The Powerful Relationship Between Gen Z and Fintech

Generation Z (Gen Z) is the portion of the population born between the mid-1990s and early 2010s which puts the age range from 10 - 25 years old. Let’s start by saying that this generation is widely considered to be more concerned about both professional and financial stability and less likely to be risk takers. These young consumers want what’s relevant now and won’t pay any mind to products that “don’t matter”. Specifically, this includes a draw to new age technologies such as smartphones, tablets, and laptops instead of traditional resources like physical books. Most importantly, these young consumers like to shop quickly and easily.

For FinTech companies, this screams opportunity. To put it further into perspective, consider these statistics:

• In 2020, Gen Z accounted for 40% of all consumer spending

• 34% would rather invest in cryptocurrency than a pension

• 87% of Gen Z use or have used some form of FinTech

• 95% own a smartphone, 83% own a laptop, 78% own a gaming console, and 30% use their smartphone after midnight

• Between 50-80% of Gen Z use mobile banking

We can see how invested this consumer group is in the products that have been in circulation thus far. Bear in mind that there are about 10,800 FinTech companies in North America alone. Of those, how many can you name off the top of your head? The market is highly competitive, especially for this consumer age range who have grown up with technology and are highly accustomed to day-to-day living with mobile banking and services of its nature. This creates both challenges and opportunities for FinTech companies who are anxious to get their product in front of the younger demographic.

The first point to note is that Gen Z will not be impressed by convenience or ease in the way millennials embraced services such as Robinhood or Venmo. This is a consumer group that wants personalization and not services that are mass-user-oriented. Of course, FinTech companies know this and have implemented features such as real-time data collection to create offers or users being able to compare their spending habits to that of their peers. The direction these applications are going in is ideal to continue to draw in young users who will use these services for a lifetime. However, to sustain that trajectory, there needs to be contingency planning.

It’s important to understand that Gen Z is not without their concerns, specifically when it comes to the climate, cost of living, and overall social consciousness. These consumers are very observant, especially in the tech space which has become a sizzling hub for marketing. The marketing approach taken by FinTech companies is creative for this demographic since it is aimed to address these concerns with personalized service. Again, being able to see and keep track of spending using digital metrics is a great example of something that would make a consumer feel comfortable using the service. 

When it comes to the feasible aspects that companies should look to implement in their approach, here are three specific factors that are fueling the push of Gen Z to FinTech:

Trepidation around credit card debt: Studies found that only around 17% of Gen Z uses a credit card as their preferred payment method. This is surprising when compared to the usage rate of baby boomers (47%) and millennials (46%). 

There are many reasons that this can be attributed to, such as seeing generations before them suffer from debt or the simple fact that young adults don’t have as easy access to credit. This has caused consumers to lean towards services like buy-now-pay-later which almost half of Gen Z will have used by the end of 2021.

Being able to connect with brands: Going back to the statement that this generation is socially conscious, they will look for that in the brands they trust. For example, FinTech company Stripe supports building technology for carbon removal. A big concern of Gen Z is climate change and building a sustainable infrastructure. By Stripe actively funding carbon removal, they are marketing themselves as more than just a financial service that is likely to attract the young demographic. 

This is just one example of many as companies like Daylight, Aspiration, TreeCard, and many more are making the support of social issues a minimum standard for FinTech companies.

Community: Beyond the knowledge that their money is going towards something good for themselves or a given cause, young consumers want social interaction with their finances. When we look at things like “finfluencers”, crypto trading, or meme stocks, it’s clear that investing and financial education have built a community around themselves that Gen Z has embraced. 

Charley Ma, General Manager at a New York City FinTech company called Alloy, made this statement regarding the company's relationship with Gen Z: "Nowadays, if you're a fintech company, you're wondering how to build interesting communities and get people to engage, respond, and interact with one another". Ma then states, "This is the new method of acquiring the next generation. I believe the features you must develop must be much more community-driven”. 

