How financial services can evolve to stay relevant for Gen Z

In brief

• 20% of global Gen Z is in India. Their preferences are shaping banking, payments, and investment trends of the future.
• 83% of Gen Z prefers digital-first financial services but also seeks human interaction for major decisions.
• To capture Gen Z’s loyalty, financial institutions must align with their digital needs and trust expectations.

India hosts one in every five Gen Z globally, making this generation a driving force in reshaping banking, payments, and investments. This tech-savvy generation values seamless digital experiences, personalized services, rewards and financial products that align with their social and environmental values. Financial institutions must adapt to these evolving needs and financial habits to maintain relevance and foster growth. 

This report provides insights into Gen Z's financial behavior and offers recommendations for financial service providers to effectively engage with this key demographic. The survey highlights Gen Z's complex relationship with digital finance, which includes: 

Gen Z values both digital convenience and human connection

A significant 83% prefer digital-first financial services, showcasing their comfort and reliance on technology. This digital fluency, however, does not equate to blind trust. Gen Z seeks human interaction for important financial decisions, revealing a demand for both convenience and personalized guidance. 

The key to winning Gen Z lies in the FUTURE framework

Financial institutions (FIs) must foster personalized experiences, unite rewards with payment convenience, transform financial advisory, uphold financial discipline, reassure through tailored engagement, and empower flexible, affordable credit solutions. By adapting to Gen Z’s evolving expectations, banks and FinTechs can not only meet their needs but also build long-term loyalty and future-proof their growth. The proposed FUTURE framework comprises:

• Foster channels for personalized experience: To meet Gen Z’s needs, banks must offer intuitive, mobile-first experiences with seamless navigation. AI-driven personalization enhances engagement through tailored solutions. Social media banking builds trust, while FinTech integration creates a connected, lifestyle-focused financial ecosystem.

• Unite convenience and rewards in payments: Banks can strengthen co-branding and partnerships with lifestyle brands to offer exclusive rewards and integrated payment solutions, enhancing Gen Z loyalty. They can boost credit card-linked UPI adoption by offering better incentives and seamless settlements. Partnering with Fintech and digitals enables advanced instant payments with features like automated bill splitting.

• Transform financial advisory:  Banks could build trust through transparent communication, offering clear advice, ethical AI, and responsible advocacy. They can enable goal-based financial planning with AI-powered tools and personalized guidance. Expanding digital investments with micro-solutions and ESG options caters to Gen Z’s preferences, while mentorship programs and interactive financial education empower both advisors and customers to make informed decisions.

• Uphold Gen Z’s financial discipline: Banks could offer gamified financial tools to encourage savings and financial discipline through rewards and goal-based approaches. Integrating budgeting tools within apps empowers users with real-time spending insights, while reward systems for regular activities and interactive educational resources enhance engagement and position banks as trusted financial partners.

• Redefine brand engagement: Banks can leverage influencers who align with Gen Z values to promote products authentically and build financial trust. Providing interactive experiences like webinars and virtual challenges can educate and engage Gen Z effectively. Banks can also build exclusive communities with perks and peer-led discussions while positioning. sustainability as a core to deepen loyalty and resonate with Gen Z’s social consciousness.

• Empower modern credit with flexibility: To support Gen Z’s financial needs, banks should offer flexible credit limits and customizable payment plans for better expense management. Real-time credit monitoring empowers informed decision-making, while alternative credit scoring expands access for those with limited credit history. Instant micro-funds access ensures financial stability by addressing short-term cash flow gaps.

How is Gen Z reshaping financial services, and are FIs ready for it?

As Gen Z transitions into active earners amid rapid urbanization, their demand for digital-first, agile, and personalized banking and financial solutions is reshaping the industry. Success lies in anticipating their evolving behavior and delivering purpose-driven, dynamic experiences that align with their values. Yet, the future remains uncertain - technological shifts and economic changes will continue to redefine their needs. For banks, building resilience and fostering innovation is no longer optional, it is essential. The message is clear: Gen Z is transforming finance. The question is: are financial institutions ready to meet them where they are?

Aarthy Rangarajan – Partner, Business Consulting, EY India has contributed to the article and report.