There's an old saying that youth is wasted on the young. Whoever believes such a thing these days needs to grow up.
In Latin America, youthful energy and optimism is driving financial inclusion via an enthusiastic embrace of technology, which in turn is driving more sustainable economic development. It’s no secret that about half of Latin Americans have gone unbanked for decades, relegated to running their lives and businesses on cash. As a result, the quality of life suffered for generations.
Today, smartphone adoption has skyrocketed across the region, hitting 72% of total connections in 2020, up significantly from 46% just five years earlier. More smartphones in the market has opened the doors to more digital banking services to millions, which translates into a falling percentage of the unbanked.
The fintech explosion
As of July 2021, there were 2,301 fintechs in Latin America, according to Statista.com. While it’s hard to gauge the exact number of fintechs and startups in any region at a single point in time, the figure far surpasses the 1,166 fintech ventures tallied by the Inter-American Development Bank for 2018, a number that itself was up 66% from 2017.
Still, incumbent banks aren’t sitting by on the sidelines applauding fintechs as they roll out opportunities to make payments, shop, send money and even apply for loans via digital channels. The race is on, and we wanted to know where young people were going to do their banking.
After all, today’s 20- and 30-somethings will soon be running the region’s governments and industries, so what financial preferences will they take with them along the way?
We surveyed more than 1,250 people aged 18 to 35 across six countries to find out, and in our report, “The State of Young Adult Banking in the Region,” the first in a four-part series, we found that younger Latin Americans are largely satisfied with – and loyal to – their financial institutions.
When asked to rate their satisfaction with the products they use from their bank or neobank, 75% said they were either extremely satisfied (21%) or satisfied (54%). When asked to rate their level of satisfaction for their institution’s app (either traditional bank or neobank), 77% said they were either extremely satisfied (26%) or satisfied (50%). Only 10% expressed any degree of dissatisfaction.
That loyalty, however, isn’t guaranteed.
When we asked why these Millennials (aged 25-35) and Generation Z (aged 18-24) they would defect if they ever did, respondents said better benefits and pricing, better customer services and digital tools, and better products & services were the main things to consider - all of which tie into user experiences to some degree.
Most participants tended to do business with traditional banks, though Brazil bucked that trend. And diving deeper, preferences for neobanks over their traditional counterparts differed when we compared Generation Z to Millennials.
Have a sneak preview:
- The number of individuals we surveyed who said they do not have a bank account stood at just 12%
- 77% of the total participants reported they use a traditional bank, while 28% reported that they use a neobank, and 18% said both.
- Chile and Peru were home to the highest percentage of the banked individuals who said their principal banks were traditional institutions (97%).
- Brazil was the only country where preference for neobanks eclipsed that for traditional banks (46% used traditional banks as their primary provider compared to 54% using a neobank).
- 66% prefer to do business with the same institution, while 81% prefer one app.
Generation Z respondents were largely satisfied with their bank apps and services as well.
- 30% were extremely satisfied with their apps, while 46% were satisfied.
- 22% were extremely satisfied with their financial products while 52% were satisfied.
Millennial counterparts echoed those sentiments:
- 24% were extremely satisfied with their apps, while 54% were satisfied
- 20% were extremely satisfied with their financial products, while 56% were satisfied.