Imagine a future where, instead of a national bank, one uses PayPal, Square or even Apple, Google, and Amazon for all their financial services needs. For someone in their late 30s or older, the thought of turning to any one of those companies rather than a trusted banking brand seems laughable and, most of all, risky.
But for a Millennial – that is, someone born between the years 1981 and 2000 – this imagined future probably does not seem far-fetched at all, as 73% of this generation would be more excited by a financial services offering from one of those five companies than from their own nationwide bank.
Millennials vs Banks
That surprising statistic is among the findings of the groundbreaking study, The Millennial Disruption Index, which was conducted by the creative consultancy Scratch, a division of Viacom. For the three-year study, Scratch surveyed 10,000 Millennials about 73 companies across 15 industries. Here is an overview of the index’s findings:
First off, why should big-name national banks care about Millennials’ thoughts on financial services? The fact is, banks cannot afford not to care. Scratch calculated which industries will be most affected by the Millennial generation and banking is the most at risk for a seismic disruption. This means fundamental changes to the way that the financial services industry operates.
In fact, Millennials see these changes coming and, moreover, they want them to happen. 68% of the Millennials surveyed by Scratch believe that, in five years, the way that people access their money will be totally different from now, and 70% believe that the way payments are made will be totally different then.
Plus, if that is not surprising enough, one-third of the Millennials surveyed do not think they will need a bank at all in five years. And they will not be shedding any tears if the banks they use now disappear because all four of the leading banks are among the ten brands least liked by Millennials.
What Lies Beneath
So, why all this hate? It is largely a lasting side-effect of the 2008 financial crisis. Since then, Millennials have seen their parents financially struggle and now are struggling themselves. Meanwhile, they have absorbed news coverage of the US government giving bailouts to large banks which they may blame for the financial crisis. Compounded together, this has led Millennials as a whole to mistrust large banks.
That is why 73% of the Millennials surveyed would be more excited by a financial services offering from PayPal, Square, Apple, Google, or Amazon than from their own national bank. It is simple: Millennials trust these companies and do not trust their own banks. In fact, more than 70% of them actually would rather go to the dentist than listen to what their banks are saying.
But this does not mean that the future has to be bleak for the financial services industry. If one is working at a financial services firm right now, one should look for ways that their firm can evolve its services to appeal to Millennials. For example, financial advisors, when they have face-to-face meetings with their Millennial clients, should connect with them about their concerns, such as student loan debt, and not Baby-Boomer concerns.
And if the banks do not see the threat coming from the Millennial disruption, that does not mean that everyone has to sit on their hands waiting for it to happen. Instead – whether one is in tech or consultancy or marketing – they should take their awareness of what Millennials want and turn it into an opportunity. If one is in marketing, one should position themselves as the go-to person that firms can turn to for making their marketing and communication methods Millennial-friendly.
That means: more communication through technological interfaces such as apps and less reliance on e-mails and phone calls, as well as greater thought-leadership focus on socially responsible investing.
If one works for a tech firm – even a small start-up – they should work on developing financial services-orientated apps that meet Millennials’ needs. The industry giants will notice the product’s appeal and the rewards can be great.
One example is Morningstar’s recently announced purchase of the Total Rebalance Expert (tRx) platform from FNA. FNA CEO Sheryl Rowling developed tRx when she could not find a rebalancing platform that met the needs of her own practice. In other words, she saw a gap in the industry and filled it.
And there are many more gaps in the industry to be filled by innovative professionals like Rowling. The findings of the Millennial Disruption Index are scary, for sure, but they also mean opportunities for people and organisations that can help financial services firms work to meet Millennials’ needs, or risk falling by the wayside.