Overseas embracement

The appeal of FinTech is not simply due to its virtual nature or modernity, rather its inclusivity and ease of use make it much bigger than that. When younger generations get their hands on new technology, they are likely to have a strong influence. India, for example, is home to one of the fastest growing FinTech markets bringing in $9 billion worth of investments in just the last 5 years. A recent trend that is just beginning in the country is gearing financial services specifically towards young adults and children. Many companies taking this approach have even partnered up with financial sharks such as Mastercard and Visa. India recognizes the market influence that younger generations possess and is now focusing its efforts to enhance that and take advantage of the demand.

Another country to look at is the United Kingdom which accounts for 11% of FinTech usage globally. In addition to that, more than 50% of those aged 16-24 in the country manage their money online. Of the 67 million that live in the country, there is an estimated 6.8 million within this age range which would make them account for around 10% of the population. When it comes to the United Kingdom’s economy, experts estimate that FinTech services contribute more than $13 billion and nearly 80,000 jobs. Young adults are estimated to contribute almost $2 billion to that, which in comparison may seem small, but don’t forget the influence this age group has on others. 

The Takeaway

FinTech today has been designed based on the consumer demands that have prevailed in recent years, most notably since 2020 when the digital shift dramatically took over. It is made for users to navigate today’s complex financial landscapes. This is especially important when you consider that people don’t learn today like they did 20 or even 10 years ago. 

Technology is the motivator for consumer usage and a streamlined method to interact and connect with consumers of any industry. FinTech businesses educating and involving the youth is a perfect way to make this technology (and your business) spread in all directions.

Written By Ben Brown

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ISU Corp is an award winning software development company, with over 17 years of experience in multiple industries, providing cost effective custom software development, technology management, and IT outsourcing.

Our unique owners mindset reduces development costs and fast-tracks timelines. We help craft the specifications of your project based on your company's needs, to produce the best ROI. Find out why startups, all the way to fortune 500 companies like General Electric, Heinz, and many others have trusted us with their projects. Contact us here.

How to Build Software With an End-User Mindset

Software development is a solution or an answer to the needs of a technical environment. This can be something as large and complicated as an app with millions of users or as simple as a small-scale e-commerce store. What’s important to note is that these solutions are not for the development team's satisfaction, but rather for the parties who’ve brought their issues to be solved by the development team. Sounds like common sense right? Yes, we understand this concept to be true but it is not always at the forefront of a development team's project roadmap. 

Any software developer can piece together an idea and materialize it in an application. However, for that application to succeed, there needs to be sufficient research, communication with the customer, and testing. In this section, we will be going over how development teams can enforce what’s known as an “end-user mindset” through their development process. 

What is an “end-user” mindset?

The concept is quite simple, but that doesn’t make the execution aspect easy. An end-user mindset is implemented by aligning the development process with the needs of your target audience in mind. This means that consistent improvement, data-driven development, and customer satisfaction remain at the front of all team members' concerns. 

Why is it important?

The reason there is any need to emphasize this approach is that developers commonly release the minimum standard features that check the boxes of the job description but don’t take into account the long-term success of their customers. This isn’t necessarily intentional as there can be issues in communication between developers and the sales team arranging the deadline or the team might simply be unable to identify bugs in their code.

The possible issues are a long list; some can be mitigated with scrum/agile methodologies, but it doesn’t make the product bulletproof or replace the value of tending to the end-user's needs. Even during testing phases, every possible contingency cannot be recognized and tested, which always leaves that risk on the table.

Consider that technology and data are fairly new factors in decision making but they’ve established themselves as pillars of the process. Most businesses today know that technology is a make-or-break factor for the team's success. This makes business in the tech sector extremely volatile. The United States alone is home to nearly 50,000 tech startups, most of which will not survive their first 5-10 years in business. This is the most competitive market in the world, and differentiating your business from the competition with an end-user mindset might be a contributor to your success. 

