GenZ’s new frenzy is here to stay — Independent Banking
India has the largest adolescent population globally; every fifth person in India is between 10 to 19 years old — Interestingly, India is home to around 400 million individuals between the ages 13–24. Like every other generation, GenZ has its own quirks and eccentricities, some of the most prominent ones are:
- Bharat’s Youth is Online — Mobile device penetration has increased from 19% in CY15 to 50% in CY20; Some children have access to 4 screens on average (phone, tablet, laptop, TV)
- Bharat’s Youth is of Hustlers— with an attention span of GenZ as short as 8 seconds.
- Bharat’s Youth is Connected — The majority of Gen Z consumers claim that they now use social media as their top source of shopping inspiration
- Bharat’s Youth demands superior User experience — To capture their attention brands need to prioritize authentic, organic content
- Bharat’s Youth is a decision-maker — Today’s Youth is engaged in making powerful, meaningful, and substantive choices, decisions, and determinations that affect themselves, communities, and the world. This hypercognitive generation is very comfortable with collecting and cross-referencing many sources of information and with integrating virtual and offline experiences.
Still, the Indian youth are mainly under-served and constrained when it comes to Digital Payments
67 percent of children still continue to pay in cash, and 52 percent pay using their parents’ debit/credit card — Survey conducted by FamPay
GenZ segment is not addressed by traditional banking partners and deprioritized by banks as a cohort “unprofitable” given their asset-heavy business model of operations. Teenagers end up resorting to cash on delivery or using their parent’s wallets/cards for payments. This results in curtailing financial literacy and financial independence for teenagers.
In India, 300 million adults have already started digital payments
250M teenagers are yet to get digital in payments despite being the digital natives of the country! GenZs are lacking the crucial infrastructure to exert their financial independence and there is a dire need for a fintech solution that helps GenZ assert their financial independence via an app designed just for them.
This leads us at WaterBridge Ventures to shift our focus towards a new breed of technology-driven and customer-centric financial institutions, who are working to transform the banking landscape, aptly named “Neobanks" (also known as challenger banks). They offer amongst other benefits:
1) Lower Distribution and Setup Costs — The ability to rapidly scale up across vast geographies without needing to set up physical presence and infrastructure;
2) Further lower cost due to lean structures that no longer need vast physical IT infrastructure and manpower required by conventional banks;
3) Compliance burdens are minimal as the federal banks do not govern them.
Thus, a segment that might be unprofitable for asset-heavy, compliance-ridden traditional banks, can be reasonably profitable for digital-first, non-licensed over-the-top Neobanks. A particular audience-focused Neobank can create impressive offerings that could compare highly favorably to traditional banks
Their fever is spreading around the globe due to its business agility, flexible infrastructure, and cloud-based technology stack.
The growth story of Neobanking is not fiction, which is evident if we look at the success stories and value addition by neo banking players in many underserved customer segments. This segment has witnessed growth regarding an increase in investments, the number of players, and customer growth.
“Banking is necessary; banks are not — Bill Gates”
Globally, players have started facilitating the smart generation of Gen-Z to make online and offline payments with their prepaid card-linked Digital wallet proposition. These companies are typically the first card instrument provider to these people with a seamless three-click KYC and an intuitive application to track expenses, get an education around finance, set goals, split bills, etc.
This is not only loved by children but is also promoted by parents as these cards help them to set a limit and track the expenses of a child. Parents can offer convenience to their children by facilitating a card that can be used for P2C, P2P transactions, ATM withdrawals, etc. where earlier they would use parent’s card/wallet for most of the online purchases — A journey to make their children independent decision-makers right at a very young age
Internet first prepaid cards for children has seen a 3,033% growth in the last year bagging $611 Mn across 21 rounds of funding. Global peers targeting the particular segment include Singapore-based Atlantis, German neobank Revoult, Danish challenger Luna, New York Based gohenry, and Atlanta-based 2.3bn USD valued Kid-focused fintech Greenlight. Some names in detail below:
We further believe in an economy that is shifting towards digital realms, with Prepaid cards being a cog in the wheel, Challenger banks will have the ability to integrate with a lot many third-party services. FinTech partnerships via APIs will enable these players to roll out new products and services at a much cheaper & faster rate. Challenger banks shall lend Bank-as-a-Platform and Cross-sell financial products using a marketplace model; partnering with various insurance/ lending providers + Investments.
WaterBridge Venture believes that by Leveraging contextual data and offering Native UX/UI Designs, Neobanks are capable of unbundling the bank — rebuilding single product lines. We have already seen Greenlight (United States, $556 Mn fundraised to date) enabling investing in stock markets for children under parent supervision, allowing fractional ownership of stocks up to $10.
WaterBridge Ventures strongly believes that the Indian-originated Neobanking company(ies) with a specific focus on GenZ s should be the first partner for Bharat’s Youth in their financial independence. Creating enormous value for all the stakeholders of this fintech revolution, in the long run.
FamPay — the first mover of India’s online and offline card payments for teenagers, has raised the third largest Series A funding in Indian history, raising $43.1 Mn. It is said to have more than 2 million registered users flocking over its platform within two years of its launch and is expected to be doing an annualized TPV of $90 mn.
We at WaterBridge Ventures are excited to announce a start-up that we are backing in this space. Stay tuned for more updates on this front.
