Are you still figuring out the millennium? Or are you planning for the next few years? It may already be too late.
Investment professionals have been overwhelmed in recent years with tips and tricks on how to win the loyalty of the millennial generation. Yet time flies, and now the oldest members of this skilled team are moving towards middle age.
Today another generation is emerging that deserves our attention: General Z.
Born after 1996, General Jars grew up online and loved chatting, gaming and social media. On average, their range of focus is eight seconds, four seconds shorter than their millennial equivalents, so they don’t tend to stay on any one application or platform for too long. Moreover, as digital natives, they don’t want to deal with cash: it’s not really connected to their daily reality. After all, you can’t spend it anywhere on Fortnite or online.
That’s why they represent such opportunities for Fintech and are an important part of the sector’s future consumer base.
The difference between traditional banks and fintech and neobanking may be industry centered, but not for General Z. Even its oldest members are younger than Amazon. General Gers was born into technology and never survived without it. They don’t see any obvious difference between banks, fintech and neobanks – these are all familiar institutions that they have grown up with.
So now that General Z is on their radar, how are the FinTechs noticing it?
PixPay and Greenlight have given kids a platform to keep an eye on their savings and their parents ’budgets. Another company, Zelf, has created some buzz by offering regular banking transactions through messaging services. Step, a US-based start-up, applies to teens by providing a free bank account and easy peer-to-peer transfer. And these are just a sample of Fintech’s General Z-centric offers. There is so much more.
Previously, young people made up the nonprofit business segment of larger financial institutions. No jobs, no higher education, no business – no source of income. So financial institutions wanted to attract customers in later life: marriage, first job, university, etc. Now this trend seems to be changing. Nowadays parents want to teach their children personal financial management as soon as possible. Covid-1 shock shock will probably increase this trend. And fintechs can be used to increase the financial literacy of young people.
And it’s not just the parents’ attitude that is changing. After witnessing the economic hardships of the Great Depression and the epidemic – seeing their mothers and fathers lose their jobs or fight on their own in the job market – General Jars is determined to be more vigilant about their finances. They will probably consider saving as a serious business and ensure emergency funding so they have cushions when they lose their jobs. Their views on how to make money may also change. The recent crisis can teach them the benefits of self-sufficiency and not relying on government support.
All these developments need to further enhance the quality of General Jars for Fintechs. Indeed, Covid-1 could create a generation-defining moment for the pandemic epidemic industry. How Fintech will apply to General Z will be permanent, possibly having a defining effect.
Currently, the primary challenge of fintech space centers is around trust and reputation. Dition endurance banking institutions have their advantages with their physical branches and brand images that they often cultivate for generations. And General Jars constantly checks social media and user reviews and feedback, so they immediately identify reputation-damaging issues. Now that so much activity is happening online, users are paying a lot more attention to the quality of service and support. So doing it right now can transform you into a big improvement prospect and help ensure the future of fintech.
But while the opportunities are endless, many unanswered questions remain.
The initial risk for General Z-targeting fintech? Long-term retention. Will college-going teenagers keep the same account they used to return their allowance money to grammar school? Probably not. But that teenager will probably prefer a new banking player to a traditional endowment financial institution. Thus the concepts of cross-system integration and shared economy that support smooth transformation without high switching costs will be essential.
There is another challenge: General Z’s relatively low purchasing power weakens the basic revenue model for fintechs. To reduce this risk, to compensate for Jane Z’s low-cost level through parental income, Fintech must bring value to both parents and children. A monthly subscription fee by some market players is a good example of how businesses can monetize from this strategy.
As financial services go digital, their customers will be even younger. These kids are much more likely to put extra dollars in an app on their phone than a conventional piggy bank. So Fintech needs to take action now so that they get a chance to be that app.
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All posts are the author’s opinion. As such, they should not be construed as investment advice, or the opinions expressed must not reflect the views of the CFA Institute or the author’s employer.
Photo Credit: © Getty Images / Elva Etienne