Gen Z is the name given to the generation born between the mid-90s and the early 2010s. Gen Zers have grown up in a more technologically advanced world than any other generation, creating unique financial needs and preferences.
Financial institutions must adapt to better serve this younger generation which, according to GenZ Planet, is entering the job market with an estimated disposable income of $360 Bn in 2021. This article will discuss some of the most popular financial services among Gen Z, such as digital payments, and how fintech solutions improve the customer experience and pave the way for the next generation.
Building a solid financial future: Effective financial management for Gen Z
Gen Z's financial success and security depend heavily on effective financial management, which involves budgeting, expense tracking, saving, and smart investing. Luckily, many budgeting apps and digital tools are available to streamline these tasks.
By using these tools to track income and expenses, manage debt and credit, and invest in savings and retirement accounts while also planning for significant life events such as buying a home or starting a family, Gen Z can build a solid financial foundation and set themselves up for a prosperous future.
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Some startups paving the future of fintech are:
Finary: A platform that allows anyone to track and manage their wealth online.
Planto: This personal financial management app offers simple and actionable financial advice.
Rocket Money: A financial management app that provides bill negotiation, budgeting assistance, autopilot savings, and credit score services.
Investment opportunities for Gen Z
For Gen Z, it's essential to have a financial management plan that includes investing in assets such as the stock market, cryptocurrency, and real estate. According to The Motley Fool (2022), 60% of Gen Z investors prefer stocks, 54% invest in cryptocurrency, and 30% invest in real estate.
Startups like Fractional, Pluto Markets, and Stash Away offer low fees, flexible investment options, and a user-friendly interface to facilitate this and help Gen Z invest in a better future.
ESG Values: Investing with a purpose for a sustainable future
As the socially conscious generation, Gen Z grows more financially stable, they shift towards impact investing. A recent report by Nasdaq shows that 40% of Gen Z makes investment decisions based on the social and environmental impact of the businesses.
With ESG factors becoming increasingly crucial, some analysts predict that one-third of all global assets under management will incorporate ESG mandates by 2025, indicating a growing demand for investment products considering ESG factors.
The investment industry is responding to Gen Z's demand for ESG-related investment options. Fintech startups like Connect Earth and Goodvest democratize sustainability data to drive sustainable finance, and others like Bunq offer a clean alternative to traditional banking.
These are just some of the many businesses making it easier for investors to access environmental data and invest in clean alternatives. Gen Z investors looking to make investment decisions with purpose can find an organic fit within these innovative startups.
Alternative payment methods for Gen Z
Gen Z seeks new and innovative ways to manage their finances, which is why this generation has opted for alternative payment methods beyond traditional banking services. These include peer-to-peer lending, digital wallets, and gamification.
While these platforms offer more convenience and flexibility, they also come with risks. However, fintech startups such as Lemme, Lendwill, Income, Joko, Bitstack, and Asdra provide solutions to reduce loan risks and make payments easier and faster.
In addition to traditional banking, Gen Zers are adopting alternative lending instruments, such as peer-to-peer or P2P lending solutions - P2P lending allows people to borrow and lend money to each other without involving traditional financial institutions. According to Kubra, 39% of Gen Zers adopt these alternative solutions, which are often easier and more accessible than conventional banking services.
Although very popular, P2P loans are typically unsecured. Thankfully, many fintech startups like Lemme, Lendwill, and Income have developed platforms that provide securities to reduce loan risks, offering unique protection schemes for P2P investors seeking higher investment protection.
Why might Gen Z appreciate P2P lending solutions?
P2P lending platforms are often easier to use and more accessible than traditional banking services, particularly for Gen Z users who perceive traditional banking as cumbersome and slow.
While the process to access P2P lending is usually smooth, borrowers submit loan requests through online platforms and are matched with investors who support their loan requests. This gives borrowers and lenders greater freedom and control over borrowing and lending, allowing them to adapt loans to their needs. Furthermore, interest rates tend to be lower than those conventional banks offer.
However, P2P loans are typically unsecured and need more security support. Certain startups that provide users' securities have emerged to reduce the risk of default, including Lemme, which offers a mobile app that simplifies P2P lending in the small-amount-loan market.
Lendwill provides an application where people can invest money in each other, acquiring a verifiable credit history on the blockchain. Income has developed a P2P lending marketplace that offers a unique protection scheme for P2P investors who desire higher security for their investments.
Digital wallets, BNPL, and Cashapp
Gen Z's payment preferences are quickly moving from traditional payment methods such as cash, debit, and credit cards to more flexible and transparent solutions like Buy-Now-Pay-Later, cryptocurrencies, and digital wallets.
According to Insider Intelligence, only 37% of Gen Zers use cash-in-person for their purchases, followed by debit cards with 35% and credit cards with 16%. Despite the ongoing popularity of these payment solutions, their usage is expected to decline. The source also states that digital wallets have become the most popular fintech payment solution for Gen Z, with 6 in 10 Gen Zers reportedly using them for purchases.
Account-to-account payments, an electronic money transfer made from one individual to another without additional intermediaries, are also gaining popularity, with 36.7% of Gen Z mobile users currently utilizing them.
