Here’s why Gen Zs and Millennials care so much about Fintech
Fintech is engaging Gen Zs and Millennials like traditional financial services never could. What have we seen so far and what else is to come?
If you walk around the internet streets it won’t be long till you hear about crypto, NFTs, GameStop, contactless payments etc. and I can bet it might be from a Gen Z (1996–2010) or Millennial (1980–1995).
Why? I believe this is largely driven by these generations desire to earn more, get things done easier and quicker, and overall challenge the status quo. Gen Zs and Millennials do not accept ‘let me take care of your money for you’ or ‘come into the branch to sort this out’. No.
Instead, Millennials lost trust in bankers, banking and the wider financial services sector post the financial crisis and Fintech became the perfect solution to the rebranding and transparency the industry needed. The rise of the iPhone and mobile apps gave birth to a new generation of customers who want more and want it now. Now Fintech enables Gen Zs and Millennials to manage their finances independently, largely without the interjection of a branch/wealth manager.
Fintech attracts Gen Zs and Millennials because it is built on transparency, ease and flexibility. Research estimates that Millennials are ~25% of the global population and Gen Zs are now the largest generation at 32% of the global population. Combined these generations contribute to around £264bn ($350bn) of spending power in the US alone, so no wonder all types of companies are keen to become digital-first and appeal to these demographics.
Let’s look at why Fintech has become so popular with these generations and what else we can expect to see in this space.
Fintech is… accessible
Unlike its predecessor, Fintech doesn’t pride itself on ambiguity and mystery. Consumer-facing Fintechs such as Revolut, Monzo and Starling are digital banks, which enticed customers with mobile-friendly experiences, 24/7 customer service and cheaper foreign exchange which is exactly what their digitally-native, always-on, nomadic customers craved. Although many incumbents have caught up, these Fintechs opened the door to Financial services that works around you.
Additionally, Fintech has said to these generations don’t be scared of the stock market, get involved! Fintechs such as Freetrade and Robinhood are championing the fact that you don’t need to be a millionaire to get involved in the wealth creation game.
Finally, accessibility has also been driven by social media. Just as the recent GameStop saga started via a Reddit thread. Fintech influencers are a real thing. Anecdotally, I am sure you also know many young people who go to social media (YouTube/Clubhouse/Twitter/Whatsapp or Telegram Groups etc.) for financial advice. Klarna has even created a Fintech influencer council recognising the need for responsible marketing for the financial services industry.
Fintech is… easier to understand
The financial services industry has long been very jargon-heavy. The internet has enabled the rise of platforms to open up understanding of the industry. Now, more than ever, young people can learn more about the space.
One easy way to see this is to note the language used by Fintechs such as Cleo, CashApp, ANNA Money and compare this to traditional financial institutions. The tone is generally more ‘we exist to help you, here’s how we do that simply’ rather than ‘you don’t want to learn about this complicated thing just give us your money’.
Fintech is… everywhere
If you’re in the industry, you have probably heard the famous a16z phrase ‘every company will become a Fintech company.’ Another reason why Gen Zs and Millennials care about Fintech is that fintech is increasingly becoming integrated. Our beloved tech companies like Google, Apple and Amazon are launching fintech products (see Apple Pay, Amazon business loans etc.). These companies have swooned Gen Zs and Millennials with their slickness and convenience tacking fintech on to their existing offerings. Given how time-poor we all are, this is is a winning strategy. Whatsmore they are steering clear from the deposit-taking which would put them under regulatory scrutiny.
Fintech is… frictionless
Fintech has enabled banking to be frictionless. Open Banking which essentially allows consumers to have access to their own financial data (shocking but important) initially made it much easier to switch accounts and to integrate bank accounts into one place. I love this as it has enabled customers to get a clear view of their accounts to easily monitor for fraud and securely manage money across various services and providers. E.g. See Yolt
Additionally, I couldn’t not mention Buy now, pay later (BNPL) when talking about frictionless fintech. Klarna and friends sell the dreams of the instagrammable lifestyle and tell rightly or wrongly, Gen Zs and Millennials they can have this life now. Who needs complicated and costly credit cards when you can Klarna for cheaper and easier?
