Generation Z – those born after 1996 ­– now represent 32% of the world’s population, making them the largest cohort. As with every new generation, their changing environment, social trends and financial landscape have given rise to a shift in thought, belief and outlook. And when it comes to the world of finance, this new wave of young investors and customers are starting to have a real impact, becoming a force that banks and financial services firms need to start paying attention to. Being the world’s first digital native generation, they have lived through digital transformations and significant structural changes, including the 2007-2008 financial crisis, which has made them better at spending their money consciously and sustainably. Social media, the use of smartphones and cutting-edge software have been harnessed by this generation, making their personal lives easier, faster and more efficient. They prioritise customisation and optimisation as users and consumers, and are ‘tech-savvy, socially conscious and impact-driven’. With over 2.5 billion Gen Z in the world, they are quickly becoming a growing force in global, not just financial, markets.

Gen Z

Time to take notice

The financial industry should not underestimate this cohort; its sheer size alone makes it a significant market force. It has been reported that Gen Z will inherit between $15 trillion to $68 trillion over the next few years, with some coming into wealth at a young age – this is the influencer generation, after all. As this fourth industrial revolution takes place, it’s time for businesses to start asking themselves the following questions:

  • What type of services are they looking for?
  • What are the trends in their behaviour?
  • How are they finding services and information for financial decision making?

Gen Z and money – what can financial services firms learn?

  1. Retail investment on the rise      

Gen Z has had a significant impact on the retail investing landscape, with a 16% growth of 18–24-year-olds beginning investing during times of volatility. UK investment account openings within this age group have also increased by 88%, mainly on mobile platforms like Freetrade, with even traditional brokerages experiencing a 10-year drop in the average age of their clientele. Gen Z investors also show very little aversion to participating in stock markets, with 21% planning to take advantage of short-term gains during current instability, turning to social media to seek out community and shared information to inform their investment decisions. This, coupled with an urge to “get rich quick”, has resulted in recent viral crazes, incited by young investors on Reddit, causing ‘meme’ stocks like GameStop to rise by 2,700%. It doesn’t stop there, in pursuit of those large figure returns, it seems that Gen Z have an appetite for risk and are far more willing to invest in volatile investments like cryptocurrency and NFTs, with over three-quarters on Gen Z investors considering their inclusion in their portfolios. In response, fintechs are investing heavily in creating platforms tailored to the Gen Z audience. Startup Finary are doing exactly that, aiming to “gamify” retail investing while creating a shared messaging platform for users to connect and build strong communication habits – and they’ve just raised $3.2 million, so take note.

  1. Digital banking and the desire for customisation 

Personalisation is the name of the game when it comes to this demographic. They don’t only want it, they demand it from their digital banking services. With 37.5% of Gen Z only using digital banks, it’s clear they’re after clean, aesthetically pleasing, intuitive UX, state-of-the-art security, frictionless support and a choice of AI-hosted tools with clever names like smart chatbots or dynamic dashboards. P2P apps and digital financial tools for personal financial management are really picking up traction, with fintechs and neobanks spearheading their development, recognising that attracting the young investor is becoming increasingly important. Don’t underestimate the power of a crisp, smart and highly functional app.

  1. Financial education

Another interesting trend amongst this demographic is for banks to be financial literacy coaches, with 38% of Gen Z seeking reliable information so they can make smarter everyday decisions and set up a better financial future. There is plenty of room to innovate in the financial education space (FinEd) and this is giving rise to several fintechs, as well general financial wellbeing businesses – take financial coaching and advice companies like Claro and WealthWizards. Out of all generations, Gen Z have the lowest levels of financial literacy, with many relying solely on family and parents for their financial advice. However, there is a real appetite to learn amongst this socially connected age group as almost 40% of Gen Z are said to be using digital social platforms like Youtube, TikTok and Twitter to gain knowledge on personal finances and investing in the stock market. The young digital natives are carving a new path, away from traditional IFA’s and bank managers like the millennials before them, with only 6% of 18-34 year olds using this route. This leaves a clear gap for traditional banks to learn from fintechs and develop digital channels to capture the Gen Z market, who are more than willing to learn this way.

It’s time to prepare

It’s clear that Gen Z are a highly informed and discerning group who are very willing to spend in favour of their preferences. They have a spending power of over $143 billion and account for 40% of global consumers – a level of financial influence and capacity for disruption that we have seen across several industries in recent years. As this generation reaches adulthood, financial services could likely be the next one poised for reinvention. Are you ready?

Our team of financial services experts can get you started on a cutting-edge strategy today, using our global innovation network to connect you with startups, VCs and thought leaders at the forefront of innovation.

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