Why Banks will always be an afterthought for millennials
Banks are like libraries to millennials, they know what it’s function is, and that it was useful at one point, but it no longer fits into their everyday lives. Any fin-tech company can undercut a bank by coming in with a user-centric UI and features that banks should have introduced years ago. This has been the case for the past couple of years. For ages, banks could not imagine an ecosystem where they could experiment. Brand reputation, large competition, and even greater profit margins held them hostage to their design model. They’re not afforded the ability to “move fast and break things” as younger startups urge. They have much more on the line. What may end up being a blog post for a new feature for a startup may be 6 o’clock world news for a traditional bank. These ideals are in direct conflict with the audience banks are trying to service. The fundamental tenets of traditional banking are based on profit. That’s a stark contrast from startups of today that are focused on growth. With growing financial demands what people expect is rising at a faster rate than what banks are providing. The next step is for banks to discover who to service customers in new ways, most importantly millennials.
Landscape
Zelle was created to combat this very problem. Incorporated back in 2011 by the brain trust of JP Morgan Chase, Bank of America, Capital One and Wells Fargo. Zelle is estimated to pass Venmo users by the end of 2018. This is no small feat against a competitor, who seamlessly married a social graph with users financial data: something that was rarely successfully achieved before its inception. Friends are viewing your personal purchasing activity and users couldn’t care less.
The face of banking is changing because of mobile and retail is the conduit. The ability to purchase anything from anywhere means methods of payments must evolve with the times, contactless or otherwise. With the influx of a variety of payment alternatives Amazon pay, Chase Pay, Apple Pay, Samsung Pay etc the fight for the consumer is no longer about trust but more so about convenience. How can consumers purchase more things with fewer roadblocks? Banks and tech companies are now in a fight to prove to hold your money in a traditional institution is not only wise but the most efficient. Chase Pay current has 6x the transactions of Venmo. The banks are catching up and millennials are in their sight.
Millennials
Millennials are not a monolith. They’re as diverse, efficient, broad as the baby boomer generation that came before them. The only thing that separates them is their inheritance and their adaptability. In the early 1960s and onwards baby boomers were forced to use banks because of economic expansion the limited amount of places to store wealth. Millennials today are reportedly 3x more likely to open an account on their phone than go to a bank to open one. The storage hasn’t changed but the interface has.
The belief amongst baby boomers is that millennials treat their finances as a paradox to be managed rather than a problem to be solved, and this couldn’t be further from the truth. The truth is millennials have been handed the paradox without the right tools to solve it. Inheriting a generation’s worth of poor economic decisions made on 80s era business idealism doesn’t quite mesh with their new age conditioning. Fin-tech is changing the way society is conditioned and banks are taking notice.
Conditioning
In 30 years, traditional brick and mortar bank branches may become obsolete for a large portion of society. Not because of any disdain for banks but because a whole generation was conditioned to use a small device to solve their problems rather than consult a human being first. Today’s consumers have a diversified set of apps that manage all of their financial data. Management expertise no longer exists in a bank branch only, but across budgeting apps like Mint, p2p payments apps like Venmo and crypto like Coinbase and tens of others in the market. In an age where a mobile notification brings the days news, how can millennials merge with institutions that were built on couriers?
This generation is under no fault of its own, each era is subject to the technology its dominated by. Previous generations were subject to writing checks because that’s what the system offered. In today’s market, consumers don’t look to the system for solutions they look to third parties like Mint and Venmo.
The most adaptable generation in human history watched helplessly by as school tuition increased 300x what it was for their parents, student loan debt hit a trillion dollars, the stock market crash, the financial crisis, housing prices plummet and rise astronomically and yet they are expected to trust the very gatekeepers who bring around cyclical calamity like a never ending merry go around. What they have learned to trust is technology and trust it at an alarming rate. So when a technology comes around with an underpinning function dubbed the “trust protocol” new age consumers can only help take notice, only to the chagrin of banks.
Blockchain
The buzzword heard round the world. Between third-party applications and the underlying technology behind bitcoin and crypto, banks no longer hold sole ownership of consumer funds. The technology itself offers of a host of capabilities that banks can’t: from no spending limits, regulatory freedom, sole ownership, fixed supply, no systemic risk among many other things.
With tens of different use cases for bitcoin in particular and the novelty of the currency, being increasing purchasing power over time because of a fixed amount, its demand is sure to grow exponentially over time. Bitcoin nor blockchain will totally undo the banking system unless banks find a way to use the technology as an asset and not an enemy.
Future
Money is being storied in a variety of ways in today’s economy. With places like Kenya who use M-pesa to send money over SMS, WeChat pay taking the helm in China and dozens of others across the world.
As the world becomes more interconnected and more social so will our banking. Venmo is just the start. In the future new generations are more likely to open a banking account on a social network rather than traditional banking. These networks already have all of your information, your friend network, your preferences, your browