The development and measurement of financial technology literacy for millennials and Generation Z in the Eastern Cape

Abstract

South Africa has a small but fast-growing Fintech industry, but there is limited understanding of whether Millennials and Gen Z possess the financial and digital skills to use Fintech products effectively. This study aimed to develop a context-specific measurement instrument of Fintech and to measure the level of Fintech literacy among Millennials and Gen Z in the Eastern Cape of South Africa. Fintech literacy in this study is defined as a combination of digital and financial literacy that enables consumers to effectively use Fintech financial products and services while being aware of the digital risks involved. Therefore, Fintech literacy has two components: financial literacy and digital literacy. A positivist paradigm was followed, using a quantitative, cross-sectional design. Primary data were collected using an online questionnaire distributed to individuals aged 18 to 43 who owned a mobile phone and used at least one mobile banking application. A non-probability sampling method was used, combining judgmental and snowball techniques. The questionnaire measured five dimensions: financial literacy, digital literacy, mobile banking proficiency, knowledge of Fintech products, and overall Fintech proficiency. Data were analysed using descriptive statistics, item difficulty, item discrimination, and content validity ratio (CVR) to test the reliability and validity of the instrument The results revealed that there is a contrast between digital and financial literacy levels: while digital literacy among Millennials and Gen Z in the Eastern Cape was high, financial literacy levels were relatively low. The overall level of Fintech literacy was low to moderate. Financial literacy emerged as a key area of concern, with many respondents struggling to understand essential concepts such as compound interest, inflation, and risk diversification. Digital literacy levels were higher, particularly in relation to ownership of a mobile device, but several respondents showed uncertainty when it came to using mobile settings. In terms of knowledge of Fintech products, the respondents showed a strong awareness of payment applications, but limited familiarity with tools such as robot-advisors, cryptocurrency platforms, and peer-to-peer lending services. Based on these results, the study recommends that financial literacy be integrated more intentionally into high school and tertiary education with concepts focused on compound interest, inflation, and risk diversification, with content available in isiXhosa for accessibility. Digital literacy programmes should also be delivered through community centres and schools, focusing on practical mobile phone skills. To improve Fintech literacy, targeted awareness initiatives should be introduced through universities, NGOs, and Fintech providers, emphasising simplifying Fintech concepts and offering support in both isiXhosa and English. This study contributes by developing a locally relevant measurement instrument and offering insights into the Fintech levels of the targeted sample in the Eastern Cape. The study can be used by future studies as a baseline for future research on Fintech literacy in South Africa. Fintech service providers, educators, and policymakers may use the results to develop products and education programmes to address Fintech literacy gaps among Millennials and Gen Z in South Africa.