November 11, 2023
by The Fintech TimesWith the world of finance advancing technologically, questions of neobanks and their effect on the modern era and its generation have been raised. Gen Z demands are drastically different to those of previous generations, which has led many to speculate whether digital challenger banks are in fact the most appropriate financial service.
Serge Beck is a serial entrepreneur, venture capitalist, IT specialist, and blockchain ambassador. Beck has over ten years of experience on Wall Street and over ten years of experience as a venture capitalist: he is the CEO and Founder of Optherium Labs, a global fintech company developing blockchain solutions to reform defective functions within financial and security infrastructure. He is driven by his belief that people deserve sounder, more secure financial services in our tech-driven world and is committed to eradicating current problems detrimental to end-user experience through the creation of synergised, decentralised products.
Earlier in his career, Beck was responsible for engineering some of the most critical and innovative technological infrastructure at premier financial institutions, including Bear Stearns, Republic National Bank, HSBC Bank and Merrill Lynch, where he revolutionised the way market participants could operate through advanced software development.
Speaking to The Fintech Times, Beck explains how the banking world is evolving and how neobanks are appearing to be the solution to the newest generation’s demands:
The continued market growth of neo banking is evidence of digital banking solutions becoming increasingly embedded in society, providing ready-made, technologically-advanced solutions to accommodate business and customer needs best. For institutions and enterprises attempting to modernise their technology and security infrastructure, white-label neobank solutions provide banking-as-a-service (BaaS) that puts more control in the hands of those who use them.
The growing need for more advanced banking solutions has been made clearer in recent years, especially by the latest generations of millennials and Gen Z alike, especially demand transparency from anyone they conduct business with, traditional financial institutions included. However, in particular, the Gen Z market has been somewhat underserved by these traditional institutions, leaving them to seek more advanced, convenient digital solutions elsewhere. Are neobanks the best route for Gen Z bankers to take with their future transactions?
Because Gen Z people are always seeking more transparency from the businesses they interact with and seek advanced digital solutions, it’s somewhat eye-opening that Gen Z still prefers to do banking in branches rather than online.
According to one study, Gen Z customers are still more comfortable with bank branches than digital banking solutions because of poor digital experiences. Many Gen Z consumers expressed dissatisfaction with pertinent banking issues like resolving disputes and opening bank accounts while also identifying attempted cybercriminal activity. Gen Z customers preferred to contact humans rather than turn to digital means because either they couldn’t find the information they needed online or struggled with mobile apps. They felt more comfortable going to physical branches to handle financial transaction issues or possible cyberattacks.
With that said, Gen Z bankers have their concerns about how traditional financial institutions cater to them, providing them with digital experiences that simply don’t meet their expectations. Add the fact that banks charge Gen Z and millennials more banking fees than any other generation, and there is room for distrust between Gen Z and the traditional banking sector.
Neobanks offer multifunctionality to enhance customer experiences, including virtual and multicurrency cards, countless payment gateways, international transfers, digital receipts, and customisable interfaces. More neobanks have been building their platforms to accommodate Gen Z, allowing people from this demographic to send peer-to-peer payments and use customised cards, including teenagers, with consent from their parents, of course.
Neobanks are gradually targeting Gen Z bankers who feel underserved by traditional financial institutions and aren’t getting the value they expect from those institutions. Research shows that just under 50 per cent of Gen Z bankers have accounts with conventional banks and credit unions. How traditional banks package their financial services and concerns over trustworthiness have led neobanks to step in and provide attractive alternatives. One neobank that brands itself the metaverse’s first neobank has partnered with a social messaging server typically used by Gen Z gamers and creators. Gen Z creators are catered to by this particular neobank as many people from this generation make money from gaming and esports.
More neobanks are also launching, creating cards and other financial products for teenagers, allowing them to build credit and do peer-to-peer payments, building their financial reputation from an early stage.
That said, it will take some time before the Gen Z community fully invests in neobanks. Studies overwhelmingly show that Gen Z bankers still prefer traditional financial institutions to neobanks and feel more comfortable opening accounts with them. Only eight per cent of Gen Z bankers indicated that they’d open accounts with conventional banks and neobanks. Additionally, traditional financial institutions are slowly introducing buy now, pay later-type financial products to entice Gen Z bankers to do business with them consistently.
The Gen Z community has long been studying their parents’ financial mistakes and making more frugal economic decisions based on what they learn from their predecessors. Many Gen Z bankers are focused intently on long-term goals like buying a home or fully paying off their student loans. Additionally, as they were born in the digital age, they expect real-time solutions that facilitate their long-term financial goals, seeking increased incentives, easier payment methods, and more control over their financial information.
Neobanks provide robust ecosystems and intuitive UX and extensive personalisation and addressing unique needs, building increased trust at various touchpoints. The personalisation aspect is particularly important for Gen Z bankers as a Fortune Magazine study points out that 81 per cent of Gen Z consumers believe that being offered more personalised financial services enhances their relationships, being assured of more control and transparency along the way.
Neobanks can better accommodate the next generation of bankers simply with time and understanding regarding their offerings. They are already capitalising on what traditional financial institutions fail to provide the Gen Z community and offer a broader range of services and security measures (including blockchain technology) to make financial processes easier to handle for the newer generation.
Optherium is a powerful, secure, and cost-effective ecosystem for digital banking. It provides IT consulting and IT integration services to banks, enterprises, and governments. Its products are innovative white label neobank and regtech software-as-a-service solutions for digital banking. Its platform provides everything needed to effectively launch and run your own digital banking application. Services cover white-label mobile and web applications, pluggable interfaces, Optherium SDK, and custom APIs.