Surprise surprise. Generation Z doesn’t like banking.
Many Gen Zers are just bank-shy, according to a new report Opinion poll from securea digital identity verification provider, found that nearly half of Gen Z respondents wished they would apply for a financial account earlier in life, but did not feel ready to enter the financial ecosystem at age 18.
This presents something of a quandary, according to the survey, which surveyed 2,000 members of Generation Z and found that 35% lack a digital financial footprint. These “digital ghosts” struggle to build the credit history they need to to be approved for financial services because they lack a financial footprint to begin with.
They had little to no history of credit cards, loans, rental agreements or home purchases, making access to these same things difficult.
Without a digital financial footprint, the report says, it is extremely difficult to verify the identity of digital ghosts through traditional credit reporting agencies as they attempt to access financial and government services.
Of course, many members of Generation Z, whose ages range from 11 to 26, are too young to build any significant credit history, but important policies and trends are working against them.
The report identifies one of the biggest influences on Generation Z’s lack of financial creditworthiness Credit Card Responsibility and Disclosure Acta federal policy introduced in 2009 that was enacted to protect consumers by demanding more transparency in credit card conditions. While the regulation has helped Americans make better financial decisionsIt also introduced requirements for people under 21 who want to apply for a credit card, including co-signer and proof of income requirements. According to the report, this “reduced the first traces of a financial footprint in life further than in previous generations.”
Additionally, identity verification, which is the most important first step to accessing most financial services, is becoming increasingly difficult for financial institutions due to the increasing prevalence of Identity fraud is constantly on the rise. In fact, account takeover fraud resulted in $13 billion in losses in 2023, up from $11 billion in 2022. Because identity fraud is so widespread, companies can no longer rely on traditional identity verification methods like a social security number or official documents must be left and frequently stricter verification methods.
More than half of Gen Z survey respondents said they had to visit financial institutions in person multiple times to verify their identity for financial accounts rather than simply signing up online. And because of difficulties verifying their identity, one in five say they have trouble accessing federal student aid or student loans and grants.
Unsurprisingly, Generation Z has grown weary of the myriad of ever-changing complexities in the financial services sector and is delaying the time it takes to enter banking. According to the survey, 40% of Generation Z said they would put off banking for as long as possible, while about 20% of Generation Z believe banks don’t want them as customers.
However, the digital minds of Generation Z represent an important market and economic driver: According to this, Generation Z currently earns $7 trillion in its global cohort of 2.5 billion people Bank of America Research, and is expected to generate $33 trillion in income by 2030, when the youngest members of the group reach adulthood. By then, Generation Z will account for around 27% of global income.
The next generation of young adults may experience poor creditworthiness and delayed entry into banking expensive consequences in key areas of investment, including home building, car purchasing and borrowing. Credit checks are often standard when it comes to qualify for a car loan or renting a house, and many landlords will either reject applications without a credit report or raise prices. Other financial services such as cell phone and Wi-Fi services often require a credit check before applicants can qualify for a financing plan.