When you ask teenagers or young adults in their 20s when they last visited a bank, the answer might be “never.” However, if you ask them when they last made a wire transfer, they might say, “Just a few minutes ago.” In today’s world, going to a bank in person feels outdated.

The COVID-19 pandemic sped up the shift to digital services, and younger generations, as major consumers, are driving big changes in the banking industry. Millennials and Gen Z are reshaping the financial world with their digital-first approach and desire for convenience, helping to expand financial inclusion worldwide.

Let’s look at three key ways they are making this happen.

Embracing Digital Finance

Young people have grown up with technology at their fingertips, making them quick to adopt digital financial services. Millennials (born 1981-1995) and Gen Z (born 1995-2010) are becoming central to all economies, including banking. Their preference for fintech platforms goes beyond just meeting the needs of underserved populations. Unlike previous generations, today’s young individuals are more open to embracing technology in the banking world.

A June 2021 survey by EY found that 51 percent of Gen Z consumers view a fintech company as their most trusted financial brand, while only 23 percent choose a national bank. According to The Wall Street Journal, three factors explain why Gen Z prefers fintech for managing their finances:

– A dislike of credit card debt.

– An expectation that brands will reflect their values.

– A desire for community, networking, and self-education within financial services that invest in fun and recreational activities.

Fintech companies are innovating by reflecting the values and addressing the social concerns of younger generations, such as climate change, diversity, and inclusion—areas where traditional banks often fall short. Fintech presents itself as an easy, fun, and relatable alternative that speaks the same language and understands the needs of young consumers better than any other business.

Cryptocurrencies, while still a new asset class, have captured the interest of many young people. Platforms like Coinbase and Binance have made it easier for individuals to buy, sell, and hold cryptocurrencies. While their role in mainstream finance is still developing, cryptocurrencies have the potential to disrupt traditional banking systems and increase financial inclusion by offering an alternative to conventional financial institutions.

Buy Now, Pay Later (BNPL) services are also becoming popular among Gen Z, especially for smaller purchases. Seventy percent use it for purchases of less than $100. This is likely because BNPL is easy to use, widely available, and seen as a better alternative to credit cards. Data shows that nearly 32.8 million Gen Zers will use mobile wallets this year, and 43 percent will use BNPL. Very few in this generation use physical cards.

Driving Financial Literacy

Younger generations are becoming more aware of the importance of financial literacy. They are more likely to seek out financial education and share their knowledge with peers. Millennials, also known as Generation Y, grew up during a time of rapid economic change, which gave them higher career expectations than previous generations.

They are set to reshape the economy, having entered the workforce during economic instability and are now facing important financial decisions. Their high aspirations and reliance on technology for information are shaping their financial behavior, which will have a significant impact on the global economy.

Social media platforms like TikTok and Instagram have become popular places for financial advice, with influencers sharing tips on budgeting, saving, investing, and more. Accounts dedicated to financial education are breaking down complex financial concepts and making them accessible to a wider audience.

Young people are also less likely to accept financial jargon and complicated terms. They are pushing for clear and transparent financial products and services. Fintech companies that offer straightforward, no-nonsense products are gaining favor among these consumers.

Many young people are starting their own businesses and developing innovative financial solutions. This entrepreneurial spirit is contributing to a more inclusive financial ecosystem. Startups founded by younger entrepreneurs often focus on solving specific financial inclusion challenges, such as providing micro-loans or creating tools for underserved communities.

Shaping Consumer Behavior

The spending habits and preferences of younger generations are influencing the financial industry.

Mobile wallets and contactless payments have become the norm for many young people. This shift is driving the adoption of new payment technologies and infrastructure. Services like Apple Pay, Google Pay, and Samsung Pay are becoming widely used, pushing merchants to upgrade their payment systems to meet these preferences.

Younger generations are also more comfortable with subscription-based services, leading to the growth of subscription-based payment options. This trend is affecting everything from entertainment (Netflix, Spotify) to software (Adobe Creative Cloud, Microsoft Office 365), and even physical products (subscription boxes, meal kits).

This generation is more concerned about data privacy and security. Financial institutions must prioritize these concerns to build trust. Companies that demonstrate strong security measures and transparent data handling practices are more likely to earn the loyalty of younger customers.

Case Studies and Examples

– Kenya, M-Pesa: A mobile money service that has transformed financial inclusion by providing access to banking services for millions of previously unbanked individuals.

– China, WeChat Pay and Alipay: Mobile payment platforms that have changed the payment landscape and contributed to a cashless society.

– United States, Chime: A digital bank offering no-fee banking and early direct deposit, appealing to younger consumers.

– Sweden, Klarna: A fintech company that popularized the “buy now, pay later” model, making it easier for consumers to manage their finances.

– India, Digital India: A government initiative to expand internet access and digital literacy, bridging the digital divide and promoting financial inclusion.

– Philippines, GCash: A digital wallet partnering with rural banks to provide mobile banking services to remote communities.

Addressing Challenges and Opportunities

While younger generations are driving financial inclusion, challenges like the digital divide and the need for supportive regulations remain. By addressing these issues and leveraging the power of technology and innovation, we can create a more inclusive and equitable financial future for everyone.

By using technology, prioritizing financial education, and driving changes in consumer behavior, younger generations are playing a key role in expanding financial inclusion and creating a more equitable financial system. Their influence is driving innovation, transparency, and accessibility, ensuring that financial services are available to a larger portion of the global population.

As these trends continue, the financial landscape will undoubtedly become more inclusive and focused on the user, benefiting not only younger generations but society as a whole.