A few takeaways from the above:
- Capturing the Gen-Z market heavily requires demystifying the financial processes first. Even the oldest of our generation are paying taxes for the first time, confused about building credit, and oblivious to retirement plans. This does not mean we are apathetic about financial health; it shows how nobody explained what being financially healthy was. Fintech ventures who are struggling to appeal to Gen-Z’s may have to take an extra step in explaining why the problem they are solving is a problem in the first place. If you’re building a budgeting software that lets us manage our multiple credit accounts, our first reaction is why would you need more than one credit card?
- Though we could have googled the information on the taxes instead of waiting to be taught about it, we didn’t. Gen-Zs expect information to be easily accessible, digestible, and largely visual. On social media, information comes to us, with little effort. What we need to know is usually trending. Lately, that has been the trope of the “big brother” financial advice influencers on our TikTok feeds, educating us about financial management because no one else did.
- Retail investing has been increasing in popularity among the Gen-Z generation. We are the biggest demographic group in retail investing and are investing more in stocks than any previous generation at the same age. Whether or not we know what we’re doing, we have made a large impact as a part of the WallStreetBets community.
Chime vs. Step
Neobanks have become a crowded space in the last few years, with over 250 of them (and growing!). Insider Intelligence estimates in its first digital bank forecast report that challenger banks will claim at least 20.2 million account holders by the end of 2021.
An early winner has been Chime, filled with many attractive features such as no minimum balance, no monthly fees, and most notably its Spot Me feature, giving consumers a $200 advance with no fees attached. While this is wrapped in an enjoyable UI/UX, I am still apprehensive to commit.
Since Gen-Z encompasses 6-year-olds to those in their early twenties, they are less likely to have a steady stream of income. The focus for Gen-Zs is to manage the money they do have, not spend what they don’t. A $200 dollar advance is not as attractive as one might think as our spending rarely goes towards emergencies, after factoring in existing parental support.
Step, launched in January 2019 and designed for the new wave of the tech-savvy but financially challenged, raised a 100M Series C in April 2021. Teens gain access to an FDIC-insured bank account without fees and a secured Visa card that helps them establish credit before they turn 18. While there are no special perks, Step has gained significant traction. The app looks like Venmo, a familiar UI/UX to any teen (check), gamifies education (check), and markets through TikTok (Charli D’amelio is an angel investor).
Mint vs TikTok
Budgeting apps such as Mint have more differences than similarities with the social platform TikTok, even if we isolate the financial advice influencers. However, comparing them will serve as a starting point in determining where and how teens are acquiring financial advice.
At its core, any budgeting app serves to educate you on your spending habits. Mint helps adults split their money into various spending categories, ensuring they can cover necessary expenses like bills, mortgages, and cars first. These categories, for the most part, are predetermined from… well, life.
We don’t need a budget tracker to figure out where the average teen’s minimum wage salary is spent on. With fewer necessary expenses, teens typically spend in only “want” categories: 37% on clothes, 23% on dining out, 16% on events, with the rest split among various electronics items. Budget apps answer the question, “Which existing category should the next dollar go into? Clothes, food, or entertainment?” Instead, TikTok explains to Gen-Zers where their dollars can go instead. It opens a world of possibilities to teens, where their non-earmarked cash can go into a savings account, buy supplies to start an Instagram sticker business to set up a new revenue stream or invest in the stock market.
We have not internalized the motto: Never trust anything you read on the internet. Finance TikToks have amassed over 2.8B views, and the influencers generally have 500k to 1M followers.
So far, the app ‘Charlie’ looks promising in achieving a new blend of financial education. This Series A financial management platform raised 12.9M in 2020. It has debt reduction plans for adults but also has suggestions for side gigs and articles titled “7 Ways To Make Bank During Winter Break”. If only they were videos instead.
Wall Street Bets vs. Troop
While the forum on Reddit is not categorized as ‘traditional fintech’, there are elements that can be constructed into a fintech platform. At its core, retail investors are using technology to improve their stock screening process. With over 10.5 million ‘degenerates’, the demographic of the community is difficult to segment. Multiple user studies have concluded that there is roughly an equal amount of Gen-Z as there are millennials, though it is important to note that these studies were largely based on self-reporting.
I predict that the next wave in Fintech that will attract more Gen-Z retail investors is beginning with Troop. The Gen-Z demographic is heavily passionate about social causes and is often named the most socially conscious generation to date. Troop is a seed-stage startup that is renovating WallStreetBets, through its focus on social impact within your investment portfolio. Troop allows retail investors to pool their shares into a single block so that they can have a loud, unified voice when advocating for change within companies.
Founders should know what their customers care about when building their products. However, for Gen-Z, sometimes we just don’t know that we care about retirement funds yet..until someone (on TikTok) tells us that it is important.
All opinions expressed here are my own. Please do not follow financial advice on TikTok blindly.
Marissa Hao is a Venture Analyst Intern at Arc Ventures. Currently, she is a junior at UC Berkeley where between Industrial Organization classes, she focuses on programming for the University of California’s LAUNCH Accelerator and Berkeley Investment Group.