FIS Modern Banking Platform
Advance your bank with a modern core platform.
A leading theme in Worldpay’s 2020 Global Payments Report is on the emerging importance of Gen Z. We explore the characteristics of this generation and how that’s influencing the way brands will interact, target, and ultimately connect with consumers. We recently sat down with Fernanda Hoefel from McKinsey and Gabriel Milanez from Box 1824—contributors to a recent report, “‘True Gen’: Generation Z and its implications for companies”—to get their perspectives on a new generation that’s changing the face of commerce.
Worldpay: You recently did a lot of research in Brazil on Gen Z. How is this demographic going to change commerce? How does Gen Z in Brazil compare to other countries?
Fernanda Hoefel: McKinsey and Box 1824 wanted to better understand what Generation Z was about and how they could change the landscape of the consumer industry in Brazil. Our research was focused in Brazil but based on what we’ve seen elsewhere we have a strong conviction that across geographies generations have more common traits than differences. We’ve found a lot of homogeneity within Gen Z in Brazil, which we are also seeing elsewhere in the world. These are people that are extremely connected among each other and that are exposed to many similar influences.
Worldpay: How can brands collaborate or co-create content with Gen Z to redefine commerce? What do you see them doing with retailers or brands there?
Fernanda Hoefel: We see a lot of eCommerce players go into great depth with data to provide very targeted offerings and services. This generation buys or consumes a brand to express itself—not to be part of the crowd. It’s much more about brands being a means for people to express themselves than about them being a template in which people will fit in.
Gabriel Milanez: For previous generations, brands would collaborate with a celebrity that could represent the whole generation. It doesn’t work that way anymore. Gen Z were born in a networked society and are connected to different networks around the world and across multiple subjects. It’s about brands being in touch with their customers in the relevant spheres. It’s about talking and interacting with consumers. Brands must choose in which universe they want to be relevant and choose relevant people in these universes to make their collaborations.
Worldpay: In your report you write about a two-track model, customization with big brands and then mass-consumption. What should brands be thinking about to account for both?
Fernanda Hoefel: Yeah, this is easier said than done, it’s a big challenge that companies shouldn’t shy away from anymore. Today, the typical retailer might have 50% of total revenues coming from 20% of their most loyal customers. That makes a strong case for a two-track model. Catering to this 20% requires more personalized offerings. As a company you need to understand exactly what people buying, what are their needs and unmet needs, and therefore what should we be doing to cater to them?
And then, on the other hand, you have the remaining 50% of the business which comprises a mass market, people that you might identify or not, but they are so numerous that it’s not possible to cater to them in an individualized fashion. This makes the two-track model necessary. That requires new levels of flexibility and agility within companies. Let’s think about the apparel or beauty markets. Time-to-market is very long, typically in the order of a year. But now consumers have completely different expectations about time to market and completely different needs. If you want to cater in a personalized fashion to consumers, you must have more flexibility than a time to market of twelve months. It will be important to have these different levels of agility. You’ll need one line of business within the company that can be fast, nimble, and cater to consumers in a very individualized fashion.
And then, there’s another track in which you have a lot of flexibility while catering to a lot of people. But the same one-track model won’t work because if you have flexibility without scale, you can’t grow. If you only have the scale without flexibility, you won’t cater to consumers’ personalized needs.
Gabriel Milanez: Gen Z were born in this networked society. They’re connected to data. They know what’s possible. They know their data is everywhere. How will companies use that data to give them back solutions? They know that hyper-personalized solutions are possible. This demand—to have something made exactly for me, just for me in all my particularities—this demand will grow because this generation was born in a world where it’s possible.
Worldpay: Your research suggests that Gen Z believes that major brands are less ethical today. How do you think larger brands should begin to overcome those assumptions?
