David Orme, SVP, IDEX Biometrics ASA, outlines the concerns of Generation Z over online banking security and the importance of biometrics to the younger generation.
The payments ecosystem continues to evolve as preferences for ways to pay grow. Today this growth is currently being driven by consumers in Generation Z (those born on, or after 1995). These young shoppers are predicted to make up 40% of all consumers by 2020, and will account for 32% of the global population. They will also overtake millennials (born between 1980-1994) who will be at 31.5%. With their growing spending power, Gen Z is on track to become a key driving force in the consumer market.
Recent IDEX research into the attitudes of Generation Z towards online security, banking and biometrics found that 79% of 16-24-year olds believe that banks should do more to protect their customers from fraud.
Furthermore, the youngest consumers in our study were 16-17-year olds, the target age for many new banking customers. The study found that of this age group, a huge 95% think banks should be increasing fraud protection for their customers.
Generation Z have grown up around the threat of cyber crime and it appears they are more aware of the risks of fraud. Our research found that nearly three-quarters (74%) of 16-24-year olds believe it is too easy to find someone’s personal information online nowadays. Also, 52% of Generation Z are worried about someone stealing their identity.
In a recent focus group of 18-24-year old consumers, I observed high levels of banking and online security awareness. Interestingly, many of the young consumers showed they don’t just jump to install the latest banking apps simply because they are new or cool. They are thoughtful with their consumer decisions and assess how well services or technologies fit their security and financial needs first.
“I only use my bank card to pay for things,” said one respondent, Nikki, who is 24 and from London. She stood out for rejecting mobile payment apps, continuing, “I deliberately keep my phone separate because I don’t want spending money to become too convenient.”
Like Nikki, many Generation Z consumers are more cautious while banking or shopping than retailers and banks often believe. The research shows that, far from being over-sharers of their personal information, 76% of Generation Z accept that it’s their responsibility to look after their data and keep their identity safe. In return, these consumers expect their banks and service providers to work just as hard to deliver a high level of protection for them.
Although new challenger banks, such as Monzo and Starling, are growing rapidly among young consumers, that doesn’t mean Generation Z trust them more when it comes to security than the high street giants. Michael, a 19-year-old student from London also in the focus group, summed up the care with which Generation Z approach digital banks: “I feel the online banks have to push up their security because there’s no physical presence,” he said. “So they’ve got to be more secure to be on top of their game.”
Our study also reveals a wider lack of confidence in all banks, as only half of Generation Z shoppers are certain that their bank would refund them any losses if someone fraudulently accessed their bank account and stole any amount of money. The new generation of banking customers expect greater security and responsibility from high street banks, which in turn is driving their consumer choices.
The findings also show that Generation Z wants to see banks adopting new technology to combat card and online fraud. Nearly two-thirds of them think all banks should offer biometric payment cards to help reduce fraud.
Additionally, 45% of Generation Z can’t believe credit and debit cards don’t already use biometrics for payment and ID security. Again, this is even higher among 16-17-year olds, with nearly 63% of them expecting banks to already use biometrics for payment card security. As high street banks often thrive on signing-up new customers while they are young, appealing to this new generation of consumers is vital for the industry.
Therefore, financial institutions must now add biometric technology to the payment card market to attract young and potentially loyal customers. In fact, nearly half of those in Generation Z would choose a bank that offered biometric payment cards over one that didn’t.
Most importantly, Generation Z consumers are willing to pay for added security, as 43% would expect to pay a little more for a biometric payment card, while 33% are willing to pay between £3-5 per month for it.
Moving forward, it’s vital for the success and future of the financial industry that banks don’t ignore the needs and demands of Generation Z customers. It is increasingly important for high street banks to act now and address the security concerns of those surveyed in this report. If not, they’ll soon be overtaken by fintechs and digital challengers who are able to adapt and innovate faster.
So, what are the key takeaways for banking professionals to increase their security? It is clear that under 24s today expect to be using new, secure biometric technology for increased payment security and convenience. Generation Z are sparking a shift in consumer behaviours and expectations. Banks that can embrace and adapt to their changing consumer behaviour and embrace digital technologies will not only survive, but also thrive in the evolving digital environment.