Here are some tactics to set your organization off on the right foot:

User-centred design (UCD)

User-centred design is a byproduct of user-focused development methodology. This approach follows guidelines that are formed based on analysis from interactions with the end-user. For example, this includes prioritizing touch bases, identifying requirements, and overall observance of the behaviours of the audience throughout the software development process.

Essentially, UCD is meant to throw out the client's old playbook and implement new software solutions as opposed to adding optimization features to the original system. The best software developers will take feedback into account and use it as inspiration for the changes they make to development features. The idea is that consistent communication with your end-user means you’ll know what they want and how they want it. Once that is established, you can build a product that addresses all concerns and will support the application's long-term functionality.

Test the product’s viability

Before full-blown software development is implemented, it will be wise to undergo tests that ensure what you’re building is something people want. A concept can seem like a great idea when you map it out, but nothing will tell the truth like the reaction of the market.

Cost-effective testing: Testing software doesn’t need to be done on a large scale audience. An effective method could be to gather several people and observe how they react and interact with various features of an application. Additionally, simply asking consumers their areas of concern with the system (previous or prototype) and what aspects they like are great for constructing a product that the market wants.

Identify requirements

Basing a product around the desires of your market requires you to compile a report of your product's goals, the overall vision, scope, cost, and timeline. The purpose of this is again, to make sure all necessary features are built into the product without having to go back and change too much. 

When this aspect is neglected, it leads to communication issues, an unorganized workflow, and an overall lack of cohesion which will result in a poor final result. 

Strategically improving the product

New factors (both external and internal) are going to present themselves in the market as well as in your organization. Most companies have a clear vision of how they want their product to look and operate overall but still fall short by neglecting a plan for consistent innovation. Consider some of the social media platforms you or people you know use daily. Notice that there are constant updates to the look and feel of the platform, some of which stay, and others improved on. Who inspires these changes? 

Well, notice the recent trend of platforms adopting TikTok's approach to content delivery (Instagram reels, Snapchat Spotlight, or YouTube shorts). These changes are made from observations in the market. Likely two questions need to be answered when a platform makes strategic changes; What does our audience like? How can we make it our own?

TikTok’s delivery of content is a good example because it demonstrates how platforms notice what keeps users engaged. When platforms saw TikTok’s usage rate blow past theirs, they implemented their approach to even the playing field. 

This concept is the same with any business and it is why software development is so relevant to keep up with ever-changing markets. 

Build scalable software

Branching off the last point, to keep up with changes not only in the market but with your company's digital Infrastructure requires software that can manage the load. Without scalability, companies will run into issues facing downtime, maintenance, and even possible security breaches.

When you start the development process with scalability as a priority, you’re giving your brand the upper hand with benefits such as reduced cost of maintenance, unique user experience, and faster functioning. Every enterprise software will require scalability to meet the demands of the organization.

The Takeaway

Every product is created based on a concept meant to either help a specific niche or change something for everyone. Companies like Apple or Tesla have a vision of everyone using their products, whereas a gaming company or a women's clothing e-commerce store would cater to a specific audience. Whichever side you’re on, an end-user mindset is where the most powerful inspiration comes from. 

Written By Ben Brown

—

ISU Corp is an award winning software development company, with over 17 years of experience in multiple industries, providing cost effective custom software development, technology management, and IT outsourcing.

Our unique owners mindset reduces development costs and fast-tracks timelines. We help craft the specifications of your project based on your company's needs, to produce the best ROI. Find out why startups, all the way to fortune 500 companies like General Electric, Heinz, and many others have trusted us with their projects. Contact us here.

How Health Insurers Are Using FinTech to Cut Costs

For health insurers, business doesn’t come cheap, which was especially problematic when the industry faced the Covid-19 pandemic. Insurers had to continue funding treatments, tests, and other care services. Adding on to this, there was significant revenue loss without the ability to perform surgeries or offer the other bulk of their services. One example is major American health care provider Humana which saw a loss of nearly $460 million in 2020. 