Gabriel Milanez: It’s not the size of the company, but how transparent the company can be. And it’s easier for a smaller company to be more transparent. For a huge company, it’s more difficult. Many traditional companies are often more closed—consumers don’t know exactly what a company’s values are. Whereas other companies embrace this culture of transparency. They have this culture of being open: open-source, inclusive decision making, showing their values. These companies, they tend to be considered more ethical. Reaching Gen Z requires more transparency. Brands will need to open themselves to the world to show people who they are, what they believe.
Worldpay: How will Gen Z disrupt consumer markets, especially as they continue to enter the workforce and gain buying power? How will Gen Z change the way we shop?
Fernanda Hoefel: Gen Z are already influencing society long before they become consumers. Young people have a disproportionate power to influence others. This is what sparked us to study this generation. As they become consumers, of course, they will change the numbers more sharply, but the influence that they have in society today is already very big.
Gabriel Milanez: Young people always push for big change. But they push for a big change and different kinds of consumption. Gen X, for example, tended toward status consumption. Millennials focused more on experiences. What’s new for Gen Z is that they are consuming truth. They want truth from companies, from brands, from everything they consume. That’s why we talk about ethics, singularity and access.
Worldpay: Do you see Gen Z influencing the generations before them to make changes? Do you see the way that they’re consuming and shopping and interacting with brands also influencing those that are older than they are?
Fernanda Hoefel: Absolutely and that’s not something new to Gen Z. Young people have influenced people older than them for generations. What’s changed today is the amount of connectivity between people. Gen Z is different because they’re digital natives—they were born connected. It’s even easier for influence to spread faster and more widely because we’re all connected. It’s so important to stay attuned to the generation that is rising, because they have the role of influencing others. We are the status quo. Gen Z is challenging the status quo.
Worldpay: Does the digitally-native Gen Z view the security of their personal information online differently than other generations?
Fernanda Hoefel: We do see that they are less learned about data privacy than other generations, but still they are concerned. Data privacy is important. They’re willing to compromise a bit on that if they received something in return from company in terms of value. Data privacy is a big concern for this generation—it’s not something to be taken lightly.
Gabriel Milanez: Gen Z understands the logic of the data better than the other generations. If you offered them something, okay, but they are aware that their data is valuable. They want something back. They want a real advantage, and that’s especially true here in Brazil.
Worldpay: How do you think Brazilians view security when it comes to their personal information and payment information online?
Fernanda Hoefel: Brazil went through a period of hyperinflation that brought a lot of instability. There was a lack of transparency—people just didn’t know how much money they had because its value was constantly changing. Further, there’s a lack of transparency about personal finances. Traditionally, Brazilians do not have a high degree of financial literacy. Historically, money management wasn’t discussed as part of the culture, so people might not know exactly how to control their money as they do in other markets.
The growth of eCommerce in Brazil has been hampered because people distrust institutions overall and are very wary about fraud. In Brazil, the fact that you are a big institution doesn’t earn the right to be thought of as honest. People are very careful about sharing their payment information. They’re very distrustful about inputting their credit card info on the internet.
Worldpay: Consumers are continually bombarded with information every day. What are some ways that brands can stand out to reach this generation of consumers through all the noise?
Fernanda Hoefel: More than ever brands must do two things: listen to what people want and offer them something back. Years ago, if you worked in advertising, you’d put your ad in a magazine or on TV and your work is done. Nowadays, to be relevant you must interact with your customers. Brands have the data and know what their customers like and must use that data to go beyond the traditional—not only talking, but listening, interacting, and offering hyper-personalized services to their customers.
For a deeper dive into Gen Z and payments around the world, download Worldpay’s 2020 Global Payments Report, our annual report that explores the pathways of people and payments that connect us all.
Fernanda Hoefel is a McKinsey partner based in São Paulo who works with retail and consumer clients to drive value creation through end-to-end commercial transformations.
Gabriel Milanez is Strategy and Research VP at São Paulo-based Box 1824, an innovation consultancy working to understand the emergent behaviors that are shaping tomorrow.