The concept of millennial marketing is nothing new. Generation marketing is based on the assumption that each generation possesses different values and behaviors, which affect consumption habits. One area this principle particularly applies to, and which warrants further investigation, is payment. Tech-loving millennials have different habits and expectations with regards to payment and traditional banking services compared to previous generations. And the need for banks and financial services to understand millennials has now become more essential than ever, as they are about to enter their prime spending years.
The more digital… the more demanding.
Having grown up in a digital and connected world, millennials expect a seamless and frictionless payment experience, with a focus on speed, convenience and security. Today’s market is meeting these needs with the invention of more and more innovate payment methods and financial services. According to Juniper Research, mobile and wearable contactless payments are expected to approach $100 billion by 2018, with Apple Pay leading the way, accounting for three-quarters of US contactless payments. Apple isn’t the only tech giant dabbling in finance to attract millennials. This year saw the launch of Messenger Payments by Facebook, Amazon has been offering loans to its SME clients since 2012 with Amazon lending, and Google Wallet has been around since 2011. In fact, there is a whole range of applications that are helping millennials to lend, share and invest money differently to previous generations. Square Cash enables them to quickly and easily transfer money to peers and SplitWise lets them track bills and other shared expenses. If they’re struggling with their loan repayments, CommonBond offers a platform to refinance, and companies such as SigFig, Wealthfront and WiseBanyan offer users financial advice for wealth management. However, with the advent of so many alternative financial services, we have to ask, where do banks stand for millennials?
Can’t bank on ‘em?
Of course, millennials have a traditional bank account, however, their loyalty to their bank is low; over 46% state that they are unsure if they will stay with their primary bank over the next six months. Furthermore, according to the Cassandra Report, millennials believe traditional banks to be outdated and not able to serve their generation’s needs. Further supporting this notion is a report from First Data, which found that 71% of millennials would rather visit the dentist than a bank, and 33% believe that they won’t need a bank in five years.
Collaboration is key
Banks now have a challenge on their hands and need to start thinking of new strategies to cater to this increasingly demanding generation in the age of GAFA (Google, Apple, Facebook, Amazon), Square and bitcoin. One way to boost banks appeal and better meet millennials needs could be collaboration with FinTechs. A united front from banks and FinTechs could also be the best way for banks to combat GAFA, who are likely to continue their expansion into financial services, given their enormous market reach! The key to pleasing millennials is customer experience: providing a fully integrated experience, which can work across multiple channels with a high level of security. Carefully chosen strategic partnerships between traditional banks and FinTechs could bring further innovation to the sector through leveraging the respective strengths of all parties. Banks could offer FinTechs their large customer base, financial regulation expertise and robust global infrastructure, and FinTechs could help banks build more innovate, faster and cheaper services that make them an even more essential part of everyday life. It appears that many banks are open to this idea, and some, such as JPMorgan and The Bank of England, have already started to work with FinTechs, either individually or through incubators. Watch this space to see if a coalition is the key to pleasing this tech-savvy generation.