The future of finance is being shaped by a generation that has always had access to smartphones and high-speed internet. For Generation Z, digital tools are not just convenient but integral to their daily lives. This is particularly evident in how they manage their finances.

I recently attended Money 20/20 Asia in Bangkok, where one of the main topics was how Gen Z handles banking. It made me reflect on how much the relationship with money has changed for younger generations and what this means for those of us building the future of finance.

Millennials might have been the last group to frequently visit ATMs and bank branches. For Gen Z, money is mostly seen as digital numbers on a screen. This digital-first approach has both benefits and drawbacks.

Gen Z is rapidly adopting technology in finance, heavily influenced by social media and the fear of missing out (FOMO). They are starting to invest at younger ages and higher rates than previous generations. Gen Z is 1.8 times more likely to begin investing because of social media, driven by novelty, community, and the potential for financial gain.

This immersion in digital finance has led to some surprisingly positive habits. An impressive 70% of Gen Z are already saving for retirement, starting at a median age of 19, over a decade earlier than Gen X, who typically started at 30. By using apps to automate savings and investing, Gen Z can benefit greatly from compound growth. Automation simplifies the process, allowing young people to save consistently without much effort. For example, if a 20-year-old invests just $200 a month at a 7% annual return, they could retire with over $500,000 by age 60. Such long-term wealth building was harder to achieve before the rise of digital finance tools.

In India, startups like Rural Invest are using mobile apps to help young people in villages invest in mutual funds via SIPs. This is the first experience of the wealth-building potential of financial markets for many rural households.

Rural Invest’s digital-only strategy represents a broader trend: using technology to overcome traditional barriers to financial inclusion. Gen Z, by automating their savings and investments, is set to benefit enormously from compound growth.

However, this digital immersion can also lead to unhealthy behaviors. E-commerce giants use gamification tactics like flash sales and one-click credit card sign-ups to encourage impulse buying. A significant 41% of Gen Z consumers are impulse buyers, compared to 34% of Millennials. The instant gratification of in-app spending can hurt budgeting discipline.

Gen Z lives much of their lives on social media, using it to gain control over their financial futures by crowdsourcing advice and sharing tips. This democratization of personal finance information makes Gen Z the most financially included generation, with access to a wealth of knowledge and perspectives previously gate-kept by traditional financial institutions.

However, social media is also full of misinformation and questionable advice, which can harm Gen Z’s financial literacy if not approached critically. Nearly half of young people learn the basics of investing through social media, and about a third delve into more advanced strategies there. The mix of fact and fiction on these platforms can be problematic. For example, one social media influencer with over 60 million followers links cryptocurrency trends with planetary alignments, which, despite being an old concept, is now amplified to millions.

Engaging with Gen Z

The assumption is that Gen Z has low brand loyalty, demands full automation, and dislikes human interaction. However, data paints a slightly different picture. Surprisingly, Gen Z in both the US and UK shows a strong preference for legacy banks over digital-only challengers. In the US, 23% of Gen Z banks with Wells Fargo, while only 4% use challengers like Chime. Additionally, 81% of American Gen Z value face-to-face support at physical branches. Similarly, in the UK, traditional banks like Lloyds, Barclays, and NatWest are among Gen Z’s most favored financial brands, with 70% trusting banks more than influencers.

Gen Z faces unique financial challenges and opportunities in a digital world. Over 50% of Gen Zers are worried about their financial stability, and they are 1.4 times more likely to say “Money stresses me out” compared to older generations. This anxiety stems from witnessing their parents struggle through financial crises and recessions.

As Gen Z looks to the future, they prioritize the stability and reliability of established institutions. Financial brands must tailor their products to Gen Z’s unique needs and digital-first preferences while building trust and offering stability.

Legacy banks often struggle to meet the expectations of digital-native customers like Gen Z due to outdated IT infrastructure. These older systems can be inflexible, slow, and unable to integrate with modern fintech solutions. This technological debt hinders legacy banks’ ability to innovate and meet Gen Z’s needs. Recently, the Reserve Bank of India questioned the resilience of a leading bank’s IT infrastructure despite its digital-savvy reputation, highlighting the urgent need for upgrades.

Financial Literacy is Crucial

The fintech community has a crucial role in promoting financial literacy among Gen Z, in addition to helping banks update their technology. By integrating financial education into the digital platforms where Gen Z spends their time, such as gamified budgeting tools, in-app investing tutorials, and AI-powered coaching, complex concepts can become engaging and actionable. Fintechs should partner with educators to develop age-appropriate, culturally relevant curricula, while regulators must ensure protections for novice investors. The goal is to empower Gen Z to use automation intentionally.

Join the Conversation

What do you think? Is Gen Z brand-loyal? Are they more money-anxious than other generations? When it comes to spending, does Gen Z struggle with self-regulation, or are modern spending options just too tempting?

P.S. There’s a huge opportunity in the booming Creator Economy, with 50 million creators globally but a lack of dedicated banking solutions. Whoever figures out how to serve these creators will be well-positioned in a $500 billion industry by 2027. (I’ll discuss this more in a future edition of Future Finance.)