Gen Z expects a seamless digital experience from brands, retailers and banks, prioritizing convenience and ease of use above all else. With more options than ever before, Gen Z has less brand loyalty when it comes to selecting financial institutions and retailers, focusing more so on what brands can offer instead rather than where they have the most history. In response, financial institutions and retailers are experimenting with products and services to capture the attention of these young, digital-first consumers. Fintechs and neobanks are trying to attract Gen Z with new banking and shopping rewards.

Consumers now more than ever look to save on products they love with robust rewards programs offered to them from their financial institutions. E-commerce and merchant-funded rewards programs also appeal to financial institutions as a method of retaining existing customers through attractive shopping rewards and accruing new ones by partnering with brands that Gen Z consumers use in their everyday lives. With a highly competitive field, incumbent banks are falling behind, and will have to look to fintechs and neobanks to expand beyond traditional merchant-funded shopping rewards programs to stand out to Gen Z.

Below are some examples of this latest trend:

Browser Extensions Allow Firms to Seamlessly and Automatically Apply Rewards

PayPal announced its partnership with the popular money-saving browser extension Honey last August to enable users to shop for promotions and earn cashback rewards which can be redeemed for a gift card or PayPal cashout. While the extension functions similarly to Capital One’s e-commerce browser extension, Capital One Shopping, PayPal Honey caters to its audience with a referral bonus. Users receive 500 points when a friend uses their referral link and makes a qualifying purchase through Honey. As one of the simplest ways to earn rewards, referral bonuses dually deepen the user’s relationship with PayPal Honey, incentivizing them to redeem their rewards to make another purchase or to deposit that money into the PayPal account, but also allows both firms to acquire new clients in an organic way.

Join Honey referral link generator

Fintechs Find Unique Ways to Combat Customer Pain Points During the Shopping Experience

With a highly competitive online retail space, it is increasingly difficult for fintechs to stand out from their competitors, much less create something entirely new. However, shopping and e-commerce company Flash embraced this challenge. Flash lets users create an email ID with a domain to use across shopping platforms, keeping their personal inboxes free of excessive shopping-related emails. Additionally, the firm offers rewards like coupons and cash back offers, plus, allows users to track their purchases within the app and browse curated recommendations. While personalized rewards and incentives available on the Flash platform increase customer engagement, discarding the customer pain point of spam emails boosts customer loyalty and satisfaction.

Flash Co Perk Promotion

Tiered Rewards Program Can Help Customers Prioritize What They Want to Purchase Based on Their Interests

Step offers a tiered rewards program based on the users’ interests, as users receive more points for certain categories than others. Step account holders can earn 3x points on monthly revolving rewards partner brands, 2x points on dining and delivery services, 2x points on charitable donations and 1x point on gaming and entertainment services and retailers. Following the success of the rewards program, the fintech recently launched a waitlist for its new Gen Z-tailored rewards card, the Step Black Card, which mirrors the structure of the rewards program by rewarding card holders with varying amounts of points based on spending category. Step also uses e-commerce rewards as a way to incentivize users to engage with the accounts’ other features. To even gain access to the rewards program, users are required to set up a monthly direct deposit. Additionally, rewards can be redeemed for cash as well as crypto. The firm’s crypto feature serves as an expansion of the cash-back rewards program and allows users to accumulate rewards in crypto when they use their Step card or make purchases with retailer partners.

Step Rewards Program

Rewards Can Promote a Firm’s Primary Feature

Acorns Rewards

Acorns works with partnered brands to promote the firm’s primary feature which is of course, investing. With Acorns Earn, clients can shop with partners to earn bonus investments deposited into an Acorns Invest portfolio. Uniquely, Acorns encourages clients to apply for “side-hustles” with partnered companies including Uber Eats, Doordash and Amazon. For example, a client can earn $30 in bonus investments after they make their first delivery as a Doordash driver. Additionally, like PayPal, Acorns offers a browser extension that automatically applies the feature when users make eligible purchases and offers a referral bonus for clients who invite a friend to use the feature.

Some Firms Offer an All-Encompassing Rewards Program that Keeps Consumers in a Firm’s Ecosystem

Klarna continues to be a firm to watch as it evolves into an all-encompassing shopping and payments app since its inception. The firm launched its “loyalty rewards club” in 2020, allowing customers to earn one point for every $1 spent with Klarna and gain a boost for completing Missions in the app including saving a merchant item, making purchases and connecting an external account. Most notably, the loyalty program offers users the option to select where they want to redeem their rewards, allowing Klarna to gain first-party data about its users and persuade them to shop and engage with the Klarna app instead of shopping from a specific retailer’s app. Klarna also added a loyalty card feature to its suite of digital offerings, enabling users to store and use their loyalty cards from other retailers in the Klarna app and further negating the need to use other apps.

SoFi offers a similar service, encouraging financial responsibility, engagement with the account and loyalty to SoFi’s ecosystem by rewarding members for maintaining a good credit history, making purchases with a SoFi credit card, exploring curated content, etc. Each redemption option is personalized to the client’s financial goals and what kind of accounts they have with the firm.

SoFi Rewards Page

Visit our fintech page to learn more about our subscription research in the fintech industry. And visit our Insights section for the latest trends and best practices across the financial services industry.

Hayden Ginder

Hayden Ginder is an Analyst on CI's projects team.