From baby boomers to Gen Z, each successive generation is more comfortable with using technology tools to manage every aspect of their daily lives. Gen Z (born 1997-2012) only knows a world that’s almost completely digital. It’s no surprise then, to find out that Mastercard’s Rise of Open Banking study showed that they were the most willing and eager to adopt cutting-edge fintech apps and services before older generations. Given that millennials have recently surpassed baby boomers as the most populous generation in the U.S. and Canada, sensitivity to their financial needs and desires is critical for fintech developers and entrepreneurs, as well as banking sector incumbents.
When asked about why you would use technology to manage finances, convenience is the top driver. The desire to try something new is motivation responsible for the biggest gap between younger and older generations. A full 28% of Gen Z and 33% of millennial consumers selected to try something new as the reason for using technology to manage finances. This compared to 21% of Gen X and 12% of boomers using technology because they wanted to try something new.
Gen Z and millenials are also far more responsive to social pressure from their peers to adopt new technologies. Twenty-two percent of Gen Z consumers and 21% of millenials react to social pressure by adopting technology to manage finances, while only 8% of Gen X and 4% of boomers feel compelled to do the same.
Having been born into a digital world, digital natives are unafraid to try a new payment app or digital lending service, just because it’s better than anything else available. They’re accustomed to the fast pace of technological development, and the accelerated life cycle of digital tools. Thirty percent of Gen Z and 34% of millennials have little hesitation to jump on board with newer, better offerings, as opposed to 23% of Gen X and 17% of boomers.
Next-Gen Use Cases Built to Serve Younger Generations
One of the newest, fastest-growing use cases powered by open banking is Buy Now, Pay Later. BNPL is essentially a riff on layaway payment plans, where consumers gradually paid off a piece of merchandise before taking it home. BNPL apps and services allow users to have the merchandise right away, but split payments up over a short period of time, in many cases at zero percent interest. BNPL usage grew an astounding 81.2% from 2020 to 2021, with nearly 75% of BNPL users in the Gen Z and millennial cohort. They’re far more willing to adopt these new fintech tools, while Gen X and baby boomers trust a branded card over new digital innovations.
Some BNPL lenders are using open banking and consumer-permissioned data points to look beyond FICO scores to qualify borrowers. This benefits consumers who have thin credit files, who can now establish a history of borrowing and repaying, without the traditional FICO barrier.
Young consumers are also loving the new wave of gamified digital banking experiences that open banking can enable. For a generation raised on video games, this is a natural fit. Gamification has been hugely successful in education, health and fitness, and is steadily growing in the finance sector. Through challenges where the user can compete against others, themselves, or even build a virtual world to entice smart financial moves, next-gen apps and services are catering to the tastes, desires and motivations of younger consumers.
Given that most of their daily lives take place on a mobile screen, it’s not surprising that Gen Z and millennials are far more likely to connect their bank accounts for digital payments. Recurring transactions like gym and streaming memberships, digital wallet top-ups, and even retail purchases are all use cases that young consumers are readily adopting to make direct digital payments.
Digital Banking Isn’t Trending, It’s the Future
Digital natives are driving innovation in the finance sector. A full 78% of millennials use mobile banking, and one-fourth of millennials now have their primary checking accounts in digital-only banks. Open banking platforms can empower these consumers to benefit from their data through a wide variety of third-party financial apps and services. These apps and services utilize that data to offer them the new money experiences they want in their financial lives.
As consumers adopt and demand more personalized digital tools to save time and money, and look to improve their financial outlook, our partners can leverage open banking solutions to drive stronger customer engagement and loyalty. Consumers should be at the center of the data experience, helping them feel more connected and in control.
Finicity’s Global Open Banking Platform is democratizing access to data, providing consumers with greater access to credit, payment choices, and convenient digital banking experiences. With their growing purchase power, this is what Gen Z and Millennial generations expect and demand, moving into the next evolution of financial apps and services.
To learn more about the use cases driving young consumers to fintech, read the full study here.