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More socially and environmentally conscious customers are on the horizon. So how do financial providers meet their needs now – and in the future? Here’s a pan-European view from Ray Brash of PPS, Andréa Ganovelli of Green-Got, and Jes Hennig from Pockid

An uptick in regulation determining organisations’ environmental, social and governance (ESG) responsibilities and the emergence of a new generation of ‘conscious consumers’ are exerting a transformational pressure on banks and other financial service providers – not just superficially, but at the core of their organisations.

And the push-me, pull-me effect of compliance and customer demand is affecting the entire supply chain.

Here, Ray Brash, co-founder and CEO of European processor/issuer PPS, Andréa Ganovelli, co-founder and CEO of upcoming sustainable French retail bank Green-Got, whose tagline is ‘technology at the service of ecology’, and Jes Hennig co-founder and CEO of Pockid, the German banking app for young people (both of whom work with PPS) offer their insights on what Generations Y and Z want – and need – from a bank.

THE FINTECH MAGAZINE: People want 'more green' businesses – and younger generations of consumers (Gen Z in particular) have been vocal on that. Their demands extend to financial services, too. So, how can that sector ensure it responds and sees a commercial return?

RAY BRASH: If you think about it, cash is not a particularly great environmental product. It’s quite an intensive manufacturing process and it has to be transported, which requires big trucks. Historically, plastic cards have had issues such as PVC content. Reducing plastic cards and cash both have a commercial benefit for the economies they’re in, and they also have an environmental benefit. I think we’ve seen those two impacts during COVID.

You’re seeing more and more institutions producing products that are, effectively, card-based payments without a physical card, and, if the consumer wants one, that’s extra. That’s encouraging consumers to use digital payments, which are much greener, and, of course, from a commercial point of view, it’s saving costs for the fintech/bank.

ANDRÉA GANOVELLI: Paying for something is the end of every kind of production, and, when you produce something, you create a CO2 footprint. A digital payment application can help people to understand the environmental impact of what they are consuming. At Green-Got, we have an app connected to your card, which can help customers understand their CO2 footprint – because to reduce it, you first you need to know it, right? And then we can give them further advice. So, payments are key.

JES HENNIG: Whatever you do, remember that Generation Z are very familiar with sustainability issues, thanks in part to Greta Thunberg’s Fridays For Future campaign, and they are very alert to greenwashing, too. So, if you want to target a product towards them, then, as a company, just make sure you are meeting all of those sustainability requirements.

The payment, in terms of digital commerce, can quite easily drive a lot of social good

Ray Brash, PPS

TFM: This generation is also said to be more socially conscious. How can financial services align themselves with those values?

RB: In terms of digital commerce, I think payments can drive a lot of social good. Amazon is maybe not the best example of a socially forward-looking company, but they have a product called Smile, which is a way of making the same purchases you would make on Amazon, but if you go through its Smile site you make a donation with every purchase – in my case, it goes to my local village hall.

We’ve also seen examples of companies giving card readers to street buskers. The Big Issue magazine [which is sold on the street by homeless people to raise awareness of homelessness in the UK] famously has contactless payments.

And there’s a company called Pennies, for instance, that encourages rounding up to charity at the point of checkout. So, there are plenty of examples [of e-commerce enabling these values].

As a consumer, you just press a button, it’s taken cvare of, and you feel you’ve done your bit.

TFM: Gen Z might know more than ESG and climate change than most of us here.

But, despite being digitally savvy, they don’t really have a good handle on money. So, how should providers address this problem and how should they communicate with these new users more broadly?

JH: If we look at the high street banking market, especially here in Germany, institutions are being challenged in the adult and corporate field all the time. But they don’t focus on the generation of customers to come.

Let’s start with the problem we want to solve. This generation is socialised with in-game purchases – through Fortnite, FIFA, League of Legends, and the like – and they use subscription-based services, like Netflix and Spotify.

So, they obviously make e-commerce transactions, but they don’t have a hyper-tailored financial services offering that really helps them enable their digital hobbies and needs, and understands about their digital spending behaviours.

