Gen Z-focused fintechs live and die by social media. Here's how they're trying to out-influence each other, and traditional banks, to nab 82 million customers for life.

• Gen Z is projected to be the largest US consumer base by 2026.
• The COVID-19 pandemic has only accelerated a trend toward digital banking.
• Fintechs are trying new tools and marketing to reach the younger generation.
• Visit the Business section of Insider for more stories.

Taylor Krebs remembers her friends’ reactions when she started using Step, a banking app that caters to Generation Z.

Krebs, a ninth-grader, had early access to Step because the company’s CEO, CJ MacDonald, is a close family friend.

The startup offers a secured credit card and the ability to send and receive money through its app. For Krebs, it means her parents can fund her account in minutes so she doesn’t have to ask for cash every time she goes out.

It didn’t take long for Step to catch her friends’ eyes, as she could use Apple Pay by connecting her Step Card.

“Everyone would be like, ‘Whoa, that’s so cool. You don’t have to ask your parents for money?'” she said, adding that all her friends have now signed up for the app.

That word-of-mouth growth is exactly what Step is aiming for. Gen Z, generally defined as people who were born between the mid-1990s and 2010, is the target of a growing number of banking startups looking to establish loyalty among a group set to become the largest segment of consumers in the US this decade.

Whereas previous generations established banking relationships based on proximity and who their parents banked with, Gen Z has come of age in a digital era. Brands are increasingly turning to social media and influencers to reach these young consumers.

Step, for example, has enlisted the help of one of the industry’s biggest stars, Charli D’Amelio.

D’Amelio, who has the most followed account on TikTok, has invested in Step and posted videos about the partnership.

But it won’t take just a couple of tweets or sponsored videos to win Gen Z’s attention online.

“The media cycle is pretty saturated. The marketing environment is very saturated. You also have to have partnerships and credibility and influence through other channels.” said Brian Hamilton, the founder and CEO of One Finance, a digital bank startup.

There’s a catch to pitching directly to members of Gen Z: Some are too young to open accounts on their own. Networks of parents have been a powerful marketing tool for fintechs like Gohenry and Greenlight.

There are Facebook groups like Greenlight Insiders, whose more than 1,200 members can connect with other parents and with Greenlight leadership to discuss the app. Greenlight says nearly two million kids and parents have signed up for the app since it launched in 2017.

“There’s a big community element of like-minded parents from all demographics who are tied together because they want to help their kids aspire to be better in this area,” Dean Brauer, the cofounder and president of Gohenry, told Insider.

While their marketing strategies might differ, these startups are similar in what they offer: a debit card and/or an app where teens and their parents can track spending and move money electronically, sidestepping the tradition of kids asking their parents for cash before heading to the mall.

They’re also hoping to upend America’s largest consumer banks, like JPMorgan Chase and Bank of America, that are capitalizing on existing relationships with parents instead of going to teens directly.

Establishing brand loyalty early on is key for future growth. People born between 1998 and 2016 — essentially Gen Z — are set to represent the biggest US consumer market by 2026, with 82 million people, according to Insider Intelligence.

“They can have their own social media account from 13 years of age. But they can’t get a bank account on their own until 18,” Betsy Graseck, an analyst at Morgan Stanley, said in a 2019 report. “So, banks are missing this critical five year window, where young people are beginning to live their lives connected to their smartphones.”

Gen Z is a huge and discerning market for banks and fintechs

As retail banking shifts toward mobile experiences, financial institutions can meet Gen Zers where they are: on their smartphones.

While opening a checking account online might seem foreign to older people, Gen Zers are at ease.

“Technology is only new if you remember it the way it was before, and in banking that’s a huge deal because Gen Z doesn’t remember doing it anywhere other than through a phone,” Jason Dorsey, the president and cofounder of a generational-research and advisory firm, told Insider.

Attracting Gen Zers isn’t just a matter of rolling out a flashy app. Marketing to them requires having a more attuned sense of authenticity and of what the generation values, market analysts said.

Gen Zers have come of age after the 2008 financial crisis and during the COVID-19 pandemic, shaping their opinions of banks and financial markets.

“They want up-front, easy-to-understand, trustworthy financial institutions that are there to support them and help them achieve their goals,” Karen Kislin, a strategic advisor at the banking-strategy firm Raddon Research, told Insider. “So I think they’re absolutely driven to authenticity.”

Some fintechs go directly to kids

Some startups are going directly to their target market, relying on kids to enlist their parents in trying a new banking product.

Step, which launched last October, took that approach. It says that in less than a year it has signed up more than 500,000 users.

check out @stepit’s a banking app for teens and it’s free! step is giving away $100,000 in cash for their launch #getstep #steppartner

D’Amelio no doubt has played a role in Step’s fast rise. The influencer’s fan base — 108 million followers on TikTok — is larger than most countries’ populations.

She partnered with Step during its launch and became an investor in December, when it raised $50 million in a Series B round that included participation from Justin Timberlake, The Chainsmokers, and former NFL star Eli Manning.

“Managing money isn’t something we’re born knowing how to do but it’s SO important, and in my opinion, not something we talk about enough,” D’Amelio told Insider in an email. “That’s also one of the major reasons I invested in Step — to help more teens learn about and have access to money management tools.”

