AI-powered financial apps are playing a significant role in how the financial industry is improving customer service, optimizing costs, and providing new products of value to customers. AI is how Gen Z will primarily communicate with financial institutions, and that AI encompasses everything from chatbots to fraud detection to task automation. “Gen Z are completely digitally native,” Dennis Gada, head of financial services for North America at Infosys, told ZDNet. “For them, banking or financial services is an extension of their lifestyle… the more digital a bank is, the higher their level of trust.”
How AI is leveraged to better serve Gen Z customers
Gen Z has grown up using Alexa and Siri. Conversational AI is second nature, and financial institutions are now implementing this technology to assist customers in accessing features 24/7. Conversational AI, however, goes beyond basic chatbots to recognizing voice patterns, identifying and recommending tools, and accessing backend systems for answers. Capital One launched the first AI-powered personal finance tool used by US banks in 2017. It was a natural language, SMS text-based assistant that provided over 12 features, including fraud monitoring and price hike alerts for subscription services. Today, Bank of America has Erica, a virtual financial assistant that can provide personalized guidance. While customers can retrieve routine information like account balances or transaction details, they can also address more complex requests through the AI tools. Erica will either provide the answer or direct customers to the appropriate resources. Predictive analysis is another feature that Gen Z has come to expect from the financial service industry. Apps like Truebill will analyze data across multiple accounts and provide alerts if spending patterns change in a way that might lead to overdraft charges. Digit employs AI technology to assess a customer’s spending habits, forecast expenses, and automatically save an amount based on the analysis. Personal Capital provides a dashboard to monitor all accounts, employing AI technology to provide a useful set of free budgeting and portfolio management tools. AI is also ushering in a Gen Z-friendly funding model. AI-powered tools are already renegotiating service contracts with subscription providers – all without involving the subscribers. Those subscribers can then choose to share a percentage of any savings recouped by the AI-powered tool. “Those are the kinds of value-added services that Gen Z truly appreciates,” Gada explained. According to research by Cornerstone, only one-third of consumers are confident they are maximizing their savings efforts. AI-powered savings apps and tools are attracting consumers who want to save more money and make better financial decisions – without having to wait to speak with a human being.
How AI is changing Gen Z’s financial habits
A survey commissioned by George Washington University School of Business and TIAA Institute found that Gen Z has the lowest level of financial literacy compared to older generations. Only 43% of Gen Z respondents answered most questions correctly compared the the average of 55%. The survey included 3,035 respondents. However, Gen Z may be more financially sophisticated at their age than any other generation. Research from Cornerstone found that one in five members of this generation already use automated savings tools. According to a 2022 online Investopedia survey of 4,000 adults administered between January 27 through February 7:
More than half, 54%, of Gen Z adults hold some kind of investment.Nearly a quarter of Gen Z adults hold cryptocurrencies and stocks (and one in 10 own NFTs).Gen Z feels the most confident about consuming and saving.Gen Z adults who have an income of more than $50,000 are more likely to be confident in their financial knowledge (57%) than those who are making less than $50,000 (39%).One-third feel they have a beginner’s knowledge of financial management basics like paying taxes and borrowing/managing debt.
“We see a lot of investment firms focus on Gen Z to give them alternatives with robo adversary techniques. Using lifestyle requirements, they are recommending the kind of investments to save money and how savings can be automated,” Gada said. Gen Z is in the early stage of adult life; long-term investment returns may not be the hook that draws them toward financial literacy – yet. However, many fintech firms are encouraging this group to save by looking at short-term lifestyle goals (like saving for vacations) and then working backwards with the help of AI and personalized recommendations for tools and services.
