April 11, 2016
The payments and banking world needs to speak a different language for the mobile generation of millennials. This is the generation that expects instant gratification: if you press a button that says transfer money, having to wait three days for it to happen is three days too late. The 80 million members of the millennial generation represent 25% of the US population and more than $200 billion in annual buying power (source: US advertising firm Barkley). Millennials are typically defined as those born between 1980 and 2000. According to a recent study, this group has influence over $600 billion of indirect spending, primarily because teens and young adults influence the purchasing habits of their parents (source: US Chamber of Commerce Foundation). Clearly there is a need for better understanding and finding new ways to target this important demographic.
This is the generation that has a higher bar: you just can’t send someone who lives in an apartment a coupon for a lawn-mower; I expect McDonalds to send me a digital mango lassi coupon on my birthday because I signed up for their loyalty program. The mobile generation expects true innovation, not appeasement. It expects a better ability to multitask, to save time & money, to live life without unnecessary overhead, and to pay attention to experiences like eating out or enjoying a vacation or sending a gift or saving money on a shopping spree rather than spending mindshare on the associated utilities like the mode of payment or the number of SMS messages allowed in the data plan. Mobile is not just an angle—it’s the backdrop and the foundation; it’s in the ether everywhere around the innovation for millennials.
Venmo: Venmo has gained significant popularity over the past year. By simply loading the app onto a smartphone, a user can connect to bank and credit card accounts and link up with friends to send money on the go. It makes scenarios such as splitting restaurant checks and paying rent quite seamless. The rising use of peer-to-peer applications is improving the prospects for apps like Venmo. The growth of Venmo can also be attributed to PayPal, which owns Venmo.
Acorns: Acorns connects to a user’s primary checking account along with credit/debit account(s) including other spending accounts (PayPal). It rounds up each purchase to create investable savings into an Acorns investment account. Additional savings amounts can be added at any time to an Acorns account either as a lump sum or recurring transfers. An investment portfolio is developed by Acorns based on the Modern Portfolio Theory based on your investment profile and invested in ETFs (low-cost funds) either in BlackRock, Vanguard or PIMCO based on five diversified portfolios. The app is available only to US citizens and residents with plans to deploy globally.
Robinhood: Robinhood, one of the hottest Silicon Valley startups, has been in the sights of FinTech enthusiasts for a while now. Built on Plaid’s infrastructure, Robinhood is a trading app that allows young investors to try out investing skills with as little as a few dollars. The company charges for the ability to buy stocks on margin or credit and also makes money by collecting interest on users’ cash balances. Robinhood was listed among the top US FinTech startups of 2015 and various other rankings.
Founded in 2013 by Vladimir Tenev and Baiju Prafulkumar Bhatt, Robinhood went live last March with 800,000 people who signed up for the wait list. Since the launch, the Robinhood team went from 14 to 50 and is growing in an attempt to democratize access to the stock market.
BillGuard: BillGuard’s mission is to empower consumers to control, protect and do more with their money. BillGuard’s proprietary transaction monitoring technology pioneered the use of crowdsourcing and big data analytics to help consumers detect the $8 billion in wrongful payment card charges missed by banks each year. Downloaded over a million and a half times since release, BillGuard’s five-star-rated mobile apps have won almost every industry award in their category, including being named one of the top banking innovations of all time by Online Banking Report. The company was founded in 2010 and was acquired by Prosper Marketplace in October 2015.
Moven: Moven, a New York-based FinTech startup, is a real-time mobile money tool that lets individuals spend money from their mobile device and provides instant feedback on their transactions and spending patterns. It works as a debit account that tracks the user’s money for them instantly. Thus, it provides them with the information they need to spend, save and live smarter. Moven acts just like a bank account with features like free account, free ATMs, pay friends, transfer money, FDIC-insured and tap-to-pay. It can be used on any Android or iOS mobile device.
SoFi: SoFi helps graduates of top-tier universities refinance student loans. The company focuses on student loans, mortgages and personal loans.
Affirm: Affirm offers loans for mainly retail products that an Affirm partner-merchant sells. The Affirm account holder can choose to pay with Affirm at checkout and instant approval is given. Affirm offers rates from 10–30% APR based on credit checks with repayment plans of three, six and twelve months.
Credit Karma: Credit Karma develops tools and maintains information resources that help users manage the credit aspect of their financial health. It helps 40+ million consumers track, maintain and improve credit health with valuable, free tools and information.
Mobile payments have fascinated millennials for making payments digitally through their phones. They are as much as 2.5 times more likely to try new technology compared to others (source: US Chamber of Commerce Foundation). Research by American Express revealed 52% of consumers ages 18-24 are likely to try new technology-enabled payment tools. And with 75% of 25–34 year-olds owning a smartphone and 90% percent of them using the Internet, it’s easy to see why they are so comfortable with mobile technology and are interested in including mobile payments in their shopping experience (source: Pew Research Center).
Even food chains themselves show evidence of mobile payments being adopted by millennials. Here are some popular cases:
Starbucks: Starbucks' app is used by around 10 million US customers with around 5 million weekly transactions. Starbucks clocked around $1 billion in mobile payments in 2013. The app uses QR code technology to authenticate payments. Starbucks partnered with companies like Square to provide an in-app payment platform, linking the app to credit and debit card details.
Dunkin' Donuts: Dunkin' Donuts' payment and gifting app achieved 3.5 million downloads in its first year. The app provides a virtual Dunkin Donuts card which can either be linked to a physical Dunkin Donuts card or an actual credit card. The app also provides in-built PayPal payment facility. Upon ordering, the app generates a QR code used by the employee to confirm the payment.
When millennials see mobile payments working well at Starbucks, they ask for the same at Taco Bell and Wendy’s. That’s why we witness many other merchants having their own mobile payment systems. And perhaps going forward, they will also force smaller merchants—even your regular hot dog guy—to adopt mobile payments as an option.
We are digital immigrants but our kids are digital natives. They have iPads and iPhones in their hand while we had abacuses and TV. Technology companies are gearing up to the millennial generation whether it’s renting movies, purchasing a Vanilla Latte at Starbucks or withdrawing money from ATM machines.