Gen Z Favor Secure Payments Solutions when Selecting Banks
By Kelly Payne, Chief Marketing Officer at MOCA
(Reprinted with permission from The Banking Exchange. Original article published on February 17, 2022 and can be viewed here.)
Generation Z has become the center of much attention and discussion among banking leaders. Gen Z is getting older, and these young people are getting more involved in financial services. According to Boston Consulting Group, Gen Z’s spending power is expected to increase by 70% over the next five years, so banks must investigate ways to cater to this growing demographic.
A study by Marqeta also reports something surprising about Gen Z. While many banking leaders may instinctively assume that Gen Z would favor newer, less conventional banking solutions, Gen Z actually prefers traditional banking institutions by 87%.
Many factors likely contribute to this trend, but data suggests that Gen Z’s preference for more established institutions may stem from concerns about digital security. Gen Z, being digital natives, have adopted digital and online payments more readily and are more sensitive about threats to privacy and security. Somewhat understandably, Gen Z trusts larger banks with greater resources and security measures to ensure their finances and information are safe. But all is not lost, community banks can appeal to Gen Z by investing in safe, secure payments technology that are on par with even the largest institutions.
Cyber-attacks have unfortunately grown more frequent, especially in the banking industry. A Trend Micro report showed that the banking industry experienced a 1,318% increase in ransomware attacks in the first quarter of 2021. Given the frequency of cyber-attacks, customers want to know if and when their data is at risk, and banks have a few different options for protecting customers and demonstrating their commitment to security.
First, real-time two-way fraud messaging helps banks engage with customers and address security concerns quickly and easily before the fraud occurs. Real-time two-way fraud messaging uses SMS text messaging to alert customers of suspicious payments and allows customers to verify their payments by responding with a text message before the payment goes through. Real-time two-way fraud text messaging results in fast and simpler resolutions to suspicious transactions since it can stop the payment from going through. Of course, if the transaction is valid, the customer can verify that as well and the payment will be permitted to proceed.
Another security solution banks must implement is card controls. Customers want to feel in control of their payment methods. Card controls are easy to implement and offer a straightforward security solution for bank-issued credit or debit cards. Card controls that allow customers to turn their cards on and off through an ever-present mobile device are especially useful in case of an emergency. For example, if a card is lost or stolen, the owner can turn the card off before it is used without the user’s permission. Customers may also keep cards turned off anytime they are not using them to protect their information.
While online shopping has already become ubiquitous, a study by Kibo suggests that Gen Z will continue to do more of their shopping online. While there are many risks associated with online shopping, banks can provide ways to protect customers. Single-use card numbers are a secure payment solution that protects consumers when shopping online. Users can generate single-use card numbers instantly and conveniently. As the name suggests, single-use card numbers are valid for one transaction, which limits risk during online payments by ensuring stolen information cannot be exploited. Many large financial institutions offer single-use card numbers, including Capital One’s Eno, Citi Virtual Account Number and Wells Fargo Digital Wallet, so banks looking to compete should seriously consider providing this service.
Finally, a simple real-time transaction alert can flag fraud before too much damage can be done – particularly when coupled with an immediate card off option.
As payments technology becomes more complex and integral to everyday finance, young people, especially Gen Z, will prioritize payment security more and more. The prevalence of data breaches and identity theft have shown that digital security is not a given. Gen Z wants the greatest degree of protection possible, and they seek out financial services organizations that can provide that security. Community banks must offer secure payment options if they want to attract and retain Gen Z.