Savings accounts, checking accounts, building society savings contracts, and possibly a share - for the boomer generation, these were often the only points of contact regarding investments or retirement planning.
But even before the outbreak of the Covid-19 pandemic, there was a significant increase in demand for (digital) investments in Germany; mainly driven by the subsequent Generation Z.
This generation earns more, saves more, invests earlier and with higher sums than previous generations: 31% of Gen Z started investing before age 21, compared to only 9% of baby boomers.
Demand for digital offerings is growing rapidly
This veritable boom was fueled by a long-standing low-interest-rate policy and the progress of general digitalization, which also made a natural entry into the financial sector. When looking for the social distribution of the increases, it is worth taking a closer look at the structure of new depo openings as well as the absolute number of shareowners in the total population. In 2021, the number of depots was 27.5 million, 2.2 million more than in the previous year. In three out of four cases, the new investors opted for an online or neo-broker (e.g. Trade Republic or Flatex). These providers are particularly popular with young investors aged 14 to 29.
The conquest of large market shares by Neobroker and Co. would not have been possible without the enormous interest in digital investments of Generation Z.
Digital investments - as easy as ordering pizza online?
This age group has previously experienced in other areas of life how easy it is to order goods or services on the Internet or via an app and demands the same ease for planning personal finances. Nowhere else are the adoption rates for fintech services as high as in this social group. Their focus is on disruptive and sustainable (ESG) investing, cryptocurrencies, and thematic investing. The interest in these topics no longer arises from the use of classic media, bank publications, or specialist articles, but is fed by the usage behavior of social media. Young investors are much more willing to take risks than their predecessors and have a much higher level of financial literacy and above-average knowledge of fintechs and neobrokers.
When choosing a provider, factors such as an uncomplicated opening of a securities account, intuitive usability, and overview - especially on the smartphone - play just as important a role as high-quality charts, a simple instrument search function, and fast order execution. Generation Z has little trust in bank advisors, which is why classic 34f advisory approaches are likely to fail. To counteract this, financial institutions should invest more in self-service functions and models. For example, a research functionality for analyzing the most important criteria (price-earnings ratio, moving average, etc.) of an investment as well as access to in-house research can be integrated into the trading app.
What financial institutions should implement now
Digital banks must first and foremost internalize the idea of the platform economy and translate it into a successful business model. For this to succeed, they need to keep three factors in mind at the same time: Scalability, IT systems, and customer-centricity. In order to significantly increase the share of young investors, financial institutions should focus more on self-service functions and implement trust-building measures in social media. Concrete offers such as cryptocurrencies, ESG, and thematic investments generate a high level of attention and more quickly awaken the willingness to "just try it out".
Thus, simple trading with Bitcoin & Co, intuitively understandable values on sustainability, and a cleverly designed customer journey are indispensable to generate new sales revenues. A cost-efficient offering can also be implemented in the short term at established institutions with complex structures. A consistent digitalization of the process and IT architecture not only create new customer experiences but also ensures a lean internal cost structure.
Book a personal demo appointment with our WealthTech experts now. We will be happy to show you how you can quickly implement your digital process with our software.
