Attention lenders, Gen Z are becoming business leaders
Are you ready? Gen Z are unlike their parents or grandparents generations. The strategies and tactics lenders have used in the past will not necessarily carry forward.
Lenders need to be conscious of who their customers are today and who they will be tomorrow. 2020 will be as generation-defining for Gen Z as the global financial crisis was for millennials or the moon landing was for baby boomers. The lenders who have taken note of and fed these insights into their transformation journey will be in the best positioned to capture the growing Gen Z-led SMB market.
Gen Z has been the most adversely impacted by 2020. They experienced the highest rate of job losses and continue to struggle to find entry-level roles. With uncertainty comes entrepreneurship, and the increasing growth of Gen Z-led SMB’s. While the 2008 global financial crisis will be remembered for birthing AirBnB, Uber, and Instagram; there are legions of SMB’s whose history can be traced back to our last crisis. There is no reason to doubt that a similar wave will emerge from 2020.
This opportunity will favor the bold, as those lenders who can make the best impression will be poised to gain entry as the chosen trusted advisor to grow alongside their customers.
Lenders Must Evolve Beyond the Lending Function
Gen Z doesn’t form opinions on a company solely based on the quality of their products; practices, ethics, and societal impact are also influential (Deloitte, 2018). This will inform the interactions Gen Z-led SMB’s will have with lenders. Traditional tactics of impressing potential customers with refined product pitches are no longer sufficient to secure a partnership. A lender’s brand identity, values, and vision must inform and lead these conversations.
Digital Natives Invite a Digital-First Approach
Gen Z’s have an attachment to social media and the app experience (Deloitte, 2018). The entry and exit points on the customer journey will transform, and thus re-calibration is necessary (McKinsey, 2020). Lenders will need to think about everything from digital sales, digital servicing, human-centered virtual channels, and physical channels.
As each of these channels grows, there is a risk of letting each channel become more complex. But while complexity is necessary, it should not infringe the goal of making the experience as seamless as omnichannel engagement can be. The end goal? Meet Gen Z’s where they are accustomed to being and adapt to their affinity with digital.
Lenders Need to Embed Themselves in Ecosystems of the Future
Gen Z, more than any generation before them, is less likely to associate financial services strictly with a bank as it’s traditionally defined. The emergence of open banking, in the form of embedded financial service offerings withing larger ecosystems, has blurred the lines for young people. There is AliPay in China, GoPay and GrabPay in Southeast Asia, and KakaoBank in Korea. These services are embedded in ecosystems that many inhabit in normal life. While these are primarily consumer-facing services, it’s only a matter of time before a similar level of saturation is achieved in business buying and lending.
Lenders should not underestimate the importance of preparing for Gen Z-led SMBs. No other technology has had such a visceral impact on the way we live our lives. It’s a paradigm shift in life, in the same way the printing press was. McKinsey (2020) found that Gen Z ramped up their use of Fintech’s significantly during the pandemic. This embedded finance, in ecosystems that live outside the realm of banking, fuels customer demand for integrated experiences.
Are you ready for the future of lending?
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