The world is undergoing a substantial change right now. Those who were children yesterday are beginning to play an increasingly important role in the world economy. This group, that comprises millennials and Gen-Z-ers, are replacing their parents and grandparents as the most valuable clients in the world of commerce.
And as is the case with the emergence of every new generation, the older generations are weary of the new one because they are unable to interpret their thoughts or needs. This is the human phenomenon known as the “generation gap.” And, it appears that businesses are falling prey to this generation gap problem because they are unable to predict and adapt to the changing needs of millennials and Gen Z-ers as well.
However, figuring out millennials is easier said than done; this emerging new consumer group is unlike any other from previous generations. And, failing to connect with this group of young adults can be detrimental for business. Not only do they lose out on sales dollars, but they are also in danger of being replaced by newer, exciting companies that understand millennials. One industry that is likely to be left by the wayside is the financial industry.
Before dissecting the problems that banks (and other obstinate industries that are reluctant to change) could find themselves in, it is important to examine why millennials are so meaningful for businesses today and what it is exactly that makes them so different from previous generations.
- Millennials Are Replacing Baby Boomers
In 2014/2015, millennials surpassed previous generations to become the world’s most influential group of people based on their income and spending habits. Previously, the largest generation in terms of size and buying power were the baby boomers who had been the “most valuable” population group for businesses for years.
Today, the millennials are a larger population group (in size) than the baby boomers and their buying power is starting to grow. This new influencer generation is poised to reach $10 trillion in spendings with $59 trillion in total capital in the near future. Millennials are also the largest group of first-time house buyers in the US currently — another statistic that explains millennials’ increasing buying power and influence.
- Millennials Are Unlike Previous Generations
It would thus make sense that businesses start targeting this young adult population right away then, right? Yes, but, unlike previous generations, the millennial group is unlike any other. They consume information differently, take decisions differently, they communicate with businesses differently. In fact, they do everything different than their parents or grandparents before them.
Millennials tend to prefer to find information online and figure answers out by themselves rather than interact with company representatives to solve problems. Millennials also tend to demand higher levels of customer service satisfaction and expect better user experience tools for quick and easy access to services.
If these expectations are not met, they are quick to switch vendors, meaning they are not bound by brand loyalty. According to a Forrester survey, for 21% of Generation Z customers, poor social media support and the lack of functionality of a product could be a reason to change companies, while 23% switch vendors because of a bad mobile app.
And if young customers are not happy with the overall experience with the company, they tend to leave admonishing reviews online. According to statistics by Accenture, 70% of Generation Z-ers who purchased offline and online, wrote reviews and 40% stated that they do it regularly.
The Banking Conundrum
There is no denying that millennials are gaining in influence, but banks are continually failing to engage millennial customers. According to research by Kasasa, 82% of millennials don’t mind changing banks, and 83% of them would do so if competitors offer better conditions like interest rates or cash back. Meanwhile, 65% of the users would choose a bank if it has a more convenient mobile app.
- Millennials Are Unimpressed with Banks
One of the main frustrations that millennials have with banks is their lack of digital solutions. According to PWC, nowadays, only 25% of banking products are available online and most banks’ mobile apps are not up to par.
The fact that banks continue to operate “offline branches” and require customers to physically come in for many banking solutions is also another strike for the banks. In fact, in the US, 40% of banks’ customers do not visit branches for six months and more. Banks’ bureaucratic practices diminish their millennial customers’ satisfaction ratings.
In fact, the whole financial industry is filled with inefficiencies — poorly trained staff, long waiting times, lots of intermediaries and high commissions. According to the World Bank’s estimates, a reduction of costs in cross-border payments by 5% could lead to $16 billion in savings per year globally!
- Banks Could be Replaced by Exciting New Tech
Tired of the banks’ high-and-mighty ways, many businesses are coming up with solutions to solve banks’ inefficiencies. These businesses offer new tools that are perfectly tailored to the interests and ways of millennials and Gen Z-ers. This new wave of innovation is coming from a new breed of blockchain startups that is revamping the banking industry by moving online, speeding up processes and making transactions more affordable too.
One area that is in dire need of a revamp is the international wire transfer industry. Currently, sending money to another country requires the “wire” to go through a chain of intermediaries with fees being charged every step of the way. The overall process takes up to several days and it is not the solution that appeals to the millennial audience. A crypto startup that solves this problem right now is BitPesa that provides same-day or next-day transfers with 1–3 percent commission fees (a meagre amount when compared to the current industry average of 7.09%).
Another reason why banks don’t appeal to millennials is because of its near-zero interest payouts. Currently, in the U.S. the average savings account earns interest rates of 0.06% (a figure that has held steady since May 2013). This problem is remedied by the soon-to-launch Celsius platform which will allow cryptocurrency holders to earn up to 7% through the CEL token.
The Result: Banks Could Lose Their Best Customers
The fresh crop of crypto startups are offering precisely what millennials and Gen Z users want from financial companies. As is the case with grumpy older generations weary of new tech and new blood, banks, like grumpy older generations seem vehemently reluctant to the “millennial change.”