This was a significant dip from 2019 when the company saw profits of just over $590 million. The fluctuation was due in part to the influx of hospital patients being treated for Covid-19 which lowered the utilization of other care resources by 15%. Not to mention that these companies had to terminate employees and accommodate/navigate a hybrid work environment in the midst of all this.

Making Necessary Changes

The shift made companies realize that they’d have to pivot to keep up with their industry's changes. These changes specifically needed to be focused on administration in areas such as communication and payment methods. This is where FinTech technology came into play; by shifting to electronic payments and digitally corresponding communications between members and providers, the industry was able to cut costs and retain members. 

Insurance companies recognized that digital transformation is necessary to keep up with consumer demands. The particular technology that revolutionized the insurance industry is primarily made possible through ​​the Automated Clearing House network and Virtual Credit Card (ACH/VCC) which eliminate paper records and reduce customer service requests. In effect, this is attractive for members as well as companies who have benefitted from reduced support costs.

At this point the message is clear: a digital landscape allows providers to focus their efforts on the competencies that make their services useful. Though this was inhibited by the constraints of the pandemic, it may have been the cold awakening businesses needed to scale through the next decade. Insurance is a highly competitive market and although the service is not mandated everywhere, it is something that people need and will look in-depth for the best option.

The insurance industry is moving quickly, and again, there will always be a need for this service, but providers need to roll their sleeves up to bring the best product. With advancements like InsurTech, AI, ML, IoT, and other software tools like them, health insurers can operate cheaper and far more efficiently. Here are some examples of how technology is likely to change the industry:

• Customized Options: Product manufacturers and distributors teaming up to embed insurance within products and services (IoT) would allow consumers to find options that support their specific lifestyles.

• Product Flexibility: Coverage that accommodates specific needs for one's lifestyle, wellness, or current life stage and that is event-driven, time-flexible, adjustable, and modular. It is likely we could see a dominance in technology that takes this data into account when developing coverage plans.

• Automated Underwriting: AI and technological algorithms individualize pricing options based on the risk that potential customers carry.

• EZ Value Options: Taking into account the shopping habits of consumers in new markets, those who offer products that are flexible in terms of timeline, and who do not lose sight of underwriting (to weigh risk) will be successful in this market. 

AI and the machines in its technological hemisphere are changing the insurance industry from underwriting to distribution to pricing and claims. After seeing the beneficial changes InsurTech brought to the industry, companies are using these outlined methods among others to make their operation run effectively for themselves and their clients. 

This technology puts consumers in the driver's seat of their healthcare and well-being. For companies, this makes the sales process easier as they can understand their clients better. It’s made connecting with consumers easier which led to over $2.7 billion generated in revenue for the insurance industry during 2021 using AI. That number is expected to reach around $46 billion in the next decade.

Reasons Behind the Growth

Insurance companies continually investing in AI and Machine Learning dramatically increases collaboration between solution companies and insurers. Additionally, insurance services looking for personalized solutions contribute significantly to the global expansion of the solutions development market. 

Common worries about limits on the market stem from high usage costs and talent shortage. However, this risk is mitigated with initiatives from the government and surging investments which make the market highly lucrative and sustainable long term. 

The Takeaway

Finding solutions that serve the best interests of your business is not an inducement but a requirement for a software company to earn business. The technology serving the FinTech industry isn’t exclusive and this is something insurers have tapped into. We can expect to see other industries following the same embracement of AI & Machine Learning so long as the right solutions are there to serve them.

Written By Ben Brown

—

ISU Corp is an award winning software development company, with over 17 years of experience in multiple industries, providing cost effective custom software development, technology management, and IT outsourcing.

Our unique owners mindset reduces development costs and fast-tracks timelines. We help craft the specifications of your project based on your company's needs, to produce the best ROI. Find out why startups, all the way to fortune 500 companies like General Electric, Heinz, and many others have trusted us with their projects. Contact us here.