Millennials and Generation Z are key demographics for FinTech companies, and their influence is growing. These generations are central to the market for financial technology, with Gen Z representing an increasingly significant segment. In 2018, Gen Z had around $143 billion in spending power and is poised to become the largest generation of consumers by 2020. If FinTechs don’t effectively engage with millennials and Gen Z, they risk becoming obsolete.
Millennials (ages 24 to 40) and Gen Z (ages 8 to 23) differ significantly, so what appeals to one group might not resonate with the other. However, there are some shared characteristics FinTechs should consider when engaging these groups.
Their Relationship with Technology
Both millennials and Gen Z are deeply integrated with technology. Millennials witnessed the evolution of technology, adapting as it advanced. They remember early mobile phones and dial-up internet but have embraced new technological innovations.
Gen Z, in contrast, has never known a world without smartphones or the internet. They have grown up immersed in technology, with even the oldest among them younger than Amazon.
Their Attitudes Toward Banking and Finance
Millennials and Gen Z have distinct financial attitudes shaped by their economic environments. Many millennials began their careers during or just after the economic recession, which influenced their financial habits.
Gen Z, having grown up during the recession, witnessed its impact on their families. This has led to heightened financial anxiety, with 81% of Gen Z citing money as a major stressor and 33% identifying personal debt as a primary concern.
Both generations are more budget-conscious than previous ones, with a strong interest in saving and financial management. Gen Z tends to make practical financial decisions. Traditional financial services, however, often exclude these younger generations due to reliance on credit scores and database checks, which can be problematic for those with limited credit history.
This has resulted in a significant portion of the younger generation being underbanked. Despite this, 61% of Gen Z choose the same bank as their parents when opening accounts, but this doesn’t always mean these banks meet their needs.
Younger generations are more inclined to conduct financial transactions with technology companies, with 44% of Gen Z and 37% of millennials preferring this option over traditional banks. Many millennials also have a lukewarm relationship with traditional banks, with only 28% expressing a preference for them.
There is a clear demand among millennials and Gen Z for alternatives to traditional financial services. As digital natives, they are more open to digital and technology-based financial solutions.
However, FinTechs need to actively engage these generations. For instance, 54% of Gen Z members who have opened a bank account do not plan on opening another one, regardless of incentives.
How Can FinTechs Engage Millennials and Gen Z?
FinTechs can’t assume their tech-savvy services automatically appeal to younger generations. They need to understand these generations’ needs and offer products that help them achieve their financial goals. Here are some steps FinTechs can take:
1. Be Transparent and Ethical
According to Salesforce Research, 71% of millennials trust companies, compared to 63% of Gen Z. Only 55% of millennials and 44% of Gen Z are comfortable with how companies use their personal information. This indicates a significant distrust, especially regarding data usage.
Millennials and Gen Z value integrity and expect companies to act ethically. Given a choice between two banks, 86% of students would choose the one with a stronger ethical focus, even if it offers fewer incentives. FinTechs must prioritize ethical practices and transparency to win over younger customers.
2. Use Technology to Support Financial Goals
Both generations are more financially conscious and want technology that helps them save, invest, and manage money. FinTechs should design services that include savings tools, debt management features, and straightforward investment options. Educating users about their finances can also be a valuable service, as seen with Monzo’s in-app credit check.
3. Offer Seamless Digital Experiences
Digital natives expect easy-to-use, mobile-first digital experiences. FinTechs need to provide smooth customer journeys, complemented by personal support when necessary. Traditional methods of customer verification, like credit database checks, often fail younger users. FinTechs should explore alternative verification methods to streamline digital experiences and make services more accessible to underbanked younger generations.
