Many Gen Zers are “digital ghosts” – and that’s bad news for the financial ecosystem

Surprise surprise. Gen Z doesn’t like banking.

Many Gen Zers may be shy about banks, according to a new survey per Safea digital identity verification provider, which found that nearly half of Gen Z respondents wished they had applied for financial accounts earlier in life, but also didn’t feel prepared to enter the financial ecosystem at age 18.

This represents something of a dead end, according to the research, which surveyed 2,000 members of Gen Z and found that 35% did not have a digital financial footprint. These “digital ghosts” struggle to build the credit history they need to be approved for financial services because they don’t have a sufficient financial footprint to begin with.

They had little or no history of credit cards, loans, rentals or home purchases, which makes accessing these same things more difficult.

Without a digital financial footprint, the report concluded, the identities of digital ghosts are extremely difficult to verify through traditional credit bureaus when trying to access financial and government services.

It is true that many members of Generation Z, whose ages range from 11 to 26, are too young to even begin to build a credit history. But mainstream policies and trends are against them.

The report identifies one of the biggest influences on Gen Z’s lack of financial credit footprint as Credit Card Liability and Disclosure Acta federal policy implemented in 2009, which was enacted to protect consumers demanding more transparency in credit card terms and conditions. Although the regulation helped Americans make better financial choices, also introduced requirements for anyone under 21 trying to get a credit card, including cosigner requirements and proof of income. According to the report, this postponed “the first traces of a financial footprint even further into life than previous generations.”

Furthermore, identity verification, which is the fundamental first step to accessing most financial services, is an increasingly difficult task for financial institutions as the prevalence of identity fraud increases steadily. In fact, account takeover fraud resulted in losses of $13 billion in 2023, up from $11 billion in losses in 2022. Because of how common identity fraud is, companies can no longer rely on methods traditional methods for verifying identities, such as a Social Security number or government number. documents, and often need to engage in stricter verification methods.

More than half of Gen Z respondents said they had to go to financial institutions in person multiple times to verify their identities on financial accounts, rather than simply signing up online. And because of difficulties verifying their identity, one in five reports having trouble accessing federal student aid or college loans and grants.

It’s no surprise that Gen Z has grown weary of the myriad of ever-changing complexities ingrained in financial services and is delaying the time until they begin banking. According to the survey, 40% of Gen Zers reported putting off banking for as long as possible, while about 20% of Gen Zers believe banks don’t want them as customers.

The digital ghosts of Generation Z, however, represent an important economic and market driver: Generation Z currently earns $7 billion in its global group of 2.5 billion people, according to Bank of America to look for, and is expected to generate income of US$33 trillion by 2030 as the youngest members of the group become adults. At that time, Generation Z will represent around 27% of global income.

For the next generation of young adults, a lack of credit history and a delay in starting banking work can lead to expensive repercussions in important areas of investment, including housing, buying a car and taking out a loan. Credit checks are often standard when it comes to qualifying for an auto loan or rent a home, and many landlords will deny or raise prices on applications without a credit history. Other financial services, such as cell phone and wireless internet services, also often require credit score checks before applicants can qualify for a financing plan.

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