How Generation Z will fuel FinTech challenge

By Frank Conway

There are roughly 2 Billion Generation Z’rs world-wide which means they make up about 28% of the total global population. Here in Ireland, about one-in-four (25%) of the population across Ireland, both north and south belongs to this sub-group.

Generation Z will boost the FinTech challenge
Generation Z will boost the FinTech challenge

While every generation will have its own Michelangelo, Warren Buffet or Usain Bolt, what binds Generation Z is its use of technology.

It is the first of the ‘digital natives’, a group that not only relies on digital technology but lives in it.

Here are some more broad characteristics that make up this generation:

  • They are less certain about the future
  • They will have higher education debt
  • They will have lower job certainty
  • They are more likely to be entrepreneurial
  • They place a higher value on social impact
  • They will lack brand loyalty (Facebook is declining in popularity among this group)
  • They will use social media to share positive and negative reviews.
  • They are more likely to fact-check everything!
  • They trust little and have access to the data via SM / online
  • They will respect individualism and respond only to individualistic marketing

With so many touch-points in marketing, how can existing financial services continue to be relevant and attain success?

Values matter

A major starting point for financial services everywhere is the value of brands. While brand loyalty will be diminished, Generation Z will look for brand values.

From a competitive landscape perspective, existing financial services have their work cut out…in a major way!

Across the globe, new business model in the financial services industry and generally grouped under the label Financial Technology, or FinTech, have sent shudders down the corridors of banking behemoths. Large global brands are now so concerned about their own business models that Deutche Bank warned of the dangers from upstarts.

From so-called robo-advisers, the online platforms that users are increasingly flocking to as a low-cost alternatives to financial advisors to online currency conversion, banks, credit unions and financial advisers are witnessing the ground beneath them shift and disappear.

Across Silicon Valley, the level of finding for FinTech start-ups in astonishing in both scale and pace. Everybody it seems wants in on the money game and for good reason; the sheer scale of profit potential is staggering.

Companies to watch

Reviewing the fast-changing FinTech landscape, some companies to watch are –

BillGuard – began in 2010 as a service to alert users to hidden fees charged by their banks and credit card issuers.

Planwise – The company’s management found that the big real estate players, like Zillow and Trulia, were doing a bad job of closing the circle between its existing users, affiliated brokers and mortgage lenders.

OnDeck – The company has raised $180 million in equity financing and $300 million in debt. The idea is simple: OnDeck provides small business owners an alternative to banks for loans.

Wealthfront – is one of the biggest players in the growing automated financial advisory space.

The Currency Cloud – Another start-up trying to take business from the traditional players, is gaining market share in international payments, a space that is 85%-controlled by banks.

For existing financial services providers, it is no longer just a question of local competition. A tsunami of change is building and will be driven by the dual forces of TTIP and the ISDS when they conclude and are enacted into law.

Seamless money management including payments, conversion and transfer are becoming an accepted way of life. Now, automated financial advice based on consumer input and algorithmic platforms are gaining traction.

Banks that so willingly closed their doors to boost bottom lines will be caught in a no-man’s land in the financial services arena and may be forced to ramp up their ‘localness’ with new initiatives including re-opening some branches. This is one place where credit unions have a distinct advantage (and must capitalise on!).

In the meantime, consumers, and especially Generation Z will continue to push for relevance, social responsibility and convenience.

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