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Financial Wellness & Mobile Banking

Andie Smith
October 5, 2020
eCommerce

Earlier last week, the New York Times leaked President Donald Trump’s federal income taxes the year he was elected, which accumulated to about $750 total. Heads turned among taxpayers countrywide. It’s no understatement that the majority of the U.S. youth, (the eldest of the Generation Z population of voting ages 18 to about 25), are concerned about current in-house politics. According to the Pew Research Center, only 30% of the Gen Z approves of Trump’s job performance. When the average tax-paying 22-year-old pays more annual taxes than our president, attention shifts tremendously to the spending habits and entrepreneurialism of our youngest generation on the rise, and how it differs from the fiscal behavior of Baby Boomers or Millennials. 

Generation Z is growing into their early 20s: an age of voting rights, financial independence, and adult responsibilities. New spending habits and avenues have developed, built on banking applications like Afterpay, Venmo, Mint, and Fast. Banking platforms such as these have developed within the past decade, altering the landscape of how we spend, transfer, and handle our personal finances. 

Platforms like Afterpay or Klarna have launched collinear with a rise in eCommerce. They advertise a slogan of “buy now, pay later” in order to alleviate the immediate financial burden of big purchases. By splitting up payments into 4 installments over a time span of 4 months, it lessens the blow on spender’s wallets and makes desirable products more accessible. 

If platforms like Afterpay make financial wellness and expression through consumerism more accessible to Gen Zers, doesn’t it additionally postpone the responsibility of finance? If anything, “buy now, pay later” applications offer insight into the spending habits of this generation, even if it gives in to mildly naive expenditures. There is a double edged sword in this new spending phenomenon: wanting access to higher end products as an expression of self versus an age group that pigeonholes their finances. This specific response in spending habits with platforms like Afterpay raises the general question: What is the future of eCommerce spending across age groups if there are differing measures of tangible financial wellness, and how has mobile banking altered spending habits for better or for worse?


Defining Financial Wellness: Combining Mental Health and Financial Security

At Yaguara, our ethos circles around putting the human behind the numbers. The same connections can be applied to empathy and finance. Therefore, we come up with something like financial wellness, which is not simply a culmination of fiscal success and safety, but a conglomerate of emotional wellness, mental health and long-term financial security.

In a 2016 survey by Fidelity Investments, financial wellness is divided into four domains in order to emphasize the dissonance between an individual’s finances and how they feel about their finances. The four domains to consider include budget, savings, debt, and protection. 

The domain of debt especially plagues the millennial generation, those born between 1981-1996, when considering the student debt crisis and Recession of 2009. According to Huffington Post, millennials have taken on 300% more student debt than their parent generation, and the Baby Boomers were much more likely to retire at a younger age than millennials. Financial wellness could be scaled down for millennials, whether mobile banking is present or not.

Forbes defines financial wellness as a “dynamic state of financial health.” This evolving definition and state of wellness is rather stagnant for some generations rather than others. As mentioned, millennials graduated on the wrong side of the Recession, resulting in more barriers to buying homes, stable salary jobs, and being able to pay off their student loans. For this reason, Gen Z is more equipped towards financial wellness than millennials because they grew up watching their older counterparts struggle with the burdens offset from the Great Recession. With coronavirus affecting the future generations with finding work and employment opportunities, how is Gen Z going to learn and differentiate their spending habits from millennials? 

Financial wellness programs are trending among employers and businesses. These programs intend to educate, counsel, and assist employees with how to better manage their money. The question is how effective are these programs, especially at par with the expertise one can gain from a quick download of a mobile banking app. 

The Society for Human Resource Management claims that the metrics for measuring success in financial wellness programs includes use and engagement, turnover, absenteeism, and front-line feedback. But are Gen Zers even using these available programs and resources? In a study conducted by LifeWorks, 44% of respondents claimed that they did not have enough time for the programs, 22% said they didn’t need help with it, 20% didn’t trust their financial information to be kept confidential, and 16% felt intimidated. 

Numbers vary across the board when it comes to tracking and surveying financial literacy with the Gen Z population. Some say 81% of the Gen Z group is stressed about finances, while others like Forbes claim that over half of the age group already has checking and savings accounts, and are well equipped to take on the financial road map of their futures. With mobile banking and new banking applications being rolled out over the past decade, perhaps financial wellness can be accessed easily through the smartphone, instead of traditional avenues of in-house programs. 


Consider the Game Changed: Mobile Banking

The past 10 years have seen the creation and emergence of relevant banking applications. These platforms are changing the game in financial wellness, especially for the new wave of consumers. 

In the 1980s, it required a landline phone to pay bills, and now in 2020, we can access our account, transfer funds, pay bills, and more at the touch of a screen and a few clicks.