D’Amelio said that beyond the educational elements of the app, its Gen Z-centric design was a big draw.

“When I’m using Step, it almost feels like I’m on another social media platform,” D’Amelio said.

Step has partnered with other influencers, such as Nichole Jacklyne, a popular slime-maker. It hasn’t just been about attracting big names, though.

MacDonald said that when he was designing Step, he asked teens to weigh in on everything from the logo design to what they’d look for in a banking app. 

MacDonald also spent months at movie theaters and coffee shops asking teens how they spend and what they’d look for in a banking app.

Step’s understanding of its target market gives it a leg up on incumbent competitors, he said.

“I don’t think necessarily some of the larger, more traditional brands, specifically in financial services, understand this demographic and what motivates them and excites them,” MacDonald told Insider.

Other fintechs have narrowed their target audience. Zytara is focusing on gamers and esports fans, most of whom skew younger. In a Morning Consult poll of 1,000 Gen Zers in August, 35% said they were avid or casual fans of esports — making it more popular than the NHL, MLB, or NASCAR.

Zytara’s approach “definitely will differentiate us because we are singularly focused on this space,” Al Burgio, its founder and CEO, told Insider. “A lot of the other fintech products out there are fairly generic in terms of look, positioning, how they market.”

Burgio thinks the tactic will lead to lower customer-acquisition costs. Marketing is often a huge cost for consumer-facing fintechs — figuring out how to keep it low and still grow is key to profitability.

The gaming industry, Burgio said, “is a very healthy ecosystem” where “we can really identify our customer.”

“We can really identify their needs,” he added, “and we can really communicate directly to them.”

Others are building for kids but marketing to parents

Marketing to Gen Z can only get you so far. Kids under 18 still need approval from a parent or guardian to open a bank account. So some fintechs are marketing to parents.

Greenlight is one example. Its app includes chore tracking as well as checking and savings accounts. In January it added investing, so kids can propose stock and ETF trades to parents.

“This is an educational investing platform specifically designed for kids,” Timothy Sheehan, Greenlight’s cofounder and CEO, told Insider. “This is not just Robinhood for kids.”

Sheehan said a big focus was making sure the trading feature didn’t feel like “Legos for investing.”

“We want them to know it’s a real service, this is real money, and these are real investments you’re making,” Sheehan said.

Founded in 2014, Greenlight is open to users of any age. But it designed its app to appeal to Gen Z.

It’s seen traction with parents recommending the app to their friends. But it’s also noted the power of peer marketing among Gen Zers.

“Nothing is a stronger marketing vehicle than one kid showing another kid their debit card,” Sheehan said.

Gohenry, too, is building for kids but marketing to parents. For parents, it offers suggested allowances based on kids’ ages and anonymized data from other users. Its app is available for kids 6 to 18 and features allowances, savings, and chore tracking.

“After 18, there’s a lot of opportunity in the market, no doubt about it. But we’re 100% focused right now on this segment,” Brauer said.

Incumbent banks offer accounts for teens, but they’re not designed with only kids in mind

Established players, meanwhile, are betting that they can attract younger clients by leveraging relationships they already have with their parents.

JPMorgan Chase and Bank of America released offerings in the second half of last year that tie parents’ accounts with their children’s.

Chase’s First Banking tool launched in October in partnership with Greenlight, in which JPMorgan is an investor. It allows parents to open checking accounts and request debit cards for kids as young as 6. The kids’ accounts are linked to their parents, who can monitor their activity and set limits on spending.

“We designed this product with both the parent and child in mind. We wanted to put the parents in the driver’s seat while still giving kids the freedom to learn how to earn, spend, and save money,” Kavita Kamdar, Chase’s head of business development for consumer banking, told Insider.

Since launching its Life Plan tool in September, Bank of America has added 2.1 million accounts on the service, according to its latest quarterly results.

The tool, accessed through the Bank of America app, lets customers set near- and long-term financial goals. Some of the goals — like paying off student loans, building a credit profile, or setting up a budget — are tailored to younger users who might be interacting with the app with their parents.

While Life Plan was not created solely for younger people, it’s designed to adapt to a customer’s experience. Given Life Plan’s integration with Erica, the bank’s virtual assistant, and its compatibility with the Bank of America app, the bank is betting on the interest of younger customers.

Big industry players can put more resources than startups into nabbing customers. Traditional banks, for example, can offer cash bonuses upwards of $200 for opening a checking account and setting up direct deposit.

Banks also offer more than checking and savings accounts. From lending to wealth management and trading, big firms can meet customers’ evolving needs as they get older and have more money to save and invest.

‘They’re actually building for everybody’

Regardless of the size of the financial institution or how it’s marketing itself to a younger generation, one thing’s clear: Gen Z is a bellwether for banking.

Widespread mobile adoption has become the new normal for Americans, a process that’s only been hastened by COVID-19.

“We’re all spending way more time online. And so I think that’s a really important thing for all of the financial institutions to keep in mind,” Eric Jones, a vice president of corporate marketing at WP Engine, WordPress’ digital-experience offering, told Insider.

“They’re not just building for that one demographic — they’re actually building for everybody,” he added.

Learn more about the financial services industry.

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