Demystifying “FinTech for Indian GenZ”
In this article, we will discuss why the FinTech for GenZ market opportunity with 250 million Teens is so huge, what’s happening in this market — major players, their offerings, traction and business model!
Problems in the Teens market:
“Most teens don’t have a Bank account”
In this Tech-savvy age, Kids shop a lot from e-commerce like Flipkart and Amazon & Food delivery Apps like Swiggy, Zomato, but from where do they pay? They have to go to their parents, enter their Card details, ask for OTP in the midst of a busy meeting and then complete the transaction. Quite a friction! Teens hate cash, lose changes and everyone wants a cool card or at least a UPI App.
Even if a teen has a bank account, they face multiple problems with current UPI limits of 10,000 in many banks, Old-age Banking Apps with again a lot of dependency on their parents. To add more, the traditional banks tend to ignore the teens and treat them just as an add-on to the adult accounts.
As per my primary research, Parents also want their child to become financially independent, teach them basic finances and they just want to monitor their expenses and even, children are okay with their parents keep tracking of their expenses. Google pay, PhonePe and Paytm are widely used even now, as they make an account from their parent’s debit card, but it gives them access to the parent’s bank account and yes, many parents are sceptical about it — for instance, an Indian teenager, who had access to his parents’ bank accounts made in-app purchases for himself and his friends to the tune of whopping Rs 16 lakh!!
Financial Literacy among teens is a real issue — many teens and even young adults are not aware of even basic finances and payments, investing and credit is still a distant thing.
Market Opportunity: Rapidly growing & underserved.
There are almost 250 Million teens ~20% of the Indian population with Age (10–21) in India with 30 Million owning a smartphone. This is expected to increase rapidly with higher smartphone penetration and 10% teens adding up each year!
The COVID has further contributed to increased digital penetration with EdTech growing 2X and digital banking is now a necessity, rather than a choice.
Teen Trends: They spend on an average of 7–8K INR, with the majority of spends in E-commerce — Flipkart, Amazon, Food delivery apps — Swiggy, Zomato, Gaming — Pubg, free-fire. Apps like Instagram, Snapchat, Youtube rule these teens and they look up to such mini-influencers as their heroes! They are CTOs of the house — yes, quite literally. The parents look up to them for any Tech-related problems like creations of any social media accounts, ordering anything from Flipkart or Swiggy and many more.
An interesting thing to note is that the average age to earn money is going down, with a lot of teens now looking to earn money through freelancing, youtube and even internships!
Market Landscape Analysis:
We all might know of FamPay, but there are at least 10+ FinTechs trying to solve this problem — Walrus, Slice, Yodaa, Junio, Spoon, Birdfin, Funq, Streak and more! Looks like FinTechs are more interested to build neobanks for GenZ than millennials. They follow the similar “neobanking” model, where they partner with a bank like RBL, IDFC etc which opens a minor savings account and issues a personalised co-branded card along with promising a super user experience and customer support.
There are two approaches taken by these — Debit-first and Credit-first:
Debit-first: Fampay, Walrus, Junio etc are offering solutions like a cool & personalised debit card, a savings account, expense analysis along with many gamification features and building a community around it.
Credit-first: Slice and Spoon.money are trying to solve these by offering short-term credit and BNPL (Buy now Pay later) solutions, but they require a PAN card which restricts only college students to avail these.
Birdfin on the other hand is following a gamified education-based approach to teach kids about money while Funq is following a unique B2B API-based approach!
With a lot of banks like ICICI already launching a millennial app, it’s a high possibility that these banks and millennial neobanks may also enter the teens market in the near future, as the Tech stack remains similar, and get a whole new underserved markets.
Traction & Product:
While most of these startups have just started, Slice and Fampay have clocked over 1 Million+ install and Walrus also has registered more than 200K users on their platform. Instagram and micro-Influencer marketing along with campus ambassador programmes are key growth acquisition strategies.
High drop in acquisition funnel: KYC was a major churn in the acquisition funnel, which also requires that your mobile number should be linked to Aadhar card and ~70% of teens don’t have it and hence, at least 90% of users gets dropped in the funnel. Few startups are trying to get through this problem, by relying on their parent’s KYC and just a digital wallet for their children.
Roadmap: Most of these startups like FamPay, in order to cater to all the needs, are also developing a shopping section, similar to PhonePe switch, enabling them to buy directly from various sites, from their App itself, while Walrus is looking to gamify the whole payments experience, taking the google pay rewards experience, a one-step further.
Further, It will be interesting to see if they can teach these teens the habits of investing and savings, and most importantly, compounding through Fixed Deposits or Mutual Fund products. There is a huge market in itself of education loans, insurance and other short-term credit needs, which can be addressed via these Apps in the near future. And yes, CRED-like curated e-commerce will definitely be on the roadmap of many startups, as teens have a very high tendency to get influenced and shop some cool products.
Business Opportunity:
With a huge market, The money-making opportunity remains the biggest question!
On one side, there is a concern that these kids have a very low transaction size, giving a very low deposit for banks with very low room for selling other services like investments & credit. However, an interesting aspect can be, this population has a very low cost of Customer Acquisition(CAC) as they are more tech-savvy and get influenced easily — they have very high virality co-efficient with close and connected circles. At the same time, they have a higher Lifetime Value (LTV) of 15–20 years as it has a higher probability that they will continue with the same FinTech/Bank when they start earning “wealth”.
Many startups like Junio are also considering a recurring subscription-based model along with one-time fees for cards. Overall, The path to profitability in this industry will definitely be longer, given the long gestation period and a highly competitive market.
In the end, It will be interesting to watch the adoption of neobanks/FinTechs by the most educated, the most intelligent, but also the most cynical generation — Genz and whether they still trust their daddy’s big old bank’s experience!
That’s all for this edition :)
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