Financial Services For Generation Z
As a teenager, if you were like me and knew how much personal money you had by the size and weight of your wallet, then it can be hard to understand today’s teenagers’ attitude toward money as most of your discretionary spending was funded in cash. Due to that experience, we are, in a way, very poorly equipped to look at a seamless transaction like Uber and others. One of the reasons why we tend to spend so much on Uber, or Amazon, may be because our personal finance DNA doesn’t let us think about how much we spend in a purely digital way.
Watching the behavior of younger generations can lead to a kind of moralizing: Why are they shilling for these brands? Why do they spend so much on clothes? But these lines of thinking don’t capture what’s really happening here: these teenagers are making complex financial decisions. Chances are, they’re seeing their purchases as investments far more than, as kids, we ever did.
Teens who have grown around Snapchat and Venmo have an intrinsically different way of thinking about the world: they’re way more perceptive, accurate and smart in how they manage their relationship toward digital in general and toward money through digital means. One of the best social media examples of this is the success of Snapchat. It has quite complex privacy features that this generation is fully equipped to use and to appreciate: I can give you a message, and you can delete it. It’s transient. I’m ok with that, and I play around with that, and I know what’s going to be staying and changing.
You can see money enter this equation when you talk about sponsored content. Any teen looking at Instagram is fully aware that someone is being paid to speak about a product. They know this because as they are setting up their own channel, they are thinking about who they need to reach so they can start to get free stuff too. The idea that they’re being abused and influenced beyond reasonable means is off. They know that there is a contract — that someone is getting paid for that post. And they want to do the same.
Recently, there was a huge scandal around one of the key streamers on Fortnite abandoning his team. During a week of back-and-forth video between him and his previous team, around the disclosure of the contract, everyone following the story was debating the nature of the split of sponsorship revenue between the player and his organization. Teens know: obviously, when I click on Twitch, it’s getting money. Their concern is: How much of my money should he get, versus his team?
Knowing that this is true, it’s important to see the emerging opportunities, and to ask the right questions.
How do 16 to 25-year-olds spend? There is a gap between what teens want and how they can pay for it. And it happens to be that most of the things they want can’t be paid by cash. But we can reframe this without moral judgment: you paid for entertainment — the latest Superman comic release — with cash. You went into a shop and paid for it. A mobile app, in my mind, is completely equivalent, so kids need the “pocket money” that can be spent digitally on Fortnite skins.
One of our key interests at Anthemis is understanding better how this generation thinks about money, and how are they going to be managing it. Which companies and projects are emerging in the space? While several startups have launched, over the years, to meet this need, we believe there are a lot more opportunities that will come from tackling this user base.
We recently backed a company, Goin, a mobile app that focuses on microsaving. The founders, in their early 20s, argue that the key problem of their generation is that they don’t have enough money to do what they want. They can’t really borrow, because the don’t have the means. So they have to save: if they want to go on vacation this summer, they have to take action in January. Goin helps them set up a goal: if my goal is to save, I can round up my transaction. I can challenge myself: If I don’t wake up on time in the morning, I will be penalized.
This generation is also completely familiar with investment. They hear about crypto all the time, but that is just one example. Another is marketplaces that include second-hand, which are financial services platforms in far more ways than you might realize. At its core, a company like StockX, which is reportedly worth more than $1 billion, is a place where people can arbitrage their way into the sneakers they want.
Yes, the system still has fundamental problems — your customers’ credit card debt, for example. But it is not as simple as saying that it’s all going wrong because digital has messed with things. It’s that the whole notion of earning is evolving rapidly.
A high-end pair of white Nikes is not only really fashionable; it can also appreciate in value. So then the question is no longer “can I afford those sneakers?” It’s “How much working capital do I have to finance the fact that I’m wearing those things, and what will I get when I sell them back?”
If you’re working in this space and want to share what you’re accomplished — or what you’ve learned — we’d love to hear.