The Gen Z Factor: A Young, Growing Force
The millennial generation was a force of nature, and many of us still have a collection of Nirvana t-shirts to show for it. But millennials are rapidly approaching middle age, and while there are still opportunities to engage with them as consumers, they are largely established in their selection of financial service providers and preferences with the companies they do business with.
The good news is the generation coming up immediately after them, referred to as Gen Z, is just entering adulthood today and is a bigger, more diverse group than their predecessors. In fact, they will be the largest generation ever to come of age in the United States. This demographic is typically defined as the generation born from 1997-2012 and represents nearly 90 million young Americans of which the oldest are turning 25 years old this year.
These consumers represent your organization’s future customer base and highest growth segment in the years ahead—if you can capture them. Establishing and managing a path to easily onboard consumers from this group is critical for the growth of any enterprise.
The Gen Z Opportunity
Gen Z already has an estimated collective buying power that is nearing $150 billion1, a number that is expected to rise into the trillions of dollars as this group matures, outpacing the maximum peak purchasing power of millennials.
The opportunity is evident, and it’s critical for enterprises to develop processes that can acquire Gen Z consumers, as well as others in hard-to-identify segments, including, thin-file, new-to-country, and other groups absolutely vital to the future of your business. Organizations that are equipped to approve as many good Gen Z consumers as possible are at a competitive advantage over organizations that are slower to adapt. Organizations should consider the following as they develop and implement a strategy for Gen Z customer acquisition.
Challenges with Accurately Capturing Gen Z Consumers
Aside from Gen Z being the most diverse group of Americans, unlike millennials, their expectations are not likely to be met by simply tailoring products and services to their generation with a broad brush. According to the Wall Street Journal, Gen Z is seeking products and services that are personalized, reflect their values, and offer a sense of community. While millennials were attracted to organizations that prioritized digital-first experiences, Gen Z has grown only knowing the ease of digital engagement.
Further complicating matters, unlike previous generations, the Gen Z demographic is averse to traditional credit offerings such as credit cards. This is partly due to their lack of requisite credit history, and because of the rise of alternative solutions such as Buy Now Pay Later (BNPL) and other personalized solutions that provide immediate buying power at the point of sale without the friction associated with traditional credit offerings.
Because of Gen Z’s lack of a credit history making them “credit invisible”, many businesses put these consumers through an especially rigorous onboarding process that uses manual reviews and can be lengthy by the standards of a generation accustomed to immediate results. This creates missed opportunities from unnecessary friction, either because consumers are being unnecessarily rejected, or the onerous process causes them to drop off. Their alternative is to find your competitors that are equipped to welcome them into their portfolio and grow a lasting relationship. Ouch.
How to Unlock the Gen Z Opportunity
Because Gen Z’s generally lack a credit history, using traditional identity proofing solutions to verify these consumers is insufficient. Legacy identity proofing solutions were designed for yesterday’s economy and consumer behaviors and are often overly reliant on the very credit header data that Gen Z lacks. Many legacy solutions have also been assembled over time through acquisition to add capabilities that were not built for evolving business challenges.
The path forward is clear. You must remove unnecessary friction at every point of your customer onboarding process and ensure you have an accurate picture of as many hard-to-identify consumers that engage with your business.
Legacy identity solutions were not developed to address these challenges. Socure, however, has developed an orchestrated, scalable solution via one simple API specifically designed to achieve the best population coverage and auto-approval rates available.
Socure’s identity graph, deep analytics, and machine learning capabilities, which persistently process, analyze, and correlate every facet of a digital identity, utilizing over 17,000 features, redundant data sources, and a consortium network of over 1,000 customers, is able to deliver the highest-assurance assessments of new users in the market, even those with thin credit histories. Our patented identity clustering capabilities can accurately and inclusively cover populations across all ages and demographics giving you the advantage of saying yes to more “good” consumers in this demographic.
These are the kinds of results Socure customers are achieving:
- 20-40% increase in approval rates for 18-23-year-old Gen Z consumers
- SSN Match rates for 18-19-year-old Gen Z consumers 67% vs. 38% for legacy providers
- Address Match rates for 18-19-year-old Gen Z consumers 90% vs. 70% for legacy providers
This has translated into unprecedented revenue growth of the Gen Z audience for many of our customers. Here are just a few examples:
- Major mobile payments provider increased Gen Z annualized revenue by $15.5 million over their previous solution
- Top 5 US Bank: Improved auto-acceptance for deposit accounts among college-age applicants by 13.5%
The Time is Now
The Gen Z population is starting to establish relationships with the vendors with whom they’ll do business, and it begs the question: Is your organization confident in its ability to accurately identify and onboard these most critical consumers? If you are using a legacy solution, you are likely turning away many of the most important customers crucial to your growth every day. It’s time for a new approach.
Meet with our experts to discuss your current Gen Z challenges and discover how we have helped organizations like yours secure growth and build a foundation for success.
Matt is the Director of Product Marketing for KYC and Global Watchlist solutions at Socure. Prior to Socure, Matt established and led the product marketing efforts for fraud and identity solutions at TransUnion.
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