When Nafeesa Jafferjee founded financial education app Quirk Money in 2019, she hoped to build a platform that would encourage young people to build generational wealth early.
Quirk leveraged a money personality test to help users understand their spending habits and garnered 10k users by 2023. But Jafferjee has now made the difficult decision to close up shop.
“Building a consumer fintech in the UK, especially for this demographic, has been really challenging,” she says; Quirk had an engaged community of users but it wasn’t able to build any features to monetise that audience, which put off potential VC investors.
And Quirk isn’t alone. Twig, a London-based fintech targeting Gen Z consumers with instant cash-outs on resale items, shut down in February this year after failing to raise a Series B round. Last year, Owwn, an invite-only neobank for Gen Z, also stopped onboarding new customers with existing clients encouraged to sign up for N26 instead.
But why is it so hard to build a fintech for Gen Z? Fintech insiders tell Sifted it’s inherently hard to build a monetisable fintech catering to a demographic that’s not only just embarking on their financial lives but also isn’t known for its brand loyalty.
Still, that hasn’t stopped fintech giants like financial superapp Revolut, AI fintech Cleo and Birdwingo, an investment app for teenagers founded in 2022, from joining the race for Gen Z cash.
How to build for Gen Z
Gen Z, the oldest of whom is 27 and the youngest is 12, is projected to become the wealthiest generation ever. According to a report by consumer intelligence company NielsenIQ, by 2030 Gen Z will contribute more wealthy people than Millennials to every region in the world.
But there are some notable quirks to building for this generation. For starters, they’re value-driven when it comes to making financial decisions, says Andrej Hano, founder of Birdwingo.
“One very interesting thing that we are seeing is that, especially with Gen Zs and Gen Alphas, they really care about the company story, and what the company stands for,” he says. “So things like inclusivity, ESG and so on, they really care about this, whereas the older generations care less.”
He says users of Birdwingo’s teen account, which allows under 18s to educate themselves on investing and invest in stocks under parental controls, will often follow the news, typically through social media apps like TikTok, to gauge whether it’s “morally right” to invest in a certain company’s stock.
Making sure your fintech stays up to date with internet trends is also key. Cleo, an AI-powered chatbot offering budgeting tips, reeled Gen Z in by making sure its financial assistant is clued up on cultural trends. In the past, Cleo has incorporated a Halloween-themed Roast mode — where it will call you out for making unnecessary purchases as well as give ideas for a budget-friendly Halloween costumer — as well as a Barbie mode.
“We have things related to culturally relevant events in the US that help keep things up to date,” says Cleo product director Fernanda Dobal. “Brat summer was another example — it took social media by storm, and we can tap into some of these cultural nuances to stay relevant, to stay interesting to our audiences, which I think some of our competitors could struggle with.”
Making money
But knowing your brat summers from your “very demure, very mindful” is just one way to prevent a Gen Z fintech from flopping. Making sure it secures the bag — in other words, makes money — is key.
“While innovation and Gen Z-specific features are important, you need to prove that you can sustainably monetise that engagement,” says Brandon Mhangami, a Gen Z investor at London-based VC firm Augmentum Fintech. “VCs are looking for more than just user growth; they need to see how you’ll convert that into a profitable long-term business.”
That’s something that Quirk’s Jafferjee knows too well. “I think it’s a challenge that all consumer fintech for this audience is facing,” she says. “Because you’d have to get a massive volume of users to generate the kinds of numbers needed to raise from venture capital funds.”
It’s part of the reason why Birdwingo and Cleo have built monetisation plans from the get-go, with both relying heavily on subscription income. Birdwingo has over 20k users and charges €59.99 for its teen account.
According to Companies House filings, Cleo made $39.2m from subscription revenue, more than half of its $65.9m in total turnover in 2023. And while the fintech may be growing fast with an expected $150m in ARR this year, it’s still loss-making.
Playing the long game
Building for Gen Z also means playing the long game — only older Gen Z are in full-time employment and typically haven’t been in the workforce long enough to earn large salaries.
“Gen Z are more inclined to try new products and frequently switch, making customer retention more challenging when targeting this demographic,” says Augmentum’s Mhangami. “And with Gen Z’s average income lower than that of older generations, companies are faced with potentially lower average revenues per user.”
The opportunity lies in building brand loyalty for this notorious fickle demographic as soon as possible, which large (and already profitable brands) such as Revolut are well-positioned to do so.
In 2019, the UK fintech launched its Revolut <18 product which offers a pre-paid card, peer-to-peer transfers and savings for users between 7 to 17.
Carlo Spada, head of product at Revolut <18, says unlike other Gen Z fintechs it doesn’t need to chase revenue as it can rely on its wider already-profitable ecosystem — Revolut posted a record pre-tax profit of £438m in 2023.
“That's an advantage of companies like Revolut. We can afford to provide an amazing value for families with no direct monetisation,” he says. “Because, at the end of the day, [considering] the whole ecosystem of Revolut, we monetise in other ways.”
Instead, the app, which currently has over 4m users, is a way to make younger users familiar with the Revolut brand and act as a funnel for them to migrate over to the main Revolut app when they turn 18.
“The aim of the product is not necessarily to monetise the kids…. it's not the business goal of the product,” Spada continues. “It would be a fairly stupid one as well, because there's not that much to monetise from.”
Zooming ahead
But despite the challenges, with Gen Z positioned to become a key beneficiary in the so-called “great wealth transfer” — which suggests younger generations globally will inherit $18.3tn by 2030 — the opportunity to make money from them is only just beginning, says Augmentum’s Mhangami.
“The impending wealth transfer from boomers to younger generations positions Gen Z as a future economic powerhouse,” he says. “It also creates a prime opportunity for fintechs to capture this demographic as they start to become more valuable customers.”