Venmo launched in 2009, and swiftly took on a cultural verbiage, with millennials and Gen Zers saying, “I’ll venmo you for lunch.” Before, bill splitting and exchange between friends was handled with cash, or getting someone back. With the rise of Venmo, money leveraging can occur spontaneously and immediately. Furthermore, Venmo takes on a personality that resembles more of a social media platform than a banking one. Users can comment on their payments and requests, and if you make your payments public, anyone on your feed can see who and when you pay. 

The “Buy Now, Pay Later” model has been reiterated profusely beyond Afterpay, and includes competitors like Klarna (which launched before Afterpay), Sezzle, Affirm, FuturePay, and Quadpay. The founders of Afterpay claim that the data garnered through the app offers unique insight on the spending patterns of younger generations. They imply that more Gen Z users are likely to utilize tools like Afterpay because the new wave of consumers is interested in ethical spending, and conscious consumerism. Afterpay also says something about accessibility to higher end products. A 13-year-old boy may not have enough money to spend on a Supreme tee-shirt, but he might if he splits it up into 4 different payments across the next few months. Consumption in this sense is seen as expression rather than possession. 

Consider Fast, a banking application that launched in 2014, and recently underwent a major rebranding. It allows users to check out while online shopping with one click, rather than typing in your name and credit card information. The company prides itself on being fast, convenient, and safe. As a centralized app to aggregate orders, shipments, and expenditure, Fast is also altering the way people are transferring money and spending by eliminating the leg work of typing before purchasing. Through superseding the middle ground, Fast allows for easier mobile shopping, thus a projected increase in eCommerce through advertising on social media. An IBM study shows that 74% of Gen Zers spend most of their time online, proving this projection. 

Circling back to financial wellness, many consumers want to use banking applications that help them manage their finances and track spending. Mint is a popular budgeting tool, and has racked up 13 million users by 2020. Mint is another banking app that offers a rich pool of data on the spending habits of the U.S. citizens. However, the data is not the most robust and reliable, as wealthier people with high school or college degrees make up the majority of Mint’s users. 

Additionally, a touch-free payment boom is occurring, considering COVID-19 and the necessity for contactless payments when in public. Easy management systems have been built with Apple Pay and the Venmo app, which don’t require inserting a card, but simply holding up a phone’s QR code. The contemporary monopolies of Apple and Google monetize these gate-kept mega-platforms like the App Store or functions like Apple Pay, and therefore represent an exclusivity to mobile banking. But with 72% of all Gen Zers on Instagram (Pew Research Center), mobile banking sidelines closer and closer to a universal function and becoming more accessible. 


Spending Habits Across Generations 

Financial wellness is dictated heavily by the shift to mobile banking. As Gen Zers and Millennials are more tech-savvy than Baby Boomers, their ideas of financial wellness differ from those who are used to the traditional means of banking in the past. 

For example, 50% of Venmo’s users are between the ages of 25 and 34. Afterpay’s average user age is 33, with 75% of their users as millennials. These banking apps do indicate a key metric that shows younger users are turning away from using credit cards, and therefore considering financial wellness more carefully by spending with their own money. 41% of millennials own a credit card today in 2020, rather than 58% in 2002. An IBM study on Generation Z shows that only 14% prefer to use a credit card to a debit card. 

Looking at financial wellness across industries and age groups provides insight into our new wave of consumers, and allows us to reflect on how mobile banking is ingrained into the modern consumer’s lifestyle. Gen Z holds $44 billion of the global wealth currently, and as the mobile-first generation, they are grasping influence wherever they can get it, encouraging eCommerce on social media platforms and even promoting banking apps.  

New cultural norms have emerged from this age of banking apps, too. Contactless payments prevent credit card numbers from being recorded, and instead of splitting a check, most restaurants allow you to scan the receipt with a QR code and use your mobile device to pay. It seems as if the fears of data breaching and identity theft are a thing of the past, especially if there is no paper trail of currency following the consumer’s spending.  

Afterpay’s users offer insight into Gen Z shopping behavior in terms of considering financial wellness and long term debt. Those who use Afterpay or other “buy now, pay later” apps are more aware and apt to make smart financial decisions as they divide their payments up by month, lessen the blow on their wallets, and have to preemptively remember upcoming payments. In fact, 77% of Afterpay users said they use the application as a way to budget, rather than postpone payments. 

Back to Data

As always, an answer could lie in data, offering more financial wellness insight into individuals spending habits with access to more robust data. Are banking apps of 2020 hindering or bolstering the financial wellness of U.S. users? By providing more insights and data aggregation, more connections and benchmarks can be formed by the average consumer to access on their mobile phone. Money hasn’t changed in 2020, but the way we track, measure, and organize it certainly has.


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