The way people borrow and perceive borrowing is changing, with Gen Z offering a view into what the future borrower could look like, according to a new report from fintech Lenvi.
Gen Z currently accounts for around 15 per cent of the UK population, and are lenders continuing to voice challenges regarding attracting and retaining young consumers. As many search for ways to make their products and services more engaging and attractive to a younger audience, Lenvi is highlighting what it takes for lenders to engage Gen Z.
Although Gen Z is often dubbed as a ‘digitally native’ generation, with a widely-believed perception of being reliant on social media, family still leads the way for financial advice. Lenvi’s report found that 43 per cent of young people place parents or family as their primary source of financial education, versus only 10 per cent turning to influencers and podcasts.
However, channels such as TikTok have reported an overall 373 per cent rise in financial ‘Fintok’ content on the app over the last year – signalling the generation’s willingness to improve financial skills and manage money.
While four-fifths (81 per cent) of Gen Z has borrowed money, the most popular form of loan comes from the ‘bank of mum and dad’, as 40 per cent rely on parents for cash injections. However, parents and guardians may be pulling some strings to make this happen – in this instance, driving themselves into debt – to support their children.
Nearly a fifth (21 per cent) of parents have taken out a loan to support their child with university, while cars, mortgages and property also stuck out as reasons for borrowing for their children – signalling an opportunity for lenders to consider family banking flexibility that can target both Gen Zs and their families.
Worrying signs for Gen Z?
Over half (52 per cent) expressed concern about the money they owe – reinforcing the idea that this age group are more worried about their future than generations that preceded them.
Of those that have borrowed and now owe money, 40 per cent worry about how long it will take to pay off while 34 per cent believe it is impacting their financial freedom and lifestyle.
One of the more alarming trends from the data is the significant number of young people who are reliant on borrowed money just to fund essential living costs. Research conducted for the report on those Gen Z above legal borrowing age (18 to 27) reveals that they owe £1,400 on average – and while they most commonly owe between £100 and £300 – one per cent owe more than £10,000.
Despite concerns about owing money, reasons for borrowing are split between long-term financial freedom and today’s necessities – signalling the responsibility lenders have when it comes to supporting this new generation of borrowers in surviving the current economic climate.
When asked for the top three reasons they may need to borrow more money in 2025, Gen Z responded:
- Rising bills costs (27 per cent)
- Rising food costs (26 per cent)
- Rising rent concerns (24 per cent)
Lessons for lenders
With lenders striving for ways to engage and retain the interest of this generation, one avenue that offers customised user experiences and personalised insights is the implementation of AI. The report outlines that Gen Z can be particularly receptive to AI. Over half would be willing for AI to manage their money, although the generation is less keen on approving or deciding a loan rate (41 per cent and 43 per cent).
Richard Carter, CEO at Lenvi, says “Our research is evidence that the way people borrow and perceive borrowing is changing, and it’s crucial that lenders understand this to meet the diverse and complex needs of Gen Z. As expected, social media holds massive value for Gen Z when it comes to financial decision-making. But our research is also a reminder that family and friends matter hugely too, as a source of both advice and lending.
“More concerningly, the number of people turning to borrowing just to survive signals a pressing need for swift action in the lending industry. To preserve and protect the future borrower, lenders should be providing robust, tailored financial tools to protect and empower those grappling with these hardships.”
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