The largest population of consumers across the globe is Gen Z — born between 1995 - 2010 (right after millennials).

The immense market opportunity (over $140B in future spending) brings a heightened focus for traditional and non-traditional financial service providers. What offerings and platforms fit best for this dynamic, digital-only, social media powered demographic? It’s THE question banks and financial technology (FinTech) firms are trying to solve for today.

FinTech companies, known for speed in new product offerings, seem best positioned to earn Gen Z wallet share quickly. As of today, there isn’t a clear cut winner accommodating the diverse needs of these pre-teens through post college graduates.

Here’s an exploration of key attributes in consumer behavior, representing a potential recipe for success with Gen Z (and 4 already serving this segment).

Tech PROFICIENT

If millennials are categorized as the ‘online generation’ — Gen Z is the ‘mobile native generation’ with a high level of proficiency in modern technology. Accustomed to mobile devices over desktop workstations, tech (especially with touch screens) has been part of their everyday life since elementary school. The bar for the ‘next big thing’ in financial technology is increasingly higher — more capabilities, more speed, enhanced design, ease of use, and overall convenience.

Speed is highly prioritized. In banking, this means time in opening an account, access to funds, and making purchases or payments. Gen Z seeks financial services that are instant or real-time — basic mobile banking apps with budgeting functions (common for traditional banks) don’t cut it when it comes to processing. Neobanks and challenger banks added speed, design elements, and multiple products to bridge the gap, but more is needed than just pure tech development.

VALUE Financial Freedom

Side hustles & gigs yielding multiple income streams allowed Gen Z to start earning and saving earlier in their life. The previously mentioned characteristic of tech proficiency ushered in an economy of content creators, social media gurus, and freelancers. The ability to choose multiple platforms (YouTube, Twitter, Spotify, Medium, Etsy, Substack, etc.) to create a product and brand for monetization (from home) is unique to Gen Z.

Additionally, living through two impactful economic periods (Financial Crisis of 2008 - 2009 and the pandemic starting in 2020) increased overall consciousness of finances, debt levels, and emergency savings. These consumers tend to stay away from credit card spend as much as possible, using debit cards or interest-free payment frameworks (such as Buy-Now-Pay-Later).

Total financial freedom as a possibility at an early age is the ultimate goal. With Gen Z and its focus on financial health & diverse income potential, the likelihood to get there is even higher — as long as proper education/tools are available.

Knowledge when it comes to spending, budgeting, investing, credit, and retirement is available through multiple sources today. It’s still up to Gen Z to filter through the volume of financial content available. One-on-one advice is needed when it comes to long-term goals of purchasing a home, investment strategy, and matching wealth with retirement goals. Personalized advice for Gen Z tends to resonate most when it comes from fellow Gen Z-ers and influencers, instead of traditional mortgage bankers and financial advisors.

visibility through Social Media and community forums

With the rise of social media platforms most impacting this generation, financial literacy & advice is mostly uncovered through blogs, short videos, and articles that are colorful, engaging, and concise. The ease of availability from social media also increases the difficulty for financial services companies to reach Gen Z and have potential users take action.

A presence on Tik-Tok and Twitter is one thing, but building an engaged community is major undertaking that businesses in the past have no experience with. To capture and retain Gen Z consumers, banks and fintechs need to stock up on industry influencers and commit to building a community ecosystem for early adopters to evangelize. Having a social media first and group/community approach is vital.

SUCCESS FACTORS IN BUILDING the neobank for gen z

The most modern design, dynamic financial products & features, custom advice, tailored benefits AND engaged community via social media — it’s a lot to ask for from one platform.

The recommendation for today’s fintech builders is to tackle one bucket at a time — product & features OR advice.

Streamlined design is now tablestakes — a poor user experience doesn’t give any app a chance to grow. Tailored benefits come into play once a base of customers is established and insights gained from their transaction activity. When it comes the two focus areas:

• Product & features: there are multiple entry points here — (A) a gamified neobanking platform (we saw sweepstakes models and prize-linked savings take off before);

  (B) a credit builder program in which users receive a card to make purchases and make monthly payments automatically (secured by a customer’s deposit, or unsecured with a low spending limit);

  (C) investing app targeting common interests (environment, sustainability, etc.). Based on actual deposit and spend activity, affiliate marketing partners can be added for cashback reward offers;

• Advice: the focus here is to build a trusted relationship with Gen Z and leverage trust in offering future products; potential users would be educated and receive best practices — ‘finfluencers’ and industry experts can be featured to show support for a newly launched platform. Despite this being a ‘long play’, banks and fintechs can be rewarded with ‘sticky’ customers, which have higher user activity and keep the banking relationship.

Here are a few of today’s fintechs that highlight a targeted focus on Gen Z:

• Zelf — neobank for the ‘metaverse’ offering fiat & crypto transacting with a card;

• Finary — social app geared towards investing as a group activity;

• Alinea — another investing app focused on impact investing & crypto via a ‘playlist’ experience;

• Frich — offers ways to build better money habits for a community of 30K+ through its newsletter;

The common theme from this cohort is an emphasis on group, collaborative, and social engagement from within the platform. These aren’t the fintech apps we’re accustomed to in which we log in, perform transaction requests, and log out. There’s a community in the app that you should engage with, ask questions, show progress against personal goals, and share the overall experience with.

What’s NEXT: maturity for Gen z FINTECH

It’s still early days for platforms exclusively serving this market in an impactful way.

Besides the characteristics mentioned above (each carrying different weight by age group in Gen Z), the creators of these offerings tend to be millennials or older. There’s an inherent gap in building a platform for a younger generation — truly knowing your customer.

More Gen Z founders and product teams would be helpful, but they’d come fresh out of college with minimal experience. Mentorship for this next wave of leaders (especially after highschool) is definitely needed across the industry.

For existing Gen Z fintech apps, learnings & experience in this next year will be crucial (especially if there’s continued downward pressure in the economy). Focus on core revenue drivers, minimizing unnecessary spend, and a mindful approach to new initiatives — broadly applicable to tech startups and enterprises in 2023, but a major lesson for fintechs coming out of 2022.

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