What type of banking is the young generation looking for?
Over the last few years I’ve noticed that the original banking is slowly changing. This gradual evolution has started to speed up recently as the ‘younger’ generation grows up and becomes financially independent. The reason for this is not only that young people don’t like to enter bank branches in general, but also that the age of digitalisation has started. With my 25 years of age and my network of colleagues, I have been keeping track of what I hear from my friends to try and understand their thoughts about banking and its future. The following are a few points I noticed about how the ‘Millennial’ generation really feels about modern-day banking.
Website a must, App too!
Millennials are known to do whatever meets their fancy and not do things they don’t want to do. This isn’t any different with banks. Going to a bank to make a transfer is extremely outdated in our fast-paced, instant world. No one wants to go to a branch just to check the balance of the account. The first bank that is trying to disrupt this is Number26. This company is a great example of a start-up that realised that branches aren’t really necessary at all and that everything that bank clients need can be done through an application. It’s not surprising that they just secured a $10.6 million investment in Series A. Any bank that hasn’t developed an e-banking/online banking or something similar should hurry up, or risk becoming obsolete, because the days of customers walking through a bank’s doors are numbered.
Anyone slightly involved with app development and start-ups knows that simplicity is the key to a successful customer experience. One of the problems with banking nowadays is that any big decisions become a matter of a lot of bureaucracy and paperwork, and requires the client’s presence in the bank. Changing banks or closing an account are not a simple matter. In my opinion, this is the only reason why young people stay with their current banks. A statistic proves this claim: Around 1 in 3 people are open to switching banks within the next 90 days. An app with a simple and easy user interface can change the way clients relate to their banks, making the customer experience much more enjoyable than the current status quo. In this market, anything too complex, time consuming, or anything that requires the client to physically go to the bank is likely to decrease the client satisfaction.
Only the best customer service is good enough. There is very tough competition out there. For a first-time bank-picker it’s crucial to hear what peers have to say and if the customer service isn’t good, well, that’s a big problem. According to a study conducted by Merrill Lynch, “Millennials want to be in charge all the time”. They don’t like relying on a customer service representative too much. Apparently, this mindset comes from the feeling young customers get that advisors don’t always have their best interest in mind.
Fees, Fees and more Fees!
Young people who are just starting on their careers – such as myself – don’t want to spend their hard earned money on fees and specifically, hidden fees. Many times, I have reviewed my monthly bank statement and discovered some surprising charges. Many banks are currently working on new, transparent and clear fee structure. One company that took this principal to the extreme is Aspiration, which allows their clients to set their fees by themselves. Additionally, they donate 10% of the paid fees towards a charity organisation, which provides incentive for the client to be more generous. This method provides Millennials an altruistic way of investing without any fears of hidden fees.
Uberization of Banking
Recently, with the popularization of the ‘Uber’ car sharing service, other markets have also been undergoing ‘Uberization’, also known as “shared economy”. Many people have been trying to figure how to apply this sexy term to the banking world, but there’s been little progress so far. People – especially my age – like this concept because it’s a win-win situation: Providers can make a nice side income for their services with little to no extra cost, while their consumer enjoys quality services for discounted prices. It will be interesting to see what the “Uberization of Banking” will look like.
What is clear is that some things in the current market have to change. It is safe to say that most of us Millennials grew up having a smartphone at our disposable at all times while, on the other hand, the ones in charge of the financial industry and banking did not. This is the biggest gap that has to be overcome within the next few years. Knowing that, it doesn’t sound surprising that 73% of the Millennials answered in a survey they would be more than excited about a financial offering from one of the big companies like Google, Facebook or Amazon. It will be exciting to see how the market changes to accommodate these new needs. Will it be the existing banks who develop new products for the new generation? Or will it be a start-up niche for rising entrepreneurs to fill? Maybe one of the big companies, who were not previously involved in banking, will start an innovative branch using their knowledge of technology and user experience to change the banking scene. I guess we’ll just have to wait and see what the future holds!