Baby boomers, your time is up. Now is the era of the millennial. As far as consumer spending goes, it’s the younger age group – also known as Generation Y – that’s setting the tone these days.
For the first time, 2015 sees the millennial generation surpass the baby boom generation by size in the US. More importantly, perhaps, they’re getting richer and more powerful. They vote more and they’re much further up the corporate ladder. This group is now out of university, settling down and taking out mortgages.
There’s already a tonne of literature about how to market to millennials. But from a financial industry perspective, it’s really important to see which products and services get this generation’s juices going.
In a sense there is not a huge difference – the basic money transmission mechanisms are the same – but millennials are interacting with financial services in a way their parents are not. It’s the old cliché – there’s good and bad news, opportunities and challenges.
Millennials love to be online
There is a big appetite for online over physical channels. TD Bank in Canada found only 54 per cent of millennials would consider visiting their bank branch for information, while nine in ten use online or mobile tools for their everyday banking activities. Peer-to-peer lending and crowdfunding are also becoming more important, for some displacing traditional credit channels.
Clearly for traditional banks there is a big challenge in how they reach out to this group, which mirrors, and is part of, the wider problems associated with digital transformation in the industry.
A report from Scratch found that a third of millennials thought they could live a bank-free existence in the future. Who needs a bank when you have PayPal, Bitcoin, Square and the rest?
A future without banks?
Of course it’s not that simple. Payments are one thing – and the sector has been seeing ever-greater fragmentation for at least a decade – but who’s going to provide you with a mortgage? Peer-to-peer lending is big, but we can’t see it displacing the core home loan market. Likewise the current account – it’s one of the greatest of man’s inventions and only banks offer them. Do consumers really appreciate what their bank does?
The big task for banks of the old mould is to continue to play their role in the world while building on their privileged position by offering the kind of services that millennials want. From the marketing angle, they must continue to tell their incredible story to people who really don’t trust them. It’s vital banks keep reminding people what they’re there for. We all need them, even millennials.