In an industry where success is far from guaranteed, fintech startups are defying the odds by setting their sights on a new target market: Generation Z. Born between 1997 and 2012, these tech-savvy individuals are reshaping the financial landscape with their demand for user-friendly, mobile-first, and personalised financial services.

But what makes Gen Z so irresistible to fintech innovators? Projected to be the highest-earning generation in history, Gen Z boasts an estimated annual earning potential of $40 trillion and $140 billion in spending power. Even more intriguing, 51% of Gen Z consider fintech companies their most trusted financial institutions. These statistics underscore the massive opportunity Gen Z represents for startups and paint a promising future for the FinTech industry.

Key areas where fintech innovation is capturing the hearts (and wallets) of Gen Z.

Seamless investment platforms

Thanks to innovative services that leverage technology, social interaction, and gamification to engage novice investors, allowing them to purchase fractional shares of high-value stocks while keeping fees low, investing is now more accessible than ever.

Take, for instance, lemon.markets, a Berlin-based digital investment infrastructure provider that recently scored €12M funding, using its API-powered platform to offer investment products to its customers. Founded in Berlin in 2020, the BaFin-licensed fintech claims to have lowered the entry barrier for new investors by providing access to low-risk asset classes, such as ETFs and Mutual Funds, and supporting fractional trading with a minimum order amount of just €1. The rise of fractional trading and low-cost investment options aligns with Gen Z’s preference for flexibility and accessibility in financial products.

Max Linden, CEO of lemon.markets, outlines their mission: “We’re on a mission to grow investing opportunities across Europe. The need is more than clear: currently, only 15% of people are investing directly or indirectly. However, Gen Z is leading the way, with 40% already investing in various asset classes—a trend we are, of course, more than excited about.”

Prague-based Birdwingo takes it further, gamifying the investment experience. In May, the company secured 1.2 million to enhance its financial education and investment platform, which targets Gen Z’s growing interest in stocks and ETFs. This funding round was led by Bienville Capital, a New York-based venture capital firm, alongside other investors.

Birdwingo’s innovative approach, dubbed “The Duolingo for Finance,” dispels the myth that substantial capital is necessary to start investing. Andrej Hano, CEO & Co-Founder of Birdwingo, elaborates: “Birdwingo incorporates a social aspect, allowing users to view their friends’ investment activities and draw inspiration from one another. We even offer tangible rewards, such as fractional shares in well-known companies, to maintain motivation as users expand their knowledge and portfolios.”

The rise of fintech platforms like Birdwingo drives demand for platforms that combine education with real-world applications. The company’s gamified learning experience alone, which includes interactive lessons and real-life investing scenarios, is designed to engage young users in a way that traditional financial education methods often fail to do.

Services beyond traditional banking

Neobanks have emerged as a powerful force, resonating with Gen Z by offering services beyond traditional banking. These digital banks provide intuitive budgeting tools, real-time spending notifications, and fee-free accounts, catering to the tech-savvy and financially conscious younger generation.

One prime example is Pixpay, a mobile banking solution for teenagers. In 2020, Pixpay raised €8 million to bolster its presence in France, expand its team, and continue supporting teenagers in managing their pocket money. Global Founders and the Digital Ventures fund of Bpifrance led the funding round.

Pixpay offers a comprehensive suite of services, including a mobile bank account, a payment card, mobile payment options with Apple Pay and Google Pay, and an app that tracks spending. Teen banking solutions like Pixpay address a crucial gap in the market by offering digital services tailored to teenagers’ unique financial needs while involving parents in the process. Unlike adult finances, teenage monetary management involves distinct features: automated pocket money deposits, easy payment systems, goal-oriented saving tools, and instant card blocking.

Jeanne Ravisy, Country Manager France at Pixpay, explains the market opportunity: “With nearly 90% of teenagers owning a smartphone and the advent of new banking technologies enabling remote management and real-time control, the conditions were ripe to revolutionise how teens manage their daily finances.”

Personalisation and AI

Personalisation and AI are reshaping industries, and FinTech is no exception. In this sector, AI-driven tools such as intelligent chatbots and dynamic dashboards are revolutionising how Gen Z interacts with financial services, enabling more intuitive and efficient decision-making processes.

For instance, Xapien, a due diligence platform that caters to the rise of the conscious consumer, has recently landed £8M to transform the research industry. With its methodology, the company aligns perfectly with the demands of today’s business environment. Chris Green, CEO at Xapien, elaborates: “Our cutting-edge use of AI means businesses don’t have to wait for comprehensive and accurate reports on their counterparts. Xapien is setting new standards in due diligence, helping organisations worldwide navigate complex regulatory and ethical environments easily and confidently, ultimately creating better business practices and stronger ethical standards.”

Moreover, platforms like Xapien highlight a broader trend of fintech adapting to Gen Z’s behavioural changes. This generation values transparency, ethical practices, and social responsibility. Xapien meets these values head-on, ensuring that businesses can make informed decisions that align with ethical standards. Thanks to AI, which provides detailed and accurate due diligence reports, Xapien ensures that businesses can make informed decisions that align with ethical standards.

Financial education

Financial literacy is a critical life skill that young Europeans need to improve. According to the OECD, only 10% of this demographic can be considered financially literate. This knowledge gap affects individual financial well-being and has broader economic implications.

As a vivid example, Birdwingo provides alternatives to traditional financial textbooks to address this issue, making financial education more appealing and accessible to young people. Simultaneously, France Fintech and Pixpay propose contextualising subjects like mathematics with practical financial problems, making abstract concepts more relevant to students’ daily lives.

From a compliance perspective, lemon.markets is taking a proactive approach to financial education. Max Linden, CEO of lemon.markets, explains their strategy: “Financial education is key, and for us, this means effectively integrating a strong compliance angle. For example, we collect the knowledge and experience profile during onboarding. This means the customers answer questions about their experience, determining their eligibility for different products. If someone attempts to buy a product beyond their experience level, we issue a warning via our API, helping with conscious decision-making.”

Gen Z spending and saving habits

Birdwingo’s platform has provided insights into Gen Z’s behaviours, revealing a complex picture of their spending and saving habits. One of the most striking observations is Gen Z’s tendency to prioritise living in the moment, which often makes it challenging for them to appreciate the benefits of long-term investing.

Furthermore, despite economic challenges, 2023 saw teenage spending reach unprecedented levels, according to data from Pixpay: The average monthly spend rose to €96.6, marking a 20% increase from the previous year and outpacing inflation. Teenagers are making an average of 7 transactions per month, with each transaction averaging €13.8. Spending patterns evolve with age: 10-12-year-olds make about 3 monthly purchases, while 16-18-year-olds average 10.

A notable shift in Gen Z’s financial behaviour is the rapid adoption of mobile payment methods. In 2023, over a third of payments made by teenagers were via Apple Pay or Google Pay, up from a quarter the previous year. This trend signifies a move from traditional bank cards to smartphone-based transactions, reflecting Gen Z’s tech-savvy nature.

The challenge for fintech lies in striking a balance. Gen Z craves instant gratification, but long-term financial security is crucial. As this generation matures, FinTech startups that can address both needs will disrupt the industry and redefine finance for the future.

What do European fintechs need to offer Gen Z in 2024?

European fintech startups are targeting Generation Z, a tech-savvy demographic with a projected annual earning potential of $40 trillion and $140 billion in spending power. Key fintech innovations include seamless investment platforms, neobanks, and personalized AI-driven tools. Companies like lemon.markets and Birdwingo are leading the charge in providing accessible and engaging financial services to Gen Z.