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The Millennial Generation: Banking’s Big Problem
Opportunities in Digital Finance
Why Millennials?
They are the largest generation in US history ~92 million
Fastest growing demographic in the world.
Due to this, they will be a large force behind the transformation and disruption of the banking industry.
Their unique habits and preferences will be responsible for reshaping the global economy in the coming years.
Why Millennials?
If as a corporation or startup you are ignoring this group, you need a new strategy.
A massive area of growth for any company of any size.
Companies who successfully unlock the keys to the habits of millennials will reap major profits.
Millennials Hate Traditional Banking
The Millennial Disruption Index clearly shows what millennials think of banks….and it’s not pretty.
This is the time of Fintech.
Innovative companies have stepped in to fill the gaps.
Banks and financial services are being disrupted.
The Millennial Disruption Index (MDI)
Study done by Scratch, part of Viacom Media Networks.
A 3-year study of industry disruption at the hands of millennials.
Survey of 10,000 millennials about 73 companies spanning 15 industries.
Shows which brands are loved and which are on brink of disruption.
MDI: Key Findings
Millennial believe banking is at the highest risk of disruption
53% believe their banks offer nothing different from other banks.
71% would prefer going to the dentist than listen to what banks are saying.
1 in 3 are open to switching banks in the next 90 days.
4 leading banks (JPM, C, WFC, BA) least favorite brands.
MDI: Key Findings
68% believe accessing money will be different in 5 years.
70% believe paying for things will be different in 5 years.
33% believe banks aren’t needed at all.
50% believe startups will change the way banks work.
73% would be more excited about financial offerings from GOOG, AMZN, PYPL, & Square than a nationwide bank
They believe innovation will come from outside of the industry.This is a huge opportunity!!!
Millennial Demographics
Born between 1980-2000.
Largest generation in American history.
Millennials: 92 million, Gen X 61 million, Baby Boomers 77 million. (For comparison)
Who Are They?Goldman Sachs Report
The first digital natives.
Millennials have grown up in an “always on” world.
Internet and smartphones.
IM/Chat
Video Games
Streaming TV/Music
Different Priorities: Less Marriage and Home Ownership
Use Technology Differently
Especially financial technology. People who carry huge debt loads and make and save less money, can’t get traditional loans and have poor credit ratings.
Don’t have the same access to capital markets as generations past.
Own houses less, rent more, marry later, or stay single.
Spawned the “sharing economy”
They want access, not ownership.
Own less cars, music and luxury goods.
Services that provide access to products but not ownership.
AirBnB, Uber, Spotify, etc.
The sharing economy has now reached FinTech
Millennial Consumer Habits Study
Elite Daily Study
Companies that want to tap into the largest generation should understand these habits.
Make it part of customer acquisition strategy.
Findings
1. They aren’t influenced by advertising.
2. They don’t want to own houses or cars.
3. They review blogs before making a purchase.
4. They value authenticity over content.
5. Their future inheritances won’t change their buying behavior.
Findings
They want to engage with brands on social networks.
They want to co-create products with companies.
They are using multiple tech devices.
They are brand loyal.
They expect brands to give back to society.
Deloitte Study
“Mind the Gaps”
2015 study on how millennials view corporates and working.
What tomorrow’s leaders think of business today.
Study collected the views of 7,800 millennials from 29 countries
Deloitte Findings
Millennials think that business needs a reset.
Millennials would focus on people, while in their view, today’s leaders focus on profit and personal reward.
Feel what businesses should be doing are not what they actually are doing. (Purpose vs. Impact)
Men’s visions vs Women’s visions.
Where do banks/financial services rank?Businesses millennials regard as showing strong leadership/values
The Great Fintech OpportunityAcquiring the Millennials and the Unbanked
Half the World Is Unbanked
Half the World is Unbanked
What is Fintech?
Banks Are Very Worried!Accenture Report
Unequipped to Deal with Digital Innovations
No Real Strategy in Place
Millennials surpass Gen X as largest component of labor
force
Money Is Pouring Into FintechAnd it’s about time!
Millennials disdain banks
Blame banks for the 2008 financial crisis.
This left them financially scarred and underemployed, while carrying massive debt loads.
All the big banking scandals that have gone unprosecuted has also led to their disgust with banks/financial services.
They are highly educated so they still want access to capital markets but on their own terms: Enter the rise of Fintech.
What Do Millennials Want?
High Transparency
Very low fees
Privacy
Access to global markets
How Millennials InvestTheir Investment Psychology (UBS Study)
What Are Banks Doing About It?
This Will Not Work!Because it never does. The Innovators Dilemma!
So Where Are We Now?The Rise and Rise of Alternatives
The Rise of Challenger Banks
A bank that provides competition to the larger banks.
Virgin Money, Metro, Aldermore, Shawbrook, Paragon.
BankMobile: no physical presence, mobile-only, zero transaction fees.
Hoping to capitalize as traditional banks shrink balance sheets and have increasing regulatory pressure.
Challenger Banks- Profile
Boost options for customers who want better rates.
Carving niches by targeting specific markets. (millennials, unbanked, underserved, small businesses)
Provide faster and superior service in some cases because don’t have archaic, layered IT legacy systems.
“Personalize” their services for their customers. Front end when customers walk in and back end when wanting loans.
Lower fees (in some cases none)
The Rise of Digital Currencies
And Digital Assets too!
Bitcoin and Blockchains and Currencies.
Other Asset Classes Digitized as well.
$790 million raised by Bitcoin-related companies
APIsOpen Them Up!
Disaggregation of a BankWhat it Looks Like and It’s Happening!
The Leaders
USA
United Kingdom
What’s This Look Like?
A clear view of unmet customers needs.
The ability to create a great digital customer experience.
The use of a startup model.
AustraliaNow is the time!
Intergenerational Report
Australian millennials are very dissatisfied with banking and the economy in general. (pension system to tax policy)
Finding it increasingly challenging in a low interest rate era to save enough to purchase homes. Min. entry level $500,000
The Intergenerational Theft- seeing their parents (baby boomers) acquire all the wealth but knowing they will have to support them in the future through pensions.
The stranglehold of the big 4 banks and the high fees they charge for services.
$2.29 billion raised over 129 dealsIn the US alone!
Millennials are getting the access they want through
innovation“Robo advisors” low cost/fee alternatives.
Lending firms innovating in credit risk.
Stock-picking and automated savings apps.
Leveraging existing social technologies with financial technologies to fit the millennial mindset.
Project crowdfunding.
Wealth management with zero to low transaction fees.
Micro-payments
Ignore At Your Peril
Corporations and startups that ignore the wants, needs and habits of the millennials will be left in the dust.
This is the largest generation in history and their impact on the global economy is going to be huge.
This is the giant fintech opportunity.
