When you ask teens or young people in their 20s when they last stepped into a bank, you may hear “never” in response. However, ask them about their most recent wire transfer, and they’ll likely say, “Just a few minutes ago.” In today’s world, visiting a bank in person feels outdated.

The COVID-19 pandemic accelerated digitalisation, and young generations, as top consumers, are driving significant changes in the banking industry. Millennials and Gen Z are reshaping the financial landscape with their digital-first mindset and preference for convenience, accelerating financial inclusion globally.

Let’s explore three key ways they’re driving this change.

Embracing digital finance

Young people are digital natives who have grown up with technology at their fingertips. This has made them early adopters of 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 simply fulfilling an unattended population’s needs. Unlike previous generations, today’s young individuals are more inclined towards embracing technological inclusion in the banking arena.

A June 2021 survey by EY found that 51 per cent of Gen Z consumers name a fintech company as their most trusted financial brand, while only 23 per cent name a national bank. According to The Wall Street Journal, three patterns explain why Gen Z leans toward 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 innovate by reflecting the values and addressing the social concerns of new 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 like no other business.

Cryptocurrencies: While still a nascent asset class, cryptocurrencies have captured the imagination 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 evolving, cryptocurrencies have the potential to disrupt traditional banking systems and increase financial inclusion by providing an alternative to conventional financial institutions.
Buy Now, Pay Later (BNPL): Gen Z is increasingly embracing BNPL for smaller ticket items (70 per cent use it for purchases of less than US$100). This seems driven by BNPL’s ease of use, availability, and attractiveness as an alternative to credit cards. Data shows nearly 32.8 million Gen Zers will use mobile wallets this year, and 43 per cent will use BNPL. Very few in this generation use physical cards.

Also Read: The synergy of AI and DeFi: Shaping the future of finance

Driving financial literacy

Younger generations are increasingly 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 amid rapid economic change, which gave them higher career expectations than previous generations.

They are poised to reshape the economy, having entered the workforce during economic instability and approaching critical financial decision-making points. Their high aspirations and the reliance on technology for information are shaping their financial behaviour, which will significantly impact the global economy.

Social media and financial education: Platforms like TikTok and Instagram have become hubs for financial advice, with influencers sharing tips on budgeting, saving, investing, and more. Accounts dedicated to financial education are demystifying complex financial concepts and making them accessible to a broader audience.
Demanding financial transparency: Young people are less likely to accept financial jargon and complex terms. They are driving a demand for clear and transparent financial products and services. Fintech companies that offer straightforward, no-nonsense products are gaining favour among these consumers.
Entrepreneurship and financial innovation: 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 are often focused on solving specific financial inclusion challenges, such as providing micro-loans or building tools for underserved communities.

Shaping consumer behaviour

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

Contactless payments: 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 seeing widespread adoption, pushing merchants to upgrade their payment systems to accommodate these preferences.
Subscription economy: Younger generations are more comfortable with subscription-based services, leading to the growth of subscription-based payment options. This trend is influencing everything from entertainment (Netflix, Spotify) to software (Adobe Creative Cloud, Microsoft Office 365), and even physical products (subscription boxes, meal kits).
Data privacy and security: This generation is more concerned about data privacy and security. Financial institutions must prioritise these concerns to build trust. Companies that demonstrate robust 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 revolutionised financial inclusion by providing access to banking services for millions of previously unbanked individuals.
China, WeChat Pay and Alipay: Mobile payment platforms that have transformed 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 popularised 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.

Also Read: Navigating the complexities of Southeast Asia’s fintech landscape: Challenges and opportunities

Addressing challenges and opportunities

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

By leveraging technology, prioritising financial education, and driving consumer behaviour change, younger generations are playing a pivotal 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 within reach for a broader segment of the global population.

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

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