Opinion: How fintechs support Gen Z in a post-COVID world
It’s easy to think of “Zoomers” as the generation that had it all. Born between 1996 and 2010, these digital natives have never known a world without the internet and smart devices. Unlike their older Millennial counterparts, who were heavily impacted by the financial crash and its aftermath, they were in line to inherit a relatively strong economy, low unemployment, and a Great Wealth Transfer from older relatives. Research also revealed them to be more motivated, optimistic, and relaxed than Gen Y-ers.
Then the pandemic happened. Now, Generation Z is “Generation COVID”. Many have lost jobs and are wracked with financial worries, and there are real concerns about long-term unemployment and low social mobility. If this is a new reality, then there’s much the financial services industry can do to help. As economies begin to recover, there’s a fantastic opportunity to meet the needs of young people—through services focused on improving financial wellness, education, and access to credit.
Times have changed
The events of 2020 have already had a profound effect on Gen Z. Research reveals that one in 10 lost their jobs during the pandemic and nearly 60% saw their earnings fall. Those in education have suffered major disruption to learning which around two-thirds believe has impacted their current wellbeing, long-term plans, and future educational achievement. The potential cost to society and the economy of a generation permanently scarred by the pandemic should be a concern to us all.
Perhaps the most immediate and obvious impact of the pandemic on young people has been to undermine their financial confidence. Pre-crisis commentators pointed to this generation as one more conscious of debt and more proactive in making money than Gen Y. However, the pandemic has turned this on its head. Now 59% claim COVID-19 has made them feel more anxious about money.
No credit, no chance
Where do these financial concerns coalesce? In the UK, it’s all about property. In our recent survey of 500 Gen Z-ers, half cite buying a house as the biggest life challenge they’ll face in the next decade—more than mental health (32%), unemployment (34%), or personal relationships (24%). Over a fifth claim, it is a major financial priority.
With many restricted by low levels of savings, credit becomes the key to building a better life. Yet here, too, the system is stacked against young people. They report being forced to search for expensive short-term loans, having struggled to access mainstream credit from banks. As more get into debt through costly short-term credit, banks may become even warier in serving their younger customers. It’s a vicious circle many will struggle to break free from. That’s despite the fact that 87% of Gen Z-ers hold accounts with traditional high street lenders and, in the US at least, this generation has the purchasing power of $143bn
Time to open up
Rather than continuing down this path, financial services firms need to embrace the opportunity in truly meeting the needs of this group. One option is to build card programmes for credit and lending specifically tailored to younger people. Tymit is a provider doing just that. Alongside traditional credit, it now offers a Buy Now, Pay Later (BNPL) installment card which allows customers to create bespoke repayment plans, with no interest charged on the first three monthly payments. If they need longer, cardholders can choose to repay in 6, 12, 24, or 36 monthly installments at a transparent interest rate quoted upfront in GBP. It’s all about trying to protect customers’ credit scores by ensuring they never get into a position where they miss payments or can’t pay off their balance.
Another interesting innovation in financial services is the family credit card, recently launched by Apple, which allows parents to share their cards with children over 13, as a tool for financial education. This makes complete sense when you consider that three-quarters of Gen Z-ers say that most of their financial know-how comes from their parents, and over half want to start learning between the ages of 11-14.
It’s great to see Apple taking the lead with this new approach to lending, and it’s one the financial services sector would do well to follow. By delivering innovative new products like Tymit’s BNPL option, or targeted services that help encourage saving for big purchases like a house deposit, industry players can differentiate on more socially responsible offerings.
This doesn’t just make good business sense. In so doing, financial institutions can ensure the story of Generation COVID is not one of the missed opportunities and long-term decline, but of optimism and growth.
About the author:
Ian Johnson, is the Director, Europe at Marqeta - a fintech that specialises in how payment cards, virtual cards, and mobile authorization products should be developed and deployed. The Marqeta Platform provides the world’s first fully documented, open API issuer processor platform.