This is just the start of this space and I am also excited to see this transition to open finance, which will also open up sharing beyond just transaction data but to investments. This has great implications for choice, financial access and inclusion through greater portability of financial data.
Fintech is… cool
From neon cards to hilarious tweets, Fintech has done well to brand itself as the cooler younger, kinder version of financial services.
Fintech is… automatic
Everything is easiest when it is done without you having to remember to do so. Automation has helped Gen Zs and Millennials by providing ease and diligence to build the good financial habits we always wanted to. Robo-advisors such as Chip, Moneybox, Emma and the wide-adoption of round-ups by others too is a fantastic example of this.
Wow, this is exciting, so what else can we expect to see in this space?
Fintech becomes… social
55% of consumers feel disconnected from their financial services experience. I find this odd given finances and spending is inherently lifestyle-driven.
Gen Zs and Millennials went from ‘yay student loan dropped!!’ to ‘ok seriously, how can I make more money?’ This change in attitudes to normalise conversations about money and this disconnect in the experience can only signal that it is about time Fintech got social!
I am very passionate about community-driven companies. Good examples are Peloton, Glossier and I happen to run my own. I am excited about the idea of fintech becoming social. So although we have seen some elements of social Fintech through the P2P payments such as CashApp/Venmo etc. In the future I expect many fintechs to focus on community-building and making fintech sociable.
For instance, why can’t my bank tell me, how I spend compared to the average twenty-something year old or why can’t I share what I just bought as easily as I can send a tweet? By emphasising the social value of Fintech, the financial services sector might gain even more attention and approval from Gen Zs and Millennials. Incumbents actually have the edge here given their large customer bases and the data they have. This could be the sticky customer solution that they have been looking to find…
Additionally, I would love to see more gamification in Fintech. We all know the power of the like and share buttons and I know we could use that same energy to help people good financial habits. I’ve loved seeing IFTTT showcase the power of behavioural economics and fintech for saving. They state that those who use IFTTT save almost twice as much and reach 68% more goals than members who don’t. Another one to look out for is Public — social fintech for investments.
Aligned to this social trend, I see further growth in Fintech for creators/those with multiple streams of income, enterprise financial wellbeing products and services and purpose-driven fintech — e.g. Yayzy which allows you to calculate and offset your carbon footprint from your bank account.
Ideally, mainstream fintech or Financial services could adequately serve unrepresented groups but let me not get into that. As someone who has been actively involved in conversations about diversity and inclusion, I have always been particularly interested in how money and financial habits intersect with culture.
For instance, I have always wanted to know and be able to share how much money I have spent on Black businesses in the last year or with small independent retailers. Now, this might be closer than I think.
There is definitely a rise of Fintechs focused on specific communities e.g. Black people, LGBT+, Creators. These companies benefit from immediately resonating with their target customers and designing a curated personal banking experience with a specific customer in mind has the potential to be very sticky.
Fintech becomes... broader
Fintech has really transformed banking so I am eager to see the same concepts applied elsewhere at scale. Next up is likely the insurance industry which is even more archaic and opaque. We have already seen some great digital insurtechs like By Miles, Bought by Many and Lemonade but there is much more to do in this space.
I am also excited to see more Fintech investment and focus on other areas such as DeFi, Pensions, fractional investing etc.
In summary, fintech has made huge strides for the financial services industry, hopefully this blog post has given an insight into exactly how. It has opened the door for more people than ever to interact with financial services and is starting to change behaviours too. Although consumers are getting better services and experience through fintech, it goes without saying that trust is also important. The space is still young and bad press taints the whole industry.
To close, it is worth mentioning, this blog is very western focused and doesn’t address the fact that two billion adults, 42% of the world’s population are unbanked and are excluded from financial services. There is lots more work to do! It also excludes much mention of Blockchain and cryptocurrencies which deserve a whole other blog post and are largely just getting started.
Thank you for reading! I hope you enjoyed this. Did I miss anything? Do you agree or disagree with any of these remarks? Let me know below or via socials.