Financial processes and merchandisers need an upgrade in awareness to cash in on younger consumers’ in-store shopping loyalty.
Embedded within the changing economy are fundamental differences in the buying and banking mores of younger consumers compared to older constituents. Meeting the needs of three essential overlapping consumer groups can go a long way in how customers view their shopping options. Businesses cannot afford to ignore their quirks and behavior shifts when shopping.
Two of the most influential consumer generations are millennials, aka Gen Y (ages 27-42) and Gen Z (ages 18-24). Packed within these age groups is a lesser-recognized segment of shoppers tagged as Zillennials. This tag-along buying force is a micro-generation that sits in between.
Zillennials identify with key parts of the millennial and Gen Z shopping experience. But many banks and marketers consider them too young or too old to fully participate in social or cultural norms, which could be a costly and misguided decision.
As physical stores enjoy a return of foot traffic from younger consumers, their banking and payment preferences present challenges to retailers. Gen Z does not want to have to call someone or wait for an email response to complete simple tasks, like updating an address, locking or unlocking their credit card, or disputing a transaction.
The one must-have to cater to Gen Z customers is simple self-service through a mobile app, according to Sagar Rajgopal, president and chief customer officer at Ubiquity, a customer service and business process outsourcing provider headquartered in New York City.
“Banks need agility if they are going to meet the needs and demands of Gen Z customers. Omnichannel capabilities should include self-service via an app, chatbots, live chat, in-app messaging, and a live agent over the phone. Banks that provide a seamless customer experience and great customer support will be well positioned to capture this generation,” he told the E-Commerce Times.
Younger Consumers Welcome New Payment Methods
Today’s changing economy involves two sides of the same money coin — retaining returning customers on e-commerce sites and fanning the flames of in-store shopping. Both can be served by providing support for new payment methods, such as digital wallets, to offer the best possible checkout experience.
Despite the continued rise of e-commerce and online shopping, younger consumers still want to make in-store purchases. Digital wallets and biometric payment methods are critical for creating the best possible payment experience for younger consumers, suggested Peter Galvin, chief product officer at global payment enablement platform NMI.
These electronic options encourage them to make more purchases in-store. New data from NMI found that 83% of consumers ages 18-24 and 87% of consumers ages 25-40 said they are always excited to try new payment methods.
Zillennials are even more likely to make in-store purchases than millennials. Younger consumers still want to be able to use the convenient, tech-first payment options they enjoy online when making in-store purchases, as they already feel comfortable with those digital payment methods. That sets the path for what this consumer segment wants.
“Merchants, the independent software vendor (ISVs), and independent sales organizations (ISOs) who partner with merchants to enable these payment experiences must ensure their payment systems are equipped to handle this new era of payments whether it is in-store, online, or on a mobile device,” said Galvin.
New Banking Process Needed Too
Tweens, teens, and 20-somethings comprise 68 million consumers whose banking reality is much different from how their parents started out using financial services. Catering to this burgeoning Gen Z consumer base requires a fresh approach to customer experience (CX).
Why? More than half (54%) of Gen Z consumers will drop a company after a single negative customer experience. That type of “See Ya” consumer flip-off is not limited to product purchases, either.
Banking for digital natives bears little resemblance to their parents’ habits, observed Rajgopal. Recent research found that 83% of Gen Z consumers are frustrated with bank processes. Therefore, in addition to digital services and offerings, banks also need to take a thorough look at and use a fresh approach to customer experience to capture and maintain loyalty from younger consumers.
“Unlike banking of the past, 90% of Gen Z’s digital banking interactions take place on smartphones. Partly because of this digital-first mindset, this young generation is not wed to traditional banking,” he observed. “By pairing mobile banking features with a fresh approach to customer experience, banks can differentiate their brands across generations,” he noted.
Consumers Ripe for New, Simpler Digital Options
NMI’s Payments Innovation Pulse Report showed that around half of consumers ages 18-24 (53%), 25-40 (57%), and 41-56 (46%) use payment applications for in-store purchases. Clearly, Gen Z consumers are far more comfortable with mobile payments and digital wallets than those of older generations.
“Among respondents ages 57 and older, less than a quarter of these older respondents do,” Galvin said. “Right now, younger consumers prefer mobile and digital payments, and they expect these options to be available to them in almost all payment scenarios.”
Younger consumers today will simply walk away from a purchase if the payment process is too confusing, time-consuming, or difficult for them. The journey from finding the item they want, swiping their card, or tapping their phone has to be quick and painless for them, he insisted.
“In today’s tough economy, every customer is critical, so businesses cannot afford to lose a sale,” he added.
A serious consideration here is the fact that many younger consumers do not carry cash. Some do not even carry a physical credit or debit card anymore, noted Galvin. But they will almost always have their phone.
“So implementing mobile and digital payments can help ensure that younger consumers always have a payment method available to them,” he said.
Devising New Tricks for the Banking Trade
Banks have a role to play in helping younger consumers handle their financial literacy, according to Ubiquity’s Rajgopal. Departure from traditional tedious brick-and-mortar transactions also presents a colossal opportunity for stores to improve the CX they provide.
“Mobile banking apps are non-negotiable for Gen Z. The good news is that what will appeal to them is not likely to be a turn-off for other demographics,” he suggested. “The opposite is true.”
Digital interfaces must be packed with appealing visuals, easy-to-access resources, and full functionality. But businesses cannot ignore their web portal for those customers who prefer it.
Product and feature sets should focus on financial wellness and provide helpful tips to help young consumers gain their financial footing, he offered, adding that those same features can also be useful to older consumers.
“The biggest difference will be in how and what you market as opposed to wholesale differences in your product set,” said Rajgopal.
For example, 65% of Gen Z consumers use social media to inform their purchasing decisions. Reaching them on their social platforms of choice is going to be necessary, as well as monitoring your own brand reviews online and in social channels.
Parents Factor in Also
For younger Gen Z consumers who still live at home, banks should consider targeting their parents, according to Rajgopal. That is what fintech organizations like Greenlight, GoHenry, Step, and some banks are doing.
Targeting parents with financial tools explicitly developed for digitally savvy teens who are starting to earn money through chores or part-time jobs makes sense.
“Parents want to offer guardrails and financial education for their children, and the teens want simple, engaging digital experiences that mirror other brands they love while empowering them to shop,” he said.
All customers want to feel like their bank has their back. But it is especially true for Gen Z customers living paycheck-to-paycheck.
“Banks that provide services like budgeting and personal financial management tools that help Gen Z consumers make smarter financial decisions can build trust and loyalty,” added Rajgopal.
Business Barriers to Adding Payment Options
Providing multiple forms of digital payments can offer choices to consumers. But too much choice can create a lot of confusion, Galvin warned.
“The more forms there are, the greater the risk that consumers feel confused with the options available to them,” he explained.
A crowded checkout can lead to consumers not knowing which option is best for them, can delay the checkout process, and decrease customer satisfaction. If customers are confused or frustrated at checkout, they may take their business elsewhere as they prioritize speed and convenience when paying.
One or two digital or mobile options could bring in new sales and be a good alternative for younger consumers. However, it is not always quick and easy for businesses to implement multiple methods.
Implementing multiple forms can get to be expensive and time-consuming. This can be especially true if the business is trying to accomplish these methods themselves without the help of an ISV or ISO partner that can provide guidance and expertise into the technical side of integration, noted Galvin.