Millennials -- A topic of contention; can they really not afford houses because they enjoy avocado toast?
Presumptions aside, no one can deny that their ability to adapt and inflict change at rapid pace coupled with their high expectations for technology are changing the landscape of banking as we know it today. The future of money (and technology for that matter) is predictive, personalized and proactive...the same words that could be used to describe a Millennial.
The Millennial generation is the largest in history, with more spending power and technical acumen than any generation before it. Did you know that one-fifth of Millennials have never written a physical check? Not surprising when 59% use mobile banking on a daily basis and 68% don't even use the branch for banking, they use mobile/online banking only.
As Millennials take on increasingly complex financial lives (yes, many of them can actually afford to buy homes!), their financial behavior and the ways in which they interact with their banking providers will change. “Millennial banking customers are just as likely as members of older generations to use nearly every core deposit product with their primary bank: a checking account, a debit or check card, online bill pay, direct deposit and a savings account,” according to Gallup. The difference is that Millennials access these products differently. Over a quarter (27%) of young people say they have never visited their branch and only 14% say they prefer doing their banking in person, says The Financial Brand.
Millennials want mobile and digital first, visual services, and branchless banking. Although demanding, Millennials are often the ignored generation. Slowly, we are seeing financial institutions (mainly in the FinTech space) shift to predictive analytics to proactively offer services, rather than waiting for demand to come through.
This brings up an interesting topic of open banking which offers an exciting possibility for banks to break away from heavily siloed environments that are built around facilitating financial transactions in specific lines of business rather than customer-first services across the board. Take a look at what's happening with PSD2 (Revised Payment Service Directive) in Europe, if done correctly -- could change banking forever. It would enable bank customers, both consumers and businesses, to use third-party providers to manage their finances. For example using Facebook or Google to pay your bills, making P2P transfers and analyze your spending, while still having your money safely placed in your current bank account. Sounds right up the Millennial's alley, right? It's transparent, digital, personalized and shifts the control of banking to the consumer.
Gartner predicts that customer experience will be the largest driver of customer acquisition between businesses by 2020. So, from improving banking regulations to the changing way a Millennial chooses to interact with their bank, incumbent banks don't have time to sit around and contemplate the future of their business. They must act fast and be fearful of FinTech, that is quickly meeting the demands.
One-third of Millennials are open to switching banks in the next 90 days and the question remains: Will the existing big banks in just 10 years' time, fall apart? Or will they will respond by matching and copying some of those products by the new entrants? Perhaps the better solution is to partner with FinTech companies already on the forefront of meeting Millennial demands.