For a generation that has been exposed to the digital world from the day they entered the world, Gen Z is extremely aware of what it wants in life and how to go about achieving it.
GenZ, which is defined as a generation born between 1996 and 2010, wants to own the financial power to make its own decisions and also has enough access to many outlets to realise that dream.
Neobanking platforms are an ideal partner for the aspirations of people who’ve just entered the workforce, and have ample spending power and aspirations. Several Neobanking platforms offer their services exclusively through smartphones. As per the Nokia Annual Mobile Broadband Index report 2022, one Gen Z spends an average of 8 hours online each day, and there’s high adoption of smartphones in rural India, too. The same report also states that India is progressing to become a $1-trillion digital economy by 2025.
These metrics are of crucial importance to Neobanking platforms, which cater to the underbanked and unbanked segments of our society. Further, industry reports state that Neobanks are on the path of continuous growth. As such, there cannot be a better time to invest in a generation that values financial inclusion.
Future Of Finance
The fintech industry has shaped the future of customer finance by catering to a segment that a traditional bank usually shies away from embracing.
While traditional banks will not be entirely replaced by Neobanks, the class of services that the latter offers, makes it an extremely attractive model for GenZ to adopt.
From the time a user approaches a Neobank till the time the funds are deposited in the account or card, it is just a matter of few hours, as opposed to the days it takes to get a loan from a traditional bank. With their transparent and feasible services, Neobanks are just a simple click away.
Neobanks design a customised journey for their customers. How a Neobank designs its product will matter greatly, because GenZ knows exactly what it wants out of a product. Therefore, Neobanks will have to ensure that their user experience and user interface are friendly, clean, and of top quality.
Benefits For GenZ To Adopt Neobanks
What makes Neobanking an ideal for GenZ is that it’s a product of the digital age. Neobanking platforms have the flexibility to adapt themselves to growing changes in the banking industry.
Neobanks are accessible, meet every need of the customer, offer special rewards, optimally leverage technology, and design their financial planning mechanisms with a customer-centric focus.
Essentially, Neobanks offer every service offered by a brick and mortar bank, but with lesser overheads.
Neobanks focus on making an individual financially literate, and educating them about basic concepts, such as the importance of a good credit score and how they can build their credit footprint. Financial independence comes with financial responsibility; it comes with complete awareness of the importance of money, savings and investments, and Neobanks are a good learning ground for GenZ in these aspects.
What Neobanks Offer to GenZ
Neobanks use technology, such as artificial intelligence and machine learning to devise alternative lending scores for people with limited credit footprint. Given that GenZ is typically tech-savvy, and does a lot of budgeting and financial planning online, Neobanks have understood just how to cater to this segment. Since each financial transaction happens through smartphones, Neobanks also offer customised suggestions to users, encouraging them to adopt healthy financial habits. Some Neobanks even have bespoke services for teenagers, with the attempt being to inculcate the importance of money and budgeting from a young age. Their offerings include prepaid cards and investment products so that pre-teens too become aware of what constitutes safe and reliable financial planning.
The Way Ahead
Where Neobanks will have to make more efforts is to make the non-tech savvy segment of a population understand the simplicity and accessibility of their services.
Further, it is essential that anyone who takes to a Neobank, is completely aware of how such a service works. Is it regulated by the RBI, how big is such a company on educating people about financial fraud, what does such a company’s annual report read like, and so on?
Neobanks have successfully underwritten a diverse customer base, thereby extending the government’s mandate of financial inclusion.
As the GenZ segment becomes financially mature, we can also see customised and personalised Neobanking services, such as credit cards, line of credit, instant funds, p2p lending solutions, wealth management, and other services being offered to this segment with a focus on making them economically independent.
The author is co-founder of Stashfin
(Disclaimer: Views expressed are the author’s own, and Outlook Money does not necessarily subscribe to them. Outlook Money shall not be responsible for any damage caused to any person/organisation directly or indirectly.)
