients frequently ask us how the future generation of
consumers are currently using and managing their money, and
what this will look like in the future.
Through this <strong>eBook</strong> we uncover how Gen Z – the generation of
young people born from 1995 onwards – are actually smarter
and savvier with their money than they are often given credit
for.
They 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.
Getting this right can be challenging. To keep up-to-date on
the evolving attitudes and preferences of your youth audience,
get in touch to see how our State of the Youth Nation tracker
can help.

In this <strong>eBook</strong> we
will explore…
1
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?
2
3
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?

1
Gen Z’s cautious
attitude towards money
4

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 less-than-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.
69%
feel their future prospects will change for
the worse by leaving the EU
65%
of Gen Z are worried about committing to
any major financial decisions at this point
5
Source: <strong>YouthSight</strong> State of the Youth Nation Y1.5 Feb 2019 (N=1028), A_Y20_3 December 2018 (N=1030)

This uncertainty is reflected in their surprisingly nonfrivolous
attitude towards money
60% of 16-24s disagree
that they tend to spend
money without thinking
64%
Have some form
of savings
61% of 16-24s would be
unhappy to have short term
debt to allow them to buy
the things they want
60% of 16-24s feel
that they are on top
of their finances
6
Source: <strong>YouthSight</strong> State of the Youth Nation Y34.2, Y42_2, Y26.1. Feb 2019 (N=1028), A_Y35 Jan 2018 (1053)

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.
7
Source: Bank of America, The Homebuyer Insights Report, The Center for Generational Kinetics

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.
8
Source: HAS Store, Booking.com
8

What young people are spending their money on…
FOOD EXPERIENCES FASHION
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.
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!
The only outlier from this tendency to
spend time with others in outdoor
experiences is fashion – Gen Z use fashion
as a form of self-expression.
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.
9
Source: <strong>YouthSight</strong> State of the Youth Nation C2 June 2019 (N=1034), Y48 Feb 2019 (N=1028)

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

2
The young and the cashless

41% of Gen Z say they
rarely use cash and a third
agree that traditional
wallets will soon become
obsolete in 10 years’ time
Source: Manole Capital's second annual Gen Z Survey

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.
70%
of Gen Z have made in-app payments in the past year,
whether it be on a payment app such as Google Pay or Apple
Pay or on a retailer’s app, more than any other generation
23%
of Gen Z predicts physical cards will soon be obsolete as
opposed to just 6% of the over 55s.
Source: U.S Mobile App Report 2017

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…
14
Source: <strong>YouthSight</strong> x Link (2016) (N=492)

Source: Finder
Digital banks are fun, practical
alternatives to traditional high-street
banks
Digital banks particularly appeal to Gen Z - making paying,
transferring and saving money effortless…
Convenience
Seamlessness
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!
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.
Two-thirds of banking customers say they plan to convert fully to
digital banking in the future (rejecting high street banks).
Monzo has
even released
a feature
where you can
automatically
save £2 every
time the
temperature
where you are
goes above 20
degrees

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?
AI Bots
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.
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.
Ben Stanway, co-founder of
Moneybox
Investing
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.

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.
70%
of Gen Z’s are unlikely to buy
cryptocurrency in the next 6 months
37%
of young people don’t yet trust
cryptocurrencies such as Bitcoin
14%
of Millennial and Gen Z participants cited a
“lack of understanding” as their main
reason for not getting involved with crypto
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.
Source: Business Insider, Decrypt
Facebook’s new and controversial cryptocurrency - Libra
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.

How can you emulate the successes of the new wave
of digital banks?
Digital money systems engage with Gen Z differently…
1
2
3
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,
however for young people, their phones are their personal space – and
this is where digital money system are
18

3
How to align with Gen Z’s evolving
attitudes to money

Source: <strong>YouthSight</strong> (May 2019)
Help young people out by acknowledging
when they decide to spend their hard-earned
money with you.
Offer them little extras (rewards) along the
way that are…
Flexible
01 02
Relevant
Little and often
03 04
Seamless
Non-monetary!
05 Advocative
06
If I'm buying things often from the same
place, I'd like to be rewarded for being loyal.
13-15 year old

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.
01 Flexible
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.

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-to-date with the
evolving attitudes and preferences of 16-24s.
02 Relevant
VOXI Drop
VOXI, Vodafone’s mobile network aimed at under 30’s, has announced a new
rewards programme that encompasses both relevance and regularity.
It gives customers exclusive freebies and offers every month. Freebies and offers will be
available on things that matter to young people - 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.

Gen Z aren’t spending on big flashy items and
therefore don’t expect extravagant rewards - a
little goes a long way!
03 Little and
often
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 moneyconscious,
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.
66%
Of the 13-15yr olds we surveyed would prefer regular, smaller offers
compared to less frequent, bigger offers.
Source: <strong>YouthSight</strong> (May 2019)

Gen Z have busy lives –
make it easy for them to remain loyal
04 Seamless
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.
Source: The Manifest

Reward doesn’t have to be monetary. Can you
align to Gen Z’s values and encourage them to
pass the reward on instead?
05
Nonmonetary
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.
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.
Source: <strong>YouthSight</strong> State of the Youth Nation A_H10 June 2019 (N=1034)

06
Unique!
Advocative
Can you reward Gen Z
for advocating your
brand?
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…
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.
73%
of Gen Z’s spend the
majority of their time
online on social media.
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.
26
Source: <strong>YouthSight</strong> State of the Youth Nation A_W61 June 2018 (N=1037)

Showing you understand Gen Z’s
values and attitudes towards money
is certainly likely to result in repeat
purchase.
However, repeat purchase is not the
same as loyalty – Gen Z are savvy
enough to find cheaper alternatives.
If it’s brand loyalty that you
want to build, you need Gen Z
to love your brand. You can find
<strong>YouthSight</strong>’s take on brand love
and how to cultivate it here.

Many of the data points in this
<strong>eBook</strong> come from our youth
insight tracker:
State of the Youth Nation
tracks 1000s of questions so
our clients don’t have to
Engage
Gen Z
Inspire
Gen Z
Grow
Brand Love
Get in touch for a demo to see how State of the Youth Nation
can future-proof your organisation: research@youthsight.com