Next-generation youth banking using cards & apps blows away the old
Today's hot youth financial accounts stress mobility, parental oversight, cashless transactions, savings incentives and financial literacy education on the fly. Fintech companies have been leading the way and they are sowing seeds to grow future business with adults in Generation Z and even Generation Alpha. Banks and credit unions must ditch yesterday's kid banking concepts or lose tomorrow.
A growing number of fintechs and banking startups in the U.S. and other countries is targeting Generation Z, and even reaching into the younger Generation Alpha, children born after 2006.
In the U.S., roughly 25% of the population is under 19. In Europe teenagers and younger kids comprise around 20% of the population. This represents a tremendous market, but typically incumbent banks don’t aim many products and services at Gen Z because they aren’t currently profitable. This contrasts with more financially mature Millennials.
Newcomers are outflanking incumbents. The legacy institutions’ lack of interest created a two-fold market niche for challenger banks and fintechs: serving the current “pocket money” needs of young people and building the loyalty of today’s youngest customers for the coming years.
73% of American parents provide a regular allowance to their children, a total of $41 billion per year, according to RoosterMoney’s Kids Allowance Report. Part of pocket money is earned from domestic chores. Parents say their goal is to teach children about financial literacy, involve them in useful activities and help them to form healthy spending habits. The parents lived through the Great Recession and want to inculcate thrift. Indeed, in comparison to older generations, Gen Zers tend to save almost as much as they tend to spend right away. When they spend, it’s typically on food — mostly sweets, eating out, video games, toys and books. Most Gen Z consumers prefer in-store shopping rather than ecommerce. However, the older they grow, the more online transactions they make.
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