2 days ago
How India's Digital Natives are Redefining Financial Services
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Ask a 20-year-old today about their money goals; chances are, they'll offer a detailed perspective on why financial literacy and independence are essential. Younger generations—particularly Gen Z and Millennials—engage with financial services earlier and more actively than previous generations, showing increased seriousness about financial planning, savings, and investment. Delhi-based financial analyst Ayush Dawar shares, "I aspire for financial freedom, having enough passive in come or resources to cover life's needs to lead a life full of adventure, creativ ity, and generosity." Gen Z is a significant and rapidly growing segment of the customer base for BFSI (Banking, Financial Services, and Insurance). From a barter system to the Unified Payments Interface (UPI), India's financial transformation is a noteworthy one, one that leverages technology to its finest.
"As the first truly tech-native generation, Gen Z's financial habits are deeply intertwined with technology. They're app-first for everything – payments, expense tracking, and even diving into invest ments early," shares Adarsh Agarwal, chief actuary and product officer, Go Digit General Insurance.
From mobile applications and e-signature capabilities to offering alternative investments and gamification, financial services providers are constantly evolving with new offerings.
Digital Over Physical
Kadence International reports that 67 per cent of Indian youth are now using neo-banking services, moving away from traditional physical banks. Reserve Bank Innovation Hub observed that most of the Gen Z participants hadn't visited a physical bank branch or ATM over the last three years (at a minimum). Convenience, speed, and accessibility are the reasons.
However, those preferring the tradi tional route hold human interaction and relationship managers integral. "Gen Z thinks about money very differently. They have grown up in a digital world where they expect things to be instant, transpar ent, and intuitive. Unlike millennials who often lean on traditional banking, Gen Z questions everything from hidden fees to outdated processes," shares Vinay Bagri, CEO and Co-founder, Niyo. Hence, financial institutions must adopt a digital-first approach with a simple and cool UI/UX. "We also integrate visa and flight booking, insurance, and rewards in one seamless app because Gen Z doesn't want ten apps for ten purposes," adds Bagri.
In order to stay abreast, Indian banks are working to improve their user interface (UI) and user experience (UX) to enhance customer satisfaction and en gagement. Case in point, with the iMobile app, ICICI Bank is providing personalised offers and alerts based on spending pat terns and account behaviour, i.e. receiving targeted promotions for credit cards or in surance plans that align with a customer's financial habits Tailored offerings Agarwal feels tailoring products ac cording to the needs and trends of the hour is crucial to align with the values and needs of a target market like Gen Z.
A 2024 Redseer report stated that personal loans made up 40 per cent of Gen Z's borrowing, followed by credit card spending at 27 per cent. Pratik Shah, partner and national leader – Financial Services, EY India, earlier noted that credit cards are a growing trend with 46 per cent of Gen Z choosing them for rewards and discounts, and 36 per cent for convenience. Education and healthcare are key cat egories under financing. Akshay Mehrotra, co-founder and CEO of Fibe, shares that the startup identified the shift in the mindset of Gen Z early in its journey. "Gen Z doesn't want to live paycheck to paycheck—they seek financial flexibility and the ability to access their earnings when needed," he shares.
Great Learning's 2024 report stated that 83 per cent of freshers intended to upskill in FY25. "With upskilling essential in today's fast-paced world, our education financing solutions support young professionals to up grade their careers and stay ahead in an ever evolving job market," Fibe's chief shares. It is also enabling customers to tap into their mutual funds. "We also offer Loan Against Mutual Funds, enabling users to unlock val ue from their investments without redemp tion… We see Loan Against Mutual Fund a hit with Gen Z, and they love the idea of Interest only product, and we have high demand coming in from them," Mehrotra notes. A loan against mutual funds lets investors use their mutual fund units as security to borrow money. The lender checks the value of these units and of fers a loan based on a percentage of that value. This is a good option for those who need money but don't want to sell their investments, allowing them to keep earning potential returns.
Building Ecosystems
Fintech players are levelling their game by going the extra mile to attract and retain existing and potential customers, particularly Gen Z. For instance, Go Digit, to encourage a shift to a more environ mentally friendly transportation mode, offers EV Motor add-on with competitive premium rates. Beyond the product, Niyo is creating an ecosystem that speaks the Gen Z language. "Our community platform helps them connect with like minded peers across the country, share knowledge, and feel empowered. We share educational content and collabo rate with influential voices in travel. Gen Z doesn't seek complexity, they want clarity, speed, and rewards," shares Bagri.
The Finfluencers Landscape
The rise of financial influencers (finflu encers) and content has made youngsters comfortable with topics related to money matters. As of December 2024, India had approximately 232,000 finfluencers. This connection is being tapped by institu tions, startups, and corporations. Eighty two per cent of retail investors in India have acted on financial advice from influ encers. "The relatability and authenticity of the influencer are the primary factors that drive their trust. Insurance compa nies are also leveraging brand ambassa dors who embody the values and beliefs of Gen Z," says Agarwal.
Calling social media today is what word-of-mouth was two decades ago, but effective, Bagri shares, "Gen Z is constantly learning from people they trust online. Whether it's a finance creator explaining forex charges or a travel vlogger talking about our card benefits abroad, authenticity matters." India's private banks, such as HDFC Bank, are collaborating with influencers on social media to promote and establish their products. "Whether it's busting forex myths on a travel vlog or showing real-time currency savings on a trip to Bali, we meet Gen Z where they scroll," Bagri adds.
By 2030, Gen Z is expected to make up 36 per cent of India's workforce and con tribute nearly USD 730 billion in direct spending. This growing economic influ ence means financial institutions must continuously adapt, offering smarter, simpler, and more intuitive services that speak Gen Z's language.
