The digital disruption in banking and other financial services is unstoppable. For banks, this is an opportunity to deliver new experiences and innovative financial solutions, particularly for youth.
A report by Mastercard Foundation on youth and access to financial services in sub-Sahara terms digital banking as a “winning strategy for financial inclusion of youth.”
Digital banking, like other fintech innovations, is attractive to youth not only for the convenience it offers but also for the promise of financial empowerment.
However, innovating fit-for-purpose financial products requires a deeper understanding of the needs and behaviours of younger people.
With digital banking, it is possible to create a financially empowered generation, by bridging the financial divide that disenfranchises so many of our young people from opportunities.
For young adults, digital banking comes with many benefits. First, it offers a friendly, accessible and convenient channel, while supporting innovative, transparent, secure and simple banking products.
Second, it offers services during a critical phase in their lives as they settle down in their career and family life. Third, digital banking promotes financial literacy, a vital life skill.
Therefore, the focus ought to be on innovation towards cutting-edge, differentiated financial solutions that meet the needs of an increasingly demanding and inquisitive young consumer.
Research by consulting firm Oliver Wyman reveals that up to 30 percent of young people think they will not need a bank at all in future - a vital insight into attitudes towards traditional banking.
The study recommends that banks prioritise digital products, communication and customer service to attract millennials.
Promoting access to digital banking by the youthful consumer segment contributes to achieving financial inclusion, one of our key pillars as a financial institution.
Youth constitute the majority of the population yet are excluded from financial services. According to the UN, such exclusion is tied to legal restrictions, high transaction costs and negative perceptions, for example, that youth are a low-income group, therefore, not a viable market for lenders.
Digital banking is, however, not an end in itself. It must have a transformational impact on consumers by empowering them to save, borrow, invest and grow financially and achieve social and economic resilience.
This includes helping young people to build a financially secure future. Banking the youth is banking the future.
Apart from the overarching benefit of financial inclusion, a strategic focus on youth as a market is part of sustainable banking, which means promoting responsible and inclusive lending and other banking services. The banks must collectively act towards achieving financial inclusion.
Moreover, extending the benefits of digital banking to all is one way of building a sustainable, inclusive and stable society as espoused in the global SDG16.
Ensuring equal access to financial services by the under-served also serves to reduce and reverse inequalities.
Njoroge is MD of Faulu Microfinance Bank Limited.