Plain vanilla banking won’t cut it with millennials
Question: What’s common to wanderlust, smashed avocado toast, full moon yoga and impact investing? Answer: They are all things typically dear to millennials — the Generation Y born between the early 1980s to the late 1990s. Given that I have two daughters in this cohort, I should know!
Millennials make up about one-fourth of the global population today and are the inheritors of one of the largest inter-generational wealth transfers seen in human history, holding $17 trillion (Dh62.44 trillion) or about 10 per cent of the world’s private wealth. Banks and financial institutions have the challenge of catering to a newer type of customer in a rapidly changing technological environment, blurring boundaries and creating new business paradigms.
Digital and demanding
For both millennials and their younger cousins, the Gen Z, the world is digital.
They check their phones 150 times a day, watch TV on their laptops, and unwind by playing video games. Design is of paramount importance and every experience has to be easy and instant.
For banks, merely building a digital version of a branch is not the answer if your customers have never been to one. As author and futurist Brett King says, a bank is no longer somewhere you go to, it is something you do. Banks that are able to provide anytime, anywhere banking, combining tech and touch intelligently, stand to win.
Which is why fintechs are rapidly complementing banks when it comes to millennials.
The digital wallet Venmo, which allows free mobile money transfers between friends, handled $12 billion in transactions in the first quarter of 2018.
Alibaba’s Yu’E Bao (meaning leftover treasure) is today the largest money market fund in the world with a majority of its 300 million users under the age of 30.
Apps such as Prism in the US enables users to keep track of and pay all their bills instantly with one click, or even via their Apple Watch.
You only live once
Research in the UAE shows that the 2.5 million millennials resident in the country expect more from their banks than just plain vanilla banking. Liv., the digital lifestyle bank from Emirates NBD, was created precisely on this premise.
Today, with over 100,000 Liv. customers, 85 per cent of who are millennials, the bank has distilled some interesting insights. Millennials love to spend on food, especially at offbeat and upcoming outlets.
They indulge in online shopping at least once a week. They prefer sharing money via social media apps with friends and family. And contrary to popular perception, they do like to track and control their monthly expenditure by category.
Millennials, growing up in a rapidly changing world, ascribe much more value to experiences than material goods. That’s why the savings product within Liv. focuses on experience goals rather than on financial goals.
A one-week trekking package in Machu Picchu is a stronger motivator for a millennial saver than a retirement plan, for example.
Social and responsible
Millennials are a social generation and happy to share — workspaces, accommodation, possessions and also experiences — both good and bad. Banks that help enrich social experiences stand to win a larger mindshare among young customers.
Spain’s first mobile-only bank, imaginBank, launched by La Caixa has launched imaginCafe, in partnership with universities and brands like Samsung and Adidas, to help millennials meet and connect through concerts, gaming sessions and workshops.
Peer-to-peer lending and crowdsourcing portals are examples of how social connectedness is driving development of new banking platforms. ‘People like us’ influence our choices to take a trip to a destination because a friend posted such great pictures on Instagram.
N26, a mobile-only bank in Europe, and Liv. acquire most new customers through word-of-mouth recommendations.
Millennials also tend to see the whole world as one family, and are twice as likely to invest behind social or environmental causes.
Sustainability and impact investing is growing rapidly and expected to reach $10 trillion (Dh36.73 trillion) by 2020.
Apps such as Wealthsimple allow users to invest in a curated selection of exchange-traded funds, or ETFs, focused on causes you are interested in, whether it is affordable housing or education.
Digital, do-it-yourself, experience seekers and socially responsible — what is not to like about the new generation and their attitude to money? Here’s a big yaaas to them!