Analysis: The Role of Young Consumers in Driving Fintech Innovation

As of May 2025, according to our Seed Watch database, early-stage fintech startups have attracted approximately $555.4 million in pre-seed and seed venture capital investments globally. The youth market is a driving force for the industry as young users demand innovative financial services to cater to their needs. According to global estimates, Gen Z reportedly boast $360 billion in spending power, with the US contributing $143 billion in spending power alone. This highlights that financial services providers cannot afford to overlook this market segment. Our analysis reveals that young people are already significantly shaping the global fintech industry. This article highlights key themes from our research.

Digital Natives Embrace Digital Financial Solutions

The majority of Gen Zs in the UK and the USA have already adopted fintech solutions. Studies reveal that 73% and 93% of Gen Zs in the UK and the USA, respectively, use fintech solutions such as online banking and neobanks to perform certain financial activities such as budgeting, saving and depositing. Furthermore, 73% of Gen Zers say customer experience is critical to brand loyalty. They expect intuitive apps, real-time data, educational tools, peer interactions, and community-driven features.

Digital payments are also popular among the youth in South Africa, as 67% of people aged 18-35 years old regularly use mobile banking in South Africa, according to PayU GPO. Cash may no longer be king after all, as PayPal (40%), Capitec and FNB banking apps (38%), and Samsung/Apple Pay (27% each) are popular digital payment methods among SA youth; Gen Z values security and convenience—making digital wallets and instant transactions the new normal.

In Asia, Gen Z and Millennials currently represent 65% of the region’s fintech user base, and they are projected to account for nearly 80% of fintech users in the region by 2030. Gen Zs are also more likely to use online self-service solutions than older generations.

Appetite for Low-Cost, Low Barrier Investment Solutions

The global youth market is demanding innovative investment solutions to help them attain financial independence in the future. For instance, only 66% of Gen Z investors have a traditional brokerage account, compared to 92% of Boomers in the USA. Nearly one in four (23%) Gen Z investors use only fintech platforms, five times higher than the Boomer cohort. This indicates a strong generational preference for newer, tech-enabled platforms over established institutions. An Oliver Wyman study found that 50% of Gen Z respondents in the UK invest in the stock market.

In South Africa, interest in investment platforms is rapidly increasing. One study suggests 15% of Gen Z in South Africa invest in stocks and money markets. According to local investment platform SatrixNOW, between 2022 and 2023, 57% of all inflows to the platform came from account holders under 40, demonstrating growing confidence among younger generations. This cohort also led new account registrations- 76% in 2022 and 72% in 2023- with two-thirds under 30. Despite high inflows, youth investors still face challenges with long-term retention. According to their study, although young investors made 57% of all deposits in 2022–2023, 59% of them also made withdrawals. However, withdrawals accounted for only 20% of the total amount withdrawn, suggesting relatively smaller amounts and perhaps a lack of emergency funds. This reveals a need to deepen financial education around risk, compounding, and long-term investment benefits. It also highlights that investech solutions should prioritise incentivising young investors to hold their investments for longer.

Startups in this space must provide inclusive investment solutions; 80% of Gen Z investors prefer the lowest-cost financial services, higher than any previous generation, according to Macromonitor. They value financial tools that are accessible regardless of income level. This emphasis on democratizing investing includes seeking platforms that remove traditional barriers like minimum balances or complex jargon.

Financial Optimism & Responsibility

A 2024 YouGov survey found that 75% of South African Gen Z believe their financial situation will improve in the next year. This surprising sense of optimism could be attributed to the reported 51% of Gen Z who said their household financial situation had improved prior to the study. Gen Z consumers are also embracing an increased sense of responsibility. Despite their youth, many have adopted funeral cover (47%), life insurance (44%), and car insurance (31%). This reflects a maturity and concern for family welfare and future stability, areas often underestimated in youth markets.

Young consumers are also becoming more frugal with their finances. Savings accounts are foundational, with 70% of Gen Z holding one. Yet, deeper insights reveal that 17% have less than R500 saved, highlighting the gap between aspiration and ability. Tax-free savings accounts (25%) and fixed deposits (23%) show moderate adoption. This presents a clear need for financial literacy programmes that promote consistent saving and realistic financial goal-setting.

Due to added responsibility, Gen Z in South Africa are also driving growth in the credit industry. Gen Z account for 15% of South Africa’s credit active population. According to a TransUnion report, the Gen Z segment has experienced significant growth in the following credit product categories from 2023-2024 (YoY Growth): Personal Loans: +47.6%; Home Loans: +31.4%; Vehicle Finance: +25.4%; Credit Cards: +17.8%. It is important to note that such significant growth is to be expected as young people transition to a new phase of life. Overall, young consumers are steering away from credit card debt. For instance, 69% of Gen Z in America use debit cards on a daily or weekly basis, compared with only 39% who frequently use credit cards. Their reluctance to use credit is rooted in a desire to avoid debt and unnecessary fees. Gen Z is twice as likely as older generations to cite confusion about credit offerings as a reason for avoiding them.

Seamless & Personalised Experiences

Younger fintech users value seamless, frictionless solutions more than older users. For example, 39% of Gen Zs consider entering a PIN a pain point when using a debit card, higher than the 29% of other generations, according to a recent EY survey. This highlights the need for frictionless and instantaneous transactions, making the case for more biometric, contactless, or one-tap solutions. Gen Z is up to three times more likely than older generations to use alternative payment options such as contactless payments, mobile wallets, BNPL schemes, and even in-game currencies. This shift is largely driven by their desire for speed, convenience, and mobile-first experiences, which align with their fast-paced, connected lifestyles. Research reveals that the Gen Z customer values a banking experience tailored to their individual financial behaviours. Smart chatbots, personalised dashboards, and AI-powered alerts are features that resonate deeply with them.

Financial Literacy is Key

The demand for simplified and user-friendly investment and financial solutions is also evident among young users across the globe. Despite their active participation, more than half of Millennials and Gen Z in Asia report only a basic understanding of investing, according to a Una Financial Study. In Singapore, many even acknowledged a lack of confidence in managing their personal finances. This creates a strategic opportunity for fintechs to integrate educational tools, personalised guidance, and transparent communication into their platforms.

Despite praiseworthy efforts being made towards financial inclusion in South Africa, the fintech industry needs financial literacy solutions to ensure the youth utilise the full potential of financial tools. Research reveals that Millennials and Gen Z are highly receptive to financial guidance delivered via accessible channels. They turn to video content, podcasts, and influencers to learn. This willingness to engage presents a powerful opportunity for fintech startups and educators to design youth-friendly financial literacy programs.

Fintechs must create holistic solutions that meet the emerging needs of the youth segment. In South Africa, the youth market presents valuable business opportunities for startups within the fintech industry. Solutions that help young people plan, save and invest for the future are in high demand as Gen Zs take control over their lives. Fintechs must prioritise offering solutions that are convenient, cost-effective, and secure.

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