How AI is making Gen Z the most financially sophisticated generation

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From big banks to fintech startups, the financial services industry is leveraging the power of artificial intelligence (AI) to attract and support Gen Z customers. For those who matter, Gen Z includes anyone born between 1997 and 2012. Yes, even tweens are embracing fintech (financial technology).

AI-powered financial applications play an important role in how the financial industry improves customer service, optimizes costs, and delivers valuable new products to customers. AI is how Gen Z will primarily communicate with financial institutions, and this AI encompasses everything from chatbots to fraud detection to task automation.

“Gen Z is completely digital native,” said Dennis Gada, North America financial services manager at Infosys. ZDNet. “For them, banking or financial services are an extension of their way of life…the more digital a bank is, the higher their level of trust.”

How AI is being harnessed to better serve Gen Z customers

Generation Z grew up with Alexa and Siri. Conversational AI is second nature, and financial institutions are now implementing this technology to help customers access features 24/7. Conversational AI, however, goes beyond basic chatbots to recognize voice patterns, identify and recommend tools, and access 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 assistant that offered more than 12 features, including fraud monitoring and alerts price increases for subscription services.

Today, Bank of America has Erica, a virtual financial assistant who can provide personalized advice. While customers can retrieve routine information such as account balances or transaction details, they can also respond to more complex requests via AI tools. Erica will provide the answer or direct customers to the appropriate resources.

Predictive analytics is another feature that Gen Z expects from the financial services industry. Apps like Truebill will analyze data from multiple accounts and provide alerts if spending habits change in a way that could result in overdraft charges. Digit uses 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, using AI technology to provide a useful set of free budgeting and portfolio management tools.

AI is also ushering in a funding model suitable for Gen Z. AI-powered tools are already renegotiating service contracts with subscription providers, all without involving subscribers. These subscribers can then choose to share a percentage of any savings recovered by the AI-powered tool.

“These are the types of value-added services that Gen Z really appreciates,” Gada explained.

According to a study by Cornerstone, only a third of consumers are convinced that they are maximizing their savings efforts. AI-powered savings apps and tools appeal to consumers who want to save more money and make better financial decisions, without having to wait to talk to a human.

How AI is changing Gen Z’s financial habits

A survey commissioned by the George Washington University School of Business and the TIAA Institute found that Gen Zers have the lowest level of financial literacy compared to older generations. Only 43% of Gen Z respondents answered most questions correctly, compared to an average of 55%. The survey included 3,035 respondents.

However, Gen Z may be more financially sophisticated at their age than any other generation. Cornerstone research found that one in five of this generation already uses automated savings tools.

According to a 2022 Investopedia online survey of 4,000 adults administered between January 27 and February 7:

  • More than half, 54%, of Gen Z adults hold some kind of investment.
  • Nearly a quarter of Gen Z adults own cryptocurrencies and stocks (and one in 10 own NFTs).
  • Gen Z is the most confident about spending and saving.
  • Gen Z adults who earn more than $50,000 are more likely to be confident in their financial knowledge (57%) than those who earn less than $50,000 (39%).
  • A third feel they have a basic understanding of financial management basics, such as paying taxes and borrowing/debt management.

“We see a lot of investment firms focusing on Gen Z to offer them alternatives with robotic adversary techniques. Using lifestyle requirements, they recommend the type of investments to save money. money and how savings can be automated,” Gada said.

Generation Z is at the beginning of adult life; long-term investment returns may not yet be the hook that draws them to financial literacy. However, many fintech companies are encouraging this group to save by looking at short-term lifestyle goals (like saving for vacations) and then backtracking with the help of AI and personalized recommendations. tools and services.

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