Millennials - A great banking opportunity or risk?
Are you providing love and belonging to Millennials?
Toward the end of last year, I mused about Millennials, Blockchain and SaaS. I want to follow up with a deeper look into Millennials and specifically how they use financial services and payment instruments. We’ve worked with two great research firms, Aite Group and Forrester, to generate some compelling insights about Millennials in the United States.
As many of you know, the Millennial generation represents the largest age demographic, and as they reach their prime working and spending years, their impact on the economy is no doubt going to be huge. Millennials, including yours truly, have come of age during a time of technological change, globalization and economic disruption. That’s given us a considerably different set of behaviors and experiences than our parents.
We’re also the first generation of digital natives, and our affinity for technology helps shape how we shop, consume and bank. We are used to instant access to price comparisons, product information and peer reviews. We are literally building a different way of consuming information, products and services, but does this transfer to the business world?
The data from Forrester confirms what many of us have expected – US Millennials plan to and are using payment instruments differently from other generations. This is consistent in the retailing and banking world. For example –
- 49% of Millennials have used PayPal to purchase goods in the last 3 months compared with 40% of the rest of the US online population (Source: Forrester’s Global Consumer Technographics Online Benchmark Survey, 2015).
- 6% have used ApplePay in the last 3 months, with less than 2% among the other demographics having used it at all (Source: Forrester’s Global Consumer Technographics Online Benchmark Survey, 2015).
- Surprisingly, 15% of Millennials have used checks to pay for goods. This compares to close to a third of the rest of the US online population (Source: Forrester’s Global Consumer Technographics Online Benchmark Survey, 2015).Given the amount of debt that Millennials have, they are less averse to using credit cards, with 46% using credit cards, compared with results north of 60% for Boomer and older demographic segments (Source: Forrester’s Global Consumer Technographics Online Benchmark Survey, 2015).
The trend continues in the banking world; the data backs up the often stated thought of Millennials as fast adopters of technology –
- 17% would use biometrics on their mobile phone, compared with 9% of the general US online population (Source: Forrester’s North American Consumer Technographics Financial Services Survey, 2015).
- 21% have used their smartphone, rather than card, to withdraw cash at the ATM compared with 5% of the other segments (Source: Forrester’s North American Consumer Technographics Financial Services Survey, 2015).
Millennials have matured in a world of very blurred lines between their personal and business lives. For many, there is no such thing as a 9-to-5 role and the belief in technology is evident when Millennials run small businesses. According to Aite Group, 49.5% are likely to adopt technology as soon as it is released, compared to just 29% of other small businesses.
Because of their technological comfort and proficiency, they are more likely to use various online cash management capabilities:
- 70% use online bill pay versus 60% of other small businesses
- 47% send domestic wires compared to 37% of other small businesses
- 44% use online set up of direct deposit and payroll versus 34% of other small businesses
People move across borders as easily as money; I moved from the UK to the US at the age of 21. I’m not unique in this regard, but like many others, we understand the global nature of business and that the world is flat. And this bears out in the real world where Millennial business owners have greater aspirations to be global. And as such, they are more likely to need global banking capabilities.
When asked: How likely is your business to need the following international capabilities from its bank/primary financial institution in the next 24 months due to importing or exporting products or providing services overseas? Those responding as ‘already use’ or ‘definitely would use’ were as follows:
- Foreign exchange: 30% vs. 15%
- Ability to send international wires: 30% vs. 19%
- Letters of credit and other trade finance capabilities: 34% vs. 20%
So what insights can we glean from these two data sets? To gain market share in the Millennial demographic, it is important to offer similar and like services in both the consumer and business banking segments. We were all witness to the dramatic market share collapse of BlackBerry in the corporate world thanks to the appeal of the iPhone (including business leaders/executives among others). If banks can’t offer digitally enabled services that Millennials are used to in their consumer lives, they will lose share in the Millennial-owned business segment.
So what can banks offer Millennials for both personal and business purposes?
- An online user experience that is driven by best-in-class websites
- Interactive two-way experience
- Modernized design (flat, whitespace, etc.)
- Fewer clicks
- Mobile – There is a continued shift away from desktops
- 60% of digital content access is from mobile devices
- Convergence of PCs and Tablets –it must be designed for all form factors, not just mobile and the PC
- Immediate, Real-Time, and Same Day
- Consistent information across touchpoints
- Immediate availability of funds
- Personal Financial Management
- View toward the future vs. re-hashing the past – With tight finances and high debts, Millennials need predictive analytics that are actionable.
