The year 2022 saw renewed growth in digital banking and contactless payments in India resulting in higher adoption of wallets, contactless cards, digital payment apps and other financial products.
Amidst all this, India’s 350 million teenagers and young adults stood out as a distinct consumer category garnering attention from youth-centric neobanks and pocket money apps targeting their age group. The fintech space specifically catering to this segment is all geared to intensify in 2023.
There are some fundamental factors which will fuel the growth of this ecosystem in the New Year. Let’s understand the dynamics behind this genesis.
Kids want to learn
To begin with, the definition of financial literacy is changing in the era of digital wallets and payments. India’s teens have been seeking avenues to manage their own money or monthly allowances and make real-world decisions, just like their parents. They observe their parents working and earning money, and are increasingly showing more interest in learning about their personal finance.
A first-of-its-kind teen-focused financial literacy survey in India in 2022 found that 87 percent of teens discuss money and savings with their parents. About 93 percent of teens showed interest in learning about digital wallets while 70 percent were inclined to learn about crypto assets like blockchain and NFTs as well. This indicates immense learning potential among teens, who are overall inclined towards getting a grasp over modern-age financial solutions.
Ironically, before pocket money apps, teens never really had easy access and visibility into their finances – from spending to saving to earning – whilst figuring out how to manage money responsibly. The need for a more organised and dependable financial advice mechanism has now become necessary. For the longest time, Indian teenagers have had few avenues to attain financial literacy. Financial education for their age group is certainly one of the most underrated topics of education at both school and undergraduate levels.
Fintechs go where banks don’t
Even from a banking perspective, this segment is largely ignored and underserved as they are largely considered unprofitable. It is only when they start seeking educational loans at the age of 18 that banks begin to pay attention to them. Opening a minor’s bank account in India is a tedious process versus fintech entities such as pocket money apps for teens, which have made the process digital and much easier. Mobile banking apps have a one-size-fits-all experience as compared to Gen-Z pocket money apps which continue to be specifically curated for teens.
Learning curve
Linked to their inherent quest to understand the nuances of personal finance is the reality of India’s Gen-Z becoming more independent a lot faster than the previous generations. They seek instant convenience in almost all aspects of their lives and most certainly when it comes to something as important as managing their pocket money or allowances.
What’s more - they are a digitally savvy generation and are quick to adapt to consumer technology, which makes them far more receptive to digital products. This is a sweet spot which pocket money apps have managed to grab to a considerable extent. Prepaid cards provided by pocket money apps are lending this consumer segment an opportunity to comprehend and apply financial concepts in real-life situations and the corresponding real-age examples are galore.
On the other side of this coin is the parent community who, like the earlier generations, want the best for their child. However, unlike before, parents are equally supporting the relevance of their children now having better visibility into their finances as they seek help in parenting financially-responsible teens. Being receptive to digital offerings geared to impart financial literacy amongst the youth is turning out to be a win-win situation for India’s urban parent community.
2023 is the year when India’s teens will get even more empowered to experience financial freedom unlike ever before.
How UPI, P2P helps
This year will see teens getting access to UPI, which will not only bolster the adoption rate of pocket money apps but also enhance their user experience by providing them with seamless instant options for payment along with more security. We can certainly expect teens to engage even more with merchants in grocery and retail, food delivery and apparel, among others.
More and more players are expected to offer young users an enhanced wallet limit for their spending needs. Additionally, teens will also get to withdraw money from ATMs and complete peer-to-peer (P2P) transfers using the prepaid cards offered by pocket money apps.
As a user segment, teens love to be appreciated, acknowledged and incentivised. No wonder, retail brands focusing on them are expected to offer even more curated discounts and rewards in partnership with pocket money apps this year.
India’s larger fintech market is projected to grow to $85 billion by 2025, from $26.3 billion in 2019, at a CAGR of 22.7 percent (source- ResearchAndMarkets.com). While the fintech ecosystem addressing the needs of teenagers and young adults is still in its infancy, players focusing on this consumer segment are well poised to grab a considerable size of the overall pie. The foundation has been set for the way India’s youngsters will handle personal finance matters in their adulthood and 2023 will see the arena growing and maturing at a faster pace.
