Demographic Demands: How FinTechs can cater to Gen Z

The spending power of Generation Z – those born between the mid-90s and early-2010s – is on the rise.

In 2022, research by Gen Z Planet estimated a figure of $360 billion in disposable income, more than double what was estimated three years earlier. So, how do FinTechs capture and keep their attention?

Generation Z now accounts for around one-third of the global population. As such, they possess phenomenal spending power.

But FinTechs can’t take it for granted that the financial perspectives and behaviours among Gen Z are the same as their predecessors. They need to understand and respond to the generational shift that’s occurred if they are to remain attractive to this younger demographic. Gen Z represents huge economic opportunity, but attempts to capitalise on them could backfire if they are not engaged with properly.

Create a new generation of financial products

When thinking about financial offerings for Gen Z, one word should guide all decision-making: personalisation. Gen Z is not interested in a one-size-fits-all approach. They expect hyper-personalised services, which means delivering a service and experience that matches customer expectations based on their specific needs. 

The majority (77%) of Gen Z believe it’s important for businesses to customise interactions, while 76% are looking for companies to send them digital communications they can customise based on their preferences.

The key to creating a personalised payments experience is understanding how Gen Z has been impacted by the financial landscape. Growing up during a global financial crisis, the coronavirus pandemic, and the current cost of living crisis, Gen Z are no strangers to facing periods of economic recession. Indeed, 74% of Gen Z report increased mental stress due to managing their financials. Introducing features to ease this mental strain is something FinTechs need to consider when developing new products.

Against this backdrop it follows that, perhaps more than any previous generation, Gen Z are very financially aware and risk averse. This is epitomised through their reduced use of credit cards: a massive 79% have a budget in place and 1 in 5 believe that personal debt should be avoided at all costs.

Yet according to a tracking study released by the research company PYMNTS, ‘Buy Now, Pay Later’ (BNPL) services, do appeal to younger consumers. They offer more choice when it comes to large purchases and can be a cheaper alternative to the more conventional credit card. BNPL often has no interest or fees associated to it, something highly attractive to the budget conscious Gen Z.

Raise your social media game

The savviest brands taking things a step further with hyper-personalisation, perhaps gamifying personal finance to help young people learn better habits. This level of engagement can start today by recognising the importance of social media to this demographic. Gen Z, who spend the most time on social media of any generation at 2.5 hours per day, are demanding greater integration with social platforms.

Social media has transformed the relationship financial institutions have with young customers, from improving customer service to allowing users to transfer money via online platforms.

According to a survey commissioned by GOBankingRates recent 38.8% of Gen Zers learn about personal finance from YouTube, TikTok, or other social media platforms. For example, the hashtag #PersonalFinance on TikTok has seen more than 4.4 billion views and #StockTok 1.4 billion views.

Recognising this potential, FinTechs are now using social media data to help people get access to credit or even open a bank account. This is particularly important as Gen Z can be distrustful of messages from the government and large corporate bodies, instead taking recommendations from friends, family members, and trusted ‘finfluencers’. In fact, this generation is almost five times more likely to get financial advice from social media than adults who are 41 and older.

Gen Z cares – ensure you do too

This really is the generation that cares. They are socially conscious, hyper-aware of green issues, and expect the brands they engage with to be as well.

This means FinTechs can benefit from aligning with the identity and values of their Gen Z customers to nurture long-term relationships. Gen Zers are more likely to prefer buying from sustainable brands and are willing to spend more to do so. This attitude extends to their investment preferences. Four out of five Gen Zers factor ESG into their investment decisions. 

For FinTechs, it is an opportunity to take a holistic approach to assessing their supply chain, hold partners to high ESG standards, and ensure claims around sustainability can be backed up if challenged. This transparency is crucial as this generation is incredibly savvy and won’t be fooled by greenwashing attempts.

As Gen Z comes of age, these are exciting times for FinTechs who must position themselves to react to the needs of a new generation of consumer. By user testing products, listening to customer needs, and actively engaging on social media, FinTechs can learn from and cater to the specific financial practices and values of Gen Z.

In my experience, FinTechs have struggled to empathise with younger generations, which is understandable - young people are underrepresented within the sector. But I'd encourage them to look for outside support - from providers like ourselves - who can open their eyes to the needs of this generation.