FinTech: Readying the Next Generation to Become Responsible Payers

Did you know that almost half of young people between the ages of 15 and 24 around the world do not have a basic bank account at a formal financial institution[i]? In fact, less than 37% of youngsters in Sub-Saharan Africa are financially included in the formal banking sector[ii]. “Fortunately, with this generation never knowing a world without mobile, online and app-based services, their financial inclusion and empowerment is in reach,” says Nicho Bouma, Chief Information Officer of at Pay@ – a leading payment aggregator and provider of secure payment solutions.

He explains that young people are driving overall Fintech adoption[iii]. “This is unsurprising given that 98% of Gen Zers globally own a smartphone[iv] and in South Africa alone, 72% of 15- to 24-year-olds own cell phones[v]. Nowadays, young people are using smart and feature phones to access digital financial services. Of course, the high cost of data in South Africa is a prohibitive factor, but reductions in mobile data tariffs and new entrants to the market like Rain are making it easier for young people to transact via smart phones.

woman holding Android smartphone

“Additionally, young people are more likely to consider non-traditional financial service providers as they often lack strong relationships with banks[vi], plus, FinTechs reportedly offer more attractive rates and fees, according to EY’s latest Global FinTech Adoption Index.”

Some of the technologies and financial services that young people are increasingly opting for include e-wallets, app-based banking, QR-code based mobile payment systems, mobile apps and mobile money[vii]. “While Innovations like these have begun to close the financial inclusion gap and address young people’s specific financial needs, they could potentially have negative impacts, specifically bad debt. Experian South Africa’s latest Consumer Default Index has seen South African consumer debt surging to R1.9 trillion between January and March 2021, R20.4 billion of which was due to first time defaulters as people struggled to keep up with their payments.”

As a father of a 24-year-old and a 14-year-old, Bouma warns that it is far easier to be manipulated into buying things in the digital world. “These days, advertisers can easily use information about individuals to get them to make purchases. Think about the ads that are shown on social media platforms that are tailored to users based on their demographic information, interests, and internet searches. My advice is to be more considerate when making purchases and ask yourself if this is something you want versus something you need.”

computer monitor

He believes that one of the biggest dangers for young people is credit. “A recent study by TransUnion has found that 1.7 million Gen Z South African consumers are now credit active, with 66% having clothing loans, 8% having non-bank loans, 7% having bank loans, 5% having credit cards and 4% paying off retail Instalments. I believe that if not managed tightly, credit is just deferred pain. A bad credit history can affect your credit score which is an indication of the likelihood that you will default on a credit card or loan repayment. A bad credit score means you’ll pay more in interest over time. 

You’ll also have fewer loan options and might see your applications for things like a cell phone contract being denied. Plus, it might make it harder for you to find housing since landlords check credit before approving a rental application. In some cases, it can even affect your chances of getting a job. Young people must ensure that they not only take out manageable loans, but also pay these off on time. If possible, rather save up and buy what you need in cash. There are a number of savings apps that can be used for this very purpose.”

Bouma cautions young consumers to keep some of their money aside for emergencies like becoming ill, losing a job or having to replace an appliance. “Making use of insurance and savings products now will be most beneficial when you’re older and can potentially help you avoid having to take out loans down the line. Even if you can only spare R100 for your retirement fund, it’s better than nothing and you should start sooner rather than later.”

He concludes by saying that, for young people to be responsible payers now and in the future, they need to use the tech tools available to their advantage.

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About Pay@

Established in 2007, Pay@ is one of Southern Africa’s leading payment aggregators and is trusted by prominent South African organisations to optimise their billing and payment processes. Pay@ offers consumers a growing variety of secure, innovative and convenient bill presentment and payment platforms. Its robust system ensures highly efficient processing, with unallocated payments for example being eliminated and transaction success rates of more than 99.996%. 

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