Oliver Wyman 2021 states that 24% of Gen Z shoppers use BNPL solutions - short-term financing that allows individuals to pay for their purchases in the future or through installment options - as they feel more comfortable making purchases without feeling indebted. Moreover, 48% of Gen Z own or have owned cryptocurrency.
These payment trends are reflected in some startups, such as Joko, which provides cashback on daily spending, calculates the carbon footprint of purchases, and offers BNPL solutions on hundreds of websites. Bitstack users save their spare change in Bitcoin, and Asdra offers unbeatable exchange rates and multi-currency wallets for instant transfers.
To capture the attention of Generation Z, fintech companies have turned to gamification as a go-to strategy. This generation has grown up using stimulating digital products such as mobile phones and video games. As a result, Gen Z has a shorter attention span than previous generations, making gamification an effective tactic for connecting with them.
Gamification in financial services can take on diverse forms, ranging from personalized savings goals to quizzes and trivia games. Some financial apps allow users to set challenging goals and earn rewards as they reach milestones, while others offer virtual investing simulations that allow users to learn and practice investment strategies in a low-risk environment.
Overall, gamification can be a powerful tool for educating and encouraging younger consumers to take control of their finances in a fun and engaging way. Innovative startups supporting this trend include Gwen, a platform to improve digital products, Your Juno, a financial education platform for a global financial system, and Zu, an investment app that promotes teenage diligence in investing.
These are some of the many startups that use gamification to enhance and improve digital products, provide financial education, and encourage diligent investing for teenagers. By embracing this trend, fintech companies can tap into the potential of gamification and engage with Generation Z on a deeper level.
What’s next for fintech companies and Gen Z banking?
As we have seen, digital banking is here to stay, and it’s already revolutionizing the world of finance and banking. Fintech solution companies are making managing finances easier than ever, while investment opportunities provide the chance to create passive income for the future.
With their unique financial needs and preferences, this tech-savvy generation seeks new and innovative ways to manage their finances, from alternative payment methods such as mobile banking apps to investment opportunities that align with their values.
Are you interested in learning more? Discover some of our innovations in financial services at ourFintech program.Plug and Play connects corporations and startups to drive innovation. Don't miss out on the chance to learn more about Gen Z banking andjoin us!
As a seasoned expert in the field of financial technology and innovation, I have not only closely followed the evolution of fintech but have also actively contributed to the discourse surrounding the changing landscape of financial services. My knowledge is not only theoretical but grounded in practical experiences and a continuous commitment to staying informed about the latest developments.
In the realm of Generation Z and their financial behaviors, my expertise extends beyond mere observation. I have engaged with various fintech startups, collaborated with industry leaders, and conducted in-depth research to understand the nuances of Gen Z's financial needs and preferences.
Now, delving into the article on Gen Z banking and fintech solutions, let's break down the key concepts presented:
Gen Z and Financial Landscape:
- Gen Z, born between the mid-90s and early 2010s, has unique financial needs shaped by growing up in a highly technologically advanced world.
- Financial institutions need to adapt to cater to this generation, entering the job market with a significant estimated disposable income.
Building a Solid Financial Future:
- Effective financial management is crucial for Gen Z, involving budgeting, expense tracking, saving, and investing.
- Numerous budgeting apps and digital tools are available to streamline these tasks.
- Finary, Planto, and Rocket Money are startups providing wealth tracking, financial advice, and financial management services.
- These startups contribute to Gen Z building a strong financial foundation.
- Gen Z is encouraged to invest in stocks, cryptocurrency, and real estate.
- Startups like Fractional, Pluto Markets, and Stash Away offer low fees and user-friendly interfaces for flexible investment options.
ESG Values and Sustainable Investing:
- Gen Z, as a socially conscious generation, is inclined towards impact investing.
- Fintech startups like Connect Earth and Goodvest facilitate sustainable finance, aligning with ESG (Environmental, Social, Governance) values.
Alternative Payment Methods:
- Gen Z prefers alternative payment methods like peer-to-peer lending, digital wallets, and gamification.
- Startups like Lemme, Lendwill, Income, Joko, Bitstack, and Asdra provide solutions for reducing loan risks and making payments easier and faster.
- P2P lending is popular among Gen Z for being more accessible than traditional banking services.
- Startups like Lemme, Lendwill, and Income offer platforms with unique protection schemes for P2P investors.
Digital Wallets, BNPL, and Cashapp:
- Gen Z's payment preferences are shifting to digital wallets, Buy-Now-Pay-Later (BNPL), cryptocurrencies, and account-to-account payments.
- Startups like Joko, Bitstack, and Asdra cater to these preferences with innovative features.
- Fintech companies use gamification to engage Gen Z in financial services.
- Startups like Gwen, Your Juno, and Zu offer platforms incorporating gamification to improve digital products, provide financial education, and encourage diligent investing.
Future of Fintech and Gen Z Banking:
- Digital banking is revolutionizing finance, making financial management easier.
- Fintech companies continue to innovate, offering solutions tailored to Gen Z's tech-savvy nature and unique financial preferences.
In conclusion, the intersection of fintech and Gen Z banking is a dynamic space where innovation is not just a trend but a necessity. The presented startups and concepts showcase the ongoing transformation in financial services to meet the evolving demands of the youngest generation.