Digital Budgeting Tools Are Inflation Era Lifeline for Millennials and Gen Zs

As European consumers look to mitigate against continent-wide inflationary pressure, many are tightening their purse strings ahead of what may be a difficult winter. Across the continent, soaring food and fuel prices mean keeping finances in order is more important than ever.

Learn more: UK’s 10% Inflation Rates Stretch Consumers’ Paychecks and Patience

This has led to an increase in the number of personal financial management tools and budgeting apps on the market, offering to help struggling consumers keep an eye on their spending.

As well as dedicated budgeting tools like Mint and YNAB, European neobanks have also moved to introduce features that can help account holders understand their finances and stick to their budgets.

In an interview with PYMNTS, Ali Niknam, CEO at Amsterdam-based Dutch neobank, Bunq, said the challenge modern consumers face is that spending electronic money is harder to keep track of than spending physical cash.

“Digital money just doesn’t have the same feel to it as physical money,” Niknam said. “We’ve been trying to recreate that same type of experience digitally […] we’ve always expanded on ways to make [money] more tangible and more intuitive.”

Among several new features launched this month, the neobank has introduced ‘Easy Budgeting,’ a tool that allows users to ring fence money in separate sub accounts.

As Niknam explained, users can set different budgets for groceries, housing, car expenses, etc. and Bunq’s patent-pending technology will automatically detect which budget a given payment belongs to and use funds from the correct subaccount.

Related: UK Shoppers Feel Squeeze as Average Annual Grocery Bill Rises by £380 YoY

Millennials, Gen Zs Need Help

According to research by Bunq, 94% of millennials in the Netherlands, Germany and France say they have been affected by the current economic downturn, with 40% reporting that they have reduced their expenses in response.

That data matches the findings of a recent PYMNTS Intelligence report, which notes that younger generations reported higher anxiety than older groups regarding inflation. It also finds that millennial and Gen Z consumers are the most likely to rely on digital banking apps to improve their financial literacy.

Read on: PYMNTS Intelligence: How Financial Literacy Affects Consumers’ Digital-First Banking Preferences

In fact, the report finds that openness to new financial tools is a general characteristic of younger consumers, who are embracing digital solutions in areas such as investments and mortgages.

In both these fields, Bunq has sought to tap into its users’ interest in a greater range of financial services.

As Niknam explained in a previous interview, the FinTech firm has partnered with Luxembourg-based investment firm Birdee to allow users to invest directly from their Bunq app. On the mortgage front, another partnership with Dutch lender Tulp has allowed Bunq to build a solution that processes digital mortgage applications in just 24 hours.

Watch the Interview: Bunq Out to Improve ‘Suboptimal’ Service Provided by Traditional EU Lenders

Although mortgage sales are down around 36% as of July, Niknam said that the “very conservative” nature of the Dutch market protects Bunq from a mortgage crisis.

Explaining further, he added that fixed-rate mortgages are far more common in the Netherlands than elsewhere, meaning homeowners are less at the mercy of external fluctuations. He also referred to the government’s guarantee scheme, which provides an important ballast for the Dutch mortgage market by somewhat protecting lenders from defaults.

Fair Pricing, Transparency

Overall, Bunq’s business model certainly diverges from Europe’s largest neobank Revolut in at least one fundamental aspect. As Niknam said: “We have always charged money for services. We don’t believe in free; we believe in fair pricing and transparency.”

Because Bunq accounts typically charge a monthly fee, the firm hasn’t been able to acquire anything close to the 20 million+ users that Revolut has.

But according to Niknam, Bunq’s fee-based model helps to ensure that the users it does onboard are active users who use the features provided instead of leaving their accounts dormant.

For customers that were already happy to pay Bunq’s monthly fees, Niknam is of the view that the FinTech’s new inflation-busting toolkit means more bang for their buck.

Further reading: BNPL Offers Lifeline as UK Consumer Sentiment Hits All-Time Low

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