By Shawn Conahan, Chief Revenue Officer, Wildfire Systems
According to EMARKETER, 4 million Gen Z customers will open bank accounts per year through 2026. Great news for banks, right? Well, yes and no: a recent research report, Javelin Research noted that between 2022-2024, the percentage of Gen Z customers who banked at one of the five largest US banks dropped from 68% to 61%.
Gen Z customers are highly online, highly mobile, and many tend to get their financial information from social media “finfluencers.” How can banks compete with the robust bonus offers and extremely user-friendly onboarding processes and mobile app interfaces that many digital-first fintech neobanks can provide?
While it’s true that relevant marketing, financial budgeting, education and value for money certainly plays a huge part in appealing to Gen Z, feature offerings that align with their preferences is one area that banks can consider. Let’s explore the appeal of digital wallets to this up-and-coming banking customer generation, based on research from sources including PYMNTS, Worldpay, and Wildfire Systems’ whitepaper, “Banking on Shopping Rewards.”
Digital wallets’ rising appeal
In Wildfire’s survey, 35% of all respondents report using digital wallets more this year than last. But when we break down the responses by generation, digital wallets are even more important among younger consumers. The number of Gen Z respondents who reported using a digital wallet more this year jumps to 52% – almost 20 points more than the general population.
We also asked if respondents would consider a digital wallet offering from their bank important: 59% of all customers ranked the feature as Very or Somewhat Important. But for the next generation of banking customers, 76% of Gen Z respondents report they would find a digital wallet Very or Somewhat Important.
Other notable research backs up Gen Z’s preference for digital wallets, too. A PYMNTS Intelligence and Google Wallet report drawn from a survey of 12,000 consumers noted that less than half of Gen Z respondents reported carrying a physical wallet, compared to ⅔ of the overall population. And 10% of Gen Z reported never carrying a physical wallet (the highest share reported for any generation.)
Adding value: Augment digital wallets with rewards programs for greater appeal
Worldpay noted In a March 2024 report that in 2023 digital wallets accounted for 50% of global ecommerce spend, and that they expect digital wallet use in retail stores to overtake debit cards by 2027.
As global financial uncertainty continues, offering more value to consumers in the form of convenience – e.g. time savings – as well as actual monetary savings, in the form of rewards, could be a potent combination for winning over prospective Gen Z customers.
In our survey, 33% of all respondents and 47% of Gen Z respondents report they prefer earning cashback rewards and finding coupons in a digital wallet. And consumers are making these preferences known through action: PYMNTS Intelligence also shared results from a June 2024 survey of 4,100 consumers showing 33.6% of respondents who purchased something using a mobile wallet in the previous 24 hours cited rewards as an important reason that they used their mobile wallet.
The same survey found that 28% of consumers expected to use digital wallets to store and access rewards, discounts or coupons in the next three years. Plus, 22% of consumers cited rewards, discounts or deals for using digital wallets as a key factor that will positively contribute to their use going forward.
Keeping customers engaged
As more customers begin using digital wallets to store access, payment, and identity credentials, along with storing rewards, banks can play a key role in making these more secure, trustworthy, and convenient. Advanced digital wallets allow customers to create stores of value from proprietary rewards programs that even have the potential to further engage those customers in the bank’s ecosystem and using their payment methods. According to our findings, 91% of all respondents who participated in a rewards program, reported they would find the ability to pay for purchases with their earned rewards useful.
To sum it up, a digital wallet offering including shopping rewards and coupon features could give banks a chance to attract younger, digitally inclined customers. Launching a digital wallet with appealing value-added services and rewards can also serve to increase tender preference among Gen Z customers who could become lifelong bank loyalists.
About the author
At Wildfire, Shawn Conahan develops strategic partnerships with major finance, banking, and fintech companies to enable the creation of new revenue streams and modernizing their customer experience to position them competitively for the future of banking and money. He has been an entrepreneur, senior executive and investor in the wireless, technology and Internet industries for over 15 years, having previously built and sold three companies. His industry experience ranges from digital media to wireless technology to big data where the common thread has been building platforms with broad applicability.
