Questions by Matthew Dove
In the Fintech Fast Five, we ask industry insiders five of the most pressing questions facing the sector. In the firing line today is David Parker (CEO Polymath Consulting)…
1. If Generation Z (or Generation Glass if you prefer) has “become the product”, what do you see as the long-term outcomes of such a data-centric business model?
It’s interesting that we’ve seen a number of platform plays; Facebook, LinkedIn etc. where your data is both the content and what you (in effect with LinkedIn) pay to access.
We are also seeing, with GDPR and PSD2, a huge change in that data you had no control over in the past is now under your control.
Who you give permission to access your data and what they do with it gives a whole new range of options that apply not only to Generation Z but all consumers. This is going to lead, in the next 24 months, to many new and innovative propositions being brought to the market as this new data, that previously was locked in banks is made available, with your permission, to a whole range of companies.
2. AI is required to properly process and analyse the vast amounts of data being mined by such models.
Is it possible to assess the true value of this data before the potential of such technology is fully realised? Is it possible that the value of all this data is vastly overestimated?
30 years ago I started in my career in advertising and in those days direct marketing was a key tool. Over the next few years, as things started to become digital, the idea of one to one direct marketing and personalisation of messages was seen as incredibly exciting – but proved almost impossible to deliver.
Now with AI, access to big data and the computer power to analyse it, one-on-one marketing is becoming feasible. Is the data being overvalued? Certainly not, and as an example several years ago a company called Itemise did some testing.
They sent offers to consumers based on their self-selected preferences e.g. golf, cars etc. and another group got the same offers, but the exact selection of what was sent varied based on the data extracted from their receipts i.e. what they had purchased not their self-selected preferences.
Who you give permission to access this data to and what they do with it gives a whole new range of options that apply not only to Generation Z but all consumers.
These same offers were taken up by 90% more people who received them based on analysis of their purchase history than self-selected preferences. What this shows is that if you send an offer to someone at the right time, when it is relevant to them they are far more likely to buy. Ultimately all businesses want to sell something, so if you can use data to understand who will buy and when, then you can increase your sales exponentially.
3. My father was loyal to his bank because it gave him a mortgage when he was 26.
Can it be argued that Z isn’t especially loyal to financial services providers because they aren’t being offered anything meaningful?
It is a well known fact that the more products you use from a company the more brand loyal/sticky you are. Most Generation Z people just need a basic bank account these days as the average first-time buyer is now seven years older than in 1960 with most being 30 years or older before they get onto the property ladder. A mortgage is a very ‘sticky’ product in Financial Services terms – it takes hassle to change. If all you have is a basic bank account, and with the UK switching service all your direct debits etc. will be moved across, there is no hassle in changing bank. This makes the stickiness far less, it has nothing to do with meaningful product offerings and more to do with the fact that it is easy to switch so they can.
It is a well known fact that the more products you use from a company the more brand loyal/ sticky you are.
Gen Z consumers differ though from millennials, according to a Lab42 survey, in that they are less likely to be motivated by loyalty programs per se which is another issue. While nearly three quarters of millennials said loyalty offers influenced their purchasing decisions, fewer Gen Zs were spurred by reward programs to spend. It has been stated that the key to winning Gen Z may depend more on customer experience as a survey by Forrester and American Express found that younger respondents want speed and frictionless transactions i.e. it is all about ease and convenience.
4. It has been said that Generation Z is less careful than previous generations.
Do you agree that Gen Z is less careful because it has less to lose in terms of its lack of access to mortgages, loans, jobs-for life etc.?
The average age to buy get a mortgage is over 30, the average age to get married for a women is now over 35. A fact of life is that when we have children we become more cautious, just ask life insurance people the best time to sell policies and they will tell you when people first have kids. So are Generation Z less careful or is it that they are just staying young and reckless for longer. When they eventually get married and have kids they may be just as careful, just these days that is happening later in life.
While nearly three quarters of millennials said loyalty offers influenced their purchasing decisions, fewer Gen Zs were spurred by reward programs to spend.
This gives an impression of a carefree generation as opposed to a generation that will be careful just at a later time in their life. This it could be argued has also happened at the same time as the structural change in the economies of many industrialised nations such that a job for life is no longer the norm and we are seeing a far more mobile, job-flexible workforce. We’re seeing many more gig workers and people happy with a pluralistic employment structure. This is not saying they are more carefree, just what is considered to be a good job is not longer necessarily the same job or even a single job for 20 years.
5. What steps should fintechs and legacy institutions be taking to gain and then retain the loyalty of Generation Z?
As stated above Generation Z is far more engaged around experience and the quality of it along with instant gratification. To that end, fintechs who offer ‘Great Experience’ tend to win out. We only have to look at many of the Bank Challengers and Challenger Banks to see how almost every single one of them highlights the quality and ease of their UI. It’s all about the ease of use, speed of delivery that matters. Look at how Amazon is going from next day delivery to same day delivery in cities. Generation Z want it now, but with a great service level.
