If there is a generation that people have found hard to understand, it is generation Z (people born between 1997 and 2012). Considering even millennials (anyone born between 1981 and 1996) find them strange.
They are not conventional. These individuals were born when every bit of technology that makes life easier is at its peak. They, therefore, do not understand how life was or can be without these advancements.
They have even been linked to the slow death of hard cash which has been the currency that has dominated the economy for over 5,000 years.
These advancements in technology and life in general have weaved their way into how they manage their money, spend it and where they keep their stash as well.
For example, at least six in every 10 generation Zs or zoomers as they are called do not have a bank account. This is according to a report by Thunes, a global digital payment service company, titled Gen Z: The Future of Spending.
The report analsyed spending habits of this generation in 13 emerging and developed markets including Kenya.
“Across all the emerging markets surveyed in this research, almost two-thirds of Gen Zs (62 per cent) say they do not have a bank account – be it a personal bank account or one opened by their parents,” says the April 2022 report.
The mobile wallet
In the past, the report says, most of those young people would have found it challenging to participate in many areas of trade and commerce, but today, mobile wallets are filling the gap. It gives an example of The Philippines where 41 per cent of zoomers said they have a mobile wallet while 24 per cent have access to a bank account.
The report notes that this generation would rather manage their money using mobile wallets where platforms like M-Pesa fall in. This is even when these mobile wallets solutions are being provided by non-financial companies like telcos.
It notes that in some emerging economies like Kenya, bank accounts do have greater market penetration amongst generation Z but even so mobile wallets are still as popular.
“In Kenya, 45 per cent of Gen Zs have access to bank accounts, but 31 per cent have a mobile wallet,” reads the report.
It is the same case in Nigeria where 45 per cent have access to a bank account which the report says it is more than in any other emerging market in the research – but 20 per cent have a mobile wallet.
For this generation, the report describes mobile wallets as a crucial tool.
“For some emerging economy zoomers, mobile wallets from new entrants to financial services provide a means to access services they would previously have been excluded from; but even in countries with less of an exclusion issue, use of mobile wallets has become widespread,” the report reads.
They do not save
This would probably explain why financial experts have been lamenting that this generation does not save because their stash cannot be traced in any of the mainstream platforms like banks, insurance, money market and such.
They would rather have their money with them – in this case on MPesa. These mainstream institutions are already having challenge with their predecessors –millennials who are also not saving as much as baby boomers.
The 2021 FinAccess Household Survey (December 2021) also confirms this in the Kenyan context. According to the report, the percentage of Kenyans aged 18-25 where these zoomers fall who use traditional bank accounts has been dropping from 22.7 per cent in 2016, 22.8 per cent in 2019 and 15.1 in 2021.
This is while mobile banking is going up from 23.2 per cent in 2016, 24.0 in 2019 and 31.6 in 2021.
“Usage of mobile banking increased across all the demographics analysed. The use of the traditional banking (brick and mortar) however declined, except those in the age bracket of above 55 years,” reads the survey.
The survey notes increased usage of mobile banking accounts; whose proportion rose to 34.4 per cent in 2021 from 25.3 per cent in 2019.
It adds that those who used physical bank branches declined from 29.6 per cent in 2019 to 23.8 per cent in 2021 further indicating the influence of this generation combined with technology has on the financial market.
The FinAccess survey notes that young people in the age group of 18-25 years and older people above 55 years are the most excluded in accessing any form of financial services or products in the 2021 data.
“In particular, the youth (18–25 years old) had the highest exclusion rate of 22.5 per cent in 2021, rising from 18.2 per cent exclusion rate in 2019,” it reads. Such could explain why mobile wallets are friendly to this generation.
This generation, the report by Thunes adds, are also not likely to use hard cash to pay bills.
In many markets – including emerging economies, but in particular in the West – fewer than half of Gen Zs use physical cash at least once a day, the report says.
“And sizeable proportions almost never use it,” it adds.
Considering these are the big spenders of tomorrow, the not-so-bright future of hard cash economy then comes into play.
The report however notes that this is not to say physical cash is disappearing altogether – at least for now.
“It remains an important payment method that zoomers in many emerging economies, including Pakistan, Bangladesh Nigeria, Kenya and the Philippines, still use very frequently,” it reads.
The report notes that in Western markets, for example, around a quarter of Gen Zs almost never use cash. It adds that in emerging markets, many of which have traditionally been thought of as cash-based economies, the use of physical currency to settle transactions is also becoming far less common, though it remains an important payment method.
“In part, this no doubt reflects the changing shape of the global economy. As more people spend more of their money online – with zoomers leading the charge away from physical retail – the use of physical cash will naturally decline,” the report says.
But even where both parties are in the same place at the time of the transaction – say, in a physical retail outlet or a restaurant – the report says physical cash is becoming a far less popular way to pay.
“There are simply more payment options available, many of which are a more natural fit to the way in which people now live their lives,” it reads.