There is a very good new report on financial services for millenials from Telstra Global Enterprise Services titled Millennials, Mobiles and Money – The Forces Reinventing Financial Services which makes facinating reading.
Rocky Scopelliti, global financial services industry executive at Telstra argues in the report that Millennials – born between the early 1980s and early 2000s – are transforming the financial services industry, as customers, employees, investors and policy-makers, according to the role these self-styled entrepreneurs want finance to play in their digitally-driven lifestyles, business and society.
The report contends that the rise of the Millennials was one of four significant developments that saw 2014/15 become an inflection point for the financial services industry.
In 2014/15, the Millennials, or Generation Y (aged 18 to 34 years) overtook the Baby Boomers as the largest global demographic group, and emerged as the number one source of global income, spending and wealth creation. Their cohort became the largest in history with a population of one-in-three globally (two billion people) – 86 per cent of whom live in the emerging markets.
The second development was the mobile device becoming the primary technology used by consumers to access financial services in many developing and developed nations. More than 50 per cent of interactions with banks were conducted through mobile devices.
The third was “Fintegration” – mobile applications and services are rapidly overtaking the Internet as the key digital channel. Spending on mobile enterprise applications by financial institutions reached US$752 million (banking $436 million, insurance $148 million and securities and investment $168 million) in 2014/15, with growth expected to be a whopping 21 per cent compound annual growth rate through to 2019.
The fourth was “FinTech fraternisation,” or the collaboration conundrum. Scopelliti says digital partnerships have split financial services institutions down the middle, with investment in FinTech growing at three-and-a-half times the rate of the overall venture-capital market, hitting the US$13.8 billion mark across 730 deals in 2014-15.
From the four developments, Scopelliti argues that Millennials have become lead indicators of disruption in financial services. “Trust, relationships and technology is the new trinity for Millennials, who have chosen the smartphone as their connection between the physical and digital worlds.
The Millennials think differently. While transactional competence is still critical, the ‘always-on’, automated and hyper-personalised online world of the Internet and mobile devices has created a new set of expectations in their minds, says Scopelliti. They demand speed, convenience, flexibility and customisation. “The optimum trade-off between privacy and personalisation is changing daily, and institutions need to continuously balance those competing imperatives to become and remain relevant,” he says.
The Telstra report outlines ten insights with which financial institutions must come to terms:
- Trust matters – Banks are overwhelmingly seen as the most trusted institutions.
- From transactional to partnership-based relationships – Millennials don’t want a main financial institution, they want a main financial app. They value relationships grounded in security, privacy, flexibility, real-time, multi-channel, customised, emotionally connected, personalised, predictive and automated – and they’re open to whoever provides it.
- Technology confluence – Millennials’ personal aspirations and their financial priorities are fused through a trusted value relationship. Financial services are increasingly embedded in Millennials’ broader lifestyles – and both are hugely driven by technology.
- Save first, wealth later – Millennials’ financial needs remain the same as those of previous generations but, technology is central to how they plan to address these.
- Mind the relationship gap – Affluent Millennials are the most demanding – they are seeking a true value partnership with their financial services provider, but most don’t feel the relationship is currently ideal. As their affluence increases, so too does the gap, increasing risk of defection.
- Do-it-yourself digital advice – This is preferred and more valued, particularly by affluent Millennials. One-third prefer Siri or Google for advice, rather than a finance professional.
- Bespoke banking makes digital personal – Personalisation is valued and expected through smartphone apps.
- FinTech tasting (with many feasting) – Millennials are using or considering using non-traditional providers – and the affluent ones have the greatest appetites.
- The convenience customer – Convenience, customisation and value are the key reasons why Millennials consider using FinTechs.
- Removing information asymmetry friction and making personal data portable – This empowers Millennials’ digital lives and unlocks disruption. Millennials want real-time customisation, personalisation and convenience.
Connecting with Millennials and winning them as customers will prove a big challenge for many financial services institutions, says Scopelliti. It will require emerging digital technologies, including Blockchain, artificial intelligence and data analytics, which enable institutions to create networked ecosystems to provide transaction, risk management, investment and financing services to win the Millennial customer.
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