Harking back to my old “management 101” University class and Maslow’s Hierarchy of Needs, if I may adapt it to payments, meeting the demands of Millennials will be akin to providing love, belonging and a sense of connection. Not quite the basic needs of humanity, but such as necessity if the demands are not met, the Millennials will walk out the door seeking love and belonging at a different bank.
Related Blog Posts
Women in Payments: It’s Time to Get Out of Your Comfort Zone
As we gear up for Money 20/20 U.S next month, we are excited to shine a spotlight on Natalia Ruiz, manager, Payments Risk Solutions at ACI Worldwide, who was recently selected to be part of the 2019 Rise Up Academy. This global program created by Money 20/20 addresses the gender imbalance in leadership positions within the Financial Services and Fintech industry.
Universal Confirmations: Get Ready for 2020
With the arrival of universal confirmations, we sit down with some industry experts to find out more about what impact this will have on transforming cross-border payments. We’re welcomed by Fabien Depasse - Head of SWIFT gpi Customer Success at SWIFT and Craig Ramsey - Head of Real-Time Payments at ACI Worldwide.
How to be a Payments Trailblazer – The Seven Habits of Highly Innovative Organizations
The new Culture of Innovation Index from Ovum and ACI identified segments—from banks to intermediaries to merchants to corporates—at the cutting edge (of innovation) across the payments ecosystem. But what is most notable about those segments that have reached ‘trailblazing’ status is the apparent lack of commonality between them. No one segment, nor one region fosters better innovation. In fact, what’s driving these segments/organizations to be best of breed is their own culture of excellence. The only thing they have in common is their attitude.
How will SWIFT gpi Impact Latin America?
As the world continues to transition toward real-time, and technology continues to evolve, new challengers are disrupting the market with value propositions including real-time cross- border payments. The competition has inspired SWIFT to work with the industry and challengers to create the Global Payments Innovation (GPI) program, which radically changes the way banks interact with their correspondents and offers improved transparency and customer service to their customers.
The Middle Eastern payments revolution: Getting Real-Time Ready
The Middle East is developing quickly and considerably. The population has surpassed 410 million and a number of nations, such as Saudi Arabia and the United Arab Emirates (UAE), represent some of the world's most innovative economies. The region has become synonymous with the rise of large infrastructure developments and technological innovation, while tourism continues to grow - 1.4 billion people visited in 2018 alone.
Why India's Payments Players Need to Fight Fraud with Machine Learning
By 2023, experts are predicting 60 billion UPI (Unified Payments Interface) transactions annually, accounting for more than 50 percent of India’s total digital payments transactions. And it’s estimated that today nearly 50 percent of all real-time payment (RTP) transactions globally are processed in India. It’s an exciting market for payments innovation, with a wide range of digital overlay services available to consumers and merchants, thanks to the introduction of UPI.
The Untapped Opportunity of Machine Learning for Real-Time Payments Fraud Prevention
Artificial Intelligence (AI) is among the buzzwords of the moment, but when it comes to tangible innovations that have the potential to drive rapid ROI, machine learning should be part of every bank or processor’s strategy. No matter the size of the institution.
European Banks Have the Right Tools to Stay Ahead – But Will Big Tech Overtake?
Open banking and immediate payments have come a long way, according to the panelists who joined me during the ‘Open Banking in an Instant World’ session at EBAday in Stockholm recently. The building blocks are now falling into place through the introduction of national and regional schemes, open banking initiatives, regulations such as PSD2 and the acceptance and use of APIs.
How UPI is Driving India's Shift from Cash to Digital Payments
The Indian economy has traditionally been heavily dominated by cash, while experiencing low adoption of various online payment systems including National Electronic Funds Transfer (NEFT), Real Time Gross Settlement (RTGS) and inter-bank mobile payments. The dominance of cash is evidenced by the ratio of cash withdrawals at ATMs vs debit card usage at Point of Sale (POS)—ATM transaction volume is more than 2x greater than POS.
Regulating for Real-Time: The Role of Government in Payments Modernization
Dr. Leo Lipis and Craig Ramsey, Head of Real-Time Payments for ACI Worldwide, continue their discussion on real-time payments and the findings of the new white paper, Get More from Real-Time.