Our own analysis showed that 13-to-16-year-olds make around 20 to 25 microtransactions over a weekend and these transactions each have a value of 10 to 60 euro cents – they are trying to level up in their favourite games, otherwise they are missing out.

Therefore, we can take this use case, put it into our TikTok videos, and explain to our potential future customers why it is so important to have a banking app experience where they see their spending in real time and also how they can set spending limits. We think it’s important to address this target group with use cases that they experience in their daily lives. In terms of communicating, it’s about being authentic and also transparent. We are already the biggest European neobank on TikTok and we have a big mission to help the young generation pay independently, online and offline, with a dedicated and hyper-tailored experience. RB: PPS works with both Green-Got and Pockid. They bring the ideas and the target audience; our responsibility is to adapt and tailor our services, which, frankly, involve regulation that was never designed for a 13-year-old.

In fact, we started with our first product aimed at teenagers in 2001.

The next generation

Future customers are used to in-game and subscription purchases, so will expect user-friendly banking services

Speaking their language

Young people will engage with banks if the message is authentic and they are transparent

It was called Splash Plastic, for which we had to develop methods of selling financial services to people you couldn’t KYC, which is something most banks thought impossible – but we did it by being creative and really trying to understand the user experience. To do that, we work closely with our partners, and are able to adapt because we manage the regulation, as well as the processing.

Like Jes, I’ve definitely seen that there is a role for fintech in reaching an audience that has not been reached at all by big banks.

If you want to teach them, they need to trust you, and to trust you, you have to talk like a friend

Andréa Ganovelli, Green-Got

AG: Huge banks all over the world serve people from 15 to 80 years old. You don’t talk to those people in the same way, but if those banks changed how they communicated, they would lose part of their customer base.

Challenger banks, focussing on Gen Z or Millennials, can talk to them in the same way that they are talking to their friends, which allows us to become an advisor to them. If you want to teach them, they need to trust you, and to trust you, you have to talk like a friend. That’s super-important because, here in France, they don’t know about the financial system, they don’t know about the banking system. It’s difficult for them to understand the money flow.

TFM: And, once these young people are customers, how do you keep them?

AG: Firstly, the app has to work. Younger people were practically born with a phone in their hand. And, if it doesn’t work, they won’t wait for you to fix it – you’ll lose customers because, with so many offers on the market, they'll simply switch to the next one.

Secondly, we are going to grow up with our customers. Our communication will change over time, because the people that we serve, will change over time, too.

We are the same age – all the team at Green-Got is between 25 and 40 years old. We are our target audience, so we know our them perfectly! JS: Our target group of 14-to-17-year-olds have high disposable income because, in Germany, people start an apprenticeship at 16. But around 50 per cent of this target group has no bank account at all and, in any case, in this country, 90 per cent of the cards distributed by banks are Girocards that you cannot use to pay online – they are used mainly for withdrawing cash and paying in stores.

So, coming back to my earlier point about in-game purchases, subscriptions, and e-commerce transactions, it’s pretty clear that they will quite easily fall in love with a product like Pockid – and this payment behaviour will not stop with the 18th birthday. Therefore, if we manage it, to become their first bank account, with their first IBAN, and with their first virtual and physical debit Mastercard, we can, with a good experience, lock them in. We, too, will grow with them over time, and let’s see where we will be in five to 10 years.

TFM: How will banking be different for Gen Z when they are their parents’ age now?

JH: We are just at the beginning of the open banking trend. I think, over the next few years, we will see much more about contextual and embedded finance in different value chains, making the user experience even leaner and better. In the end, finance is an enabling industry but, with that, comes responsibility.

Gen Z are very familiar with sustainability issues and they have a good feeling for greenwashing

Jes Hennig, Pockid

AG: In France, we have a lot of players now that are dedicated to people with issues around money. Financial inclusion is only going to increase in the future with crypto and the blockchain and that’s super-promising. It has to be regulated, but I think that’s going to have a big impact on the banking and payments industry to such an extent, that, at some point, people won’t use banks.