Surprise, surprise. Gen Z doesn't like banking.
Many Gen Zers may simply be shying away from banks, according to new research from digital identity provider Socure. Almost half of Gen Z respondents regret not applying for a financial account when they were younger, while they feel unready to participate in the financial ecosystem by the time they turn 18. I found out that
This is something of a Catch-22, according to the study, which surveyed 2,000 members of Gen Z and found that 35% lacked access to digital finance. These “digital ghosts” struggle to build the credit history needed to be approved for financial services because they don’t have a sufficient financial footprint to begin with.
They have little or no history with credit cards, loans, rental leases, home purchases, etc., which makes it difficult for them to access those exact same things.
According to the report, without a digital financial footprint, it is extremely difficult to verify the identity of digital ghosts through traditional credit bureaus when attempting to access financial or government services.
Indeed, many members of Gen Z, between the ages of 11 and 26, are too young to even begin to build much of a credit history. But major policies and trends tend to run counter to them.
The report identifies one of the biggest influences on Gen Z's lack of financial credit as the Credit Card Accountability and Disclosure Act, a federal policy rolled out in 2009. The act was enacted to protect consumers by requiring greater transparency in credit card terms and conditions. While the regulation has helped Americans make better financial choices, it also introduced requirements such as cosigners and proof of income requirements for people under the age of 21 trying to get a credit card. This has “put the first traces of their financial footprint in their lives further away than previous generations,” according to the report.
Additionally, identity verification, the most important first step to accessing most financial services, has become an increasingly difficult task for financial institutions as the prevalence of identity fraud has steadily increased. In fact, losses from account takeover fraud have increased from $11 billion in 2022 to $13 billion in 2023. Identity fraud is so common that businesses can no longer rely on traditional methods of verifying personal information, such as social security numbers and government agencies. Documented and often requires the use of more stringent validation methods.
More than half of Gen Z survey respondents say they have had to go to their financial institution multiple times to verify their identity for a financial account, rather than simply signing up online. Additionally, 1 in 5 people report having trouble accessing federal student aid or college loans and grants because of difficulties in identifying themselves.
Unsurprisingly, Gen Zers are fed up with the myriad of ever-changing complexities inherent in financial services, and are delaying their banking journey. Research shows that 40% of Gen Zers say they want to avoid banking for as long as possible, but about 20% of Gen Zers don't think banks want them as customers.
But the digital ghost of Gen Z is a major driver of the market and economy. According to Bank of America research, Generation Z currently earns $7 trillion across the world's 2.5 billion people and is expected to generate $33 trillion in income by 2018. . In 2030, the youngest member of the group becomes an adult. By then, Gen Z will account for about 27% of global income.
For the next generation of young people, a lack of credit history and delays in starting banking can be costly in important investment areas such as buying a home, buying a car, and accessing loans. Credit checks are often standard when qualifying for a car loan or renting a home, and many landlords will deny or jack up the price on applications without a credit history. Other financial services, such as cell phone and wireless internet services, also often require a credit score check before an applicant can be considered for a financial plan.
