Meeting the demands of children and young people requires financial institutions to adapt quickly to their habits, networks and forms of communication.
The Z and Alpha generations were born in a fully digital age; as a result, their interaction with financial institutions has to be virtual, direct, and rewarding. In short, these age groups are looking for allies to help them plan for their future.
Gen Z, or centennials, are the group born between 1995 and 2010, approximately. While those born after 2010 are known as Alpha. Both have shown a keen interest in finance from an early age.
Young adults have been entering the workforce and starting to accumulate their own wealth for some years now and as a result they require new savings and borrowing tools. Witnessing pivotal economic events, such as the 2008 financial crisis and the pandemic, has made them more likely to save and invest, according to a survey by WGSN, a global consumer trends firm.
The Alphas, on the other hand, are just approaching adolescence, but from a very young age they’ve had contact with digital devices and handled money (under supervision).
According to Insider research, most young people in the US get their first smartphone before the age of 12 and are more likely to use them to access personal finance tools, usually through social media and their fin-fluencers.
The use of the internet and smartphones is crucial for these groups. In Spain, for example, almost 100% of the population between the ages of 16 and 24 are internet users and 68.7% of children and adolescents aged between 10 and 15 have a smartphone, according to data from the National Institute of Statistics published at the end of 2021.
In order to serve young people financially, banks have to adapt to their demand for fast information. It’s important to remember that they hail from generations accustomed to direct communication via digital platforms, and that they prefer not to depend on cash for their transactions and want to solve their problems as quickly as possible.
There are some interesting examples of early bankarization using dynamic products such as e-wallets. In Argentina, Banco Provincia de Buenos Aires created Cuenta DNI 13/17, a digital savings account aimed at young people in that age range, and in its first month of operations alone signed up 50,000 users.
The account is linked to a debit card that allows customers to make instant payments through a dynamic, intuitive, and secure interface, which is something that’s highly valued by young people.
The idea behind the product is to provide digital natives with a tool they can operate simply with their cell phones.
The lender spotted an opportunity when the Central Bank of Argentina (BCRA) introduced regulation that authorizes the opening of accounts for minors with the aim of encouraging financial education among adolescents and promoting the use of electronic payment methods.
Certainly, a children's account is a powerful educational tool, as parents can use the technology to set spending limits and create savings plans, while activating notifications for when the card or wallet is being used.
Anticipating this trend, Scotiabank Peru also launched Cuenta Kids —a joint savings account for a parent and child that includes a debit card.
The product seeks to encourage savings and provides a physical card with a daily spending limit of US$50, which can also be used to withdraw money from ATMs.
And as for teens, digital banks are offering them financial products in a friendly, frictionless way over the Internet, which is the preferred channel for young people.
Digital banks generally don’t have physical branches and therefore use the cell phone as a means of approaching their target audience, their main advantage being user experience and time saving.
According to a study published in April by market research firm Smartme, the neobank Imagin ranks first among lenders in Spain in terms of preference among Generation Z, while Revolut, a British neobank, ranks fifth.
This trend is echoed in Brazil, Latin America's biggest banking market. Fifty-four percent of Millennials and Centennials in that country said they prefer neobanks, according to a study by Mambu, a cloud technology provider for enterprises.
In all the other Latin American countries surveyed, the study found the opposite is true, with most young people in Mexico, Colombia, Chile, Argentina, and Peru preferring traditional banks provided they have a suitable digital offering.
Banks that adapt their strategies and technologies to include digital solutions that appeal to young users will retain their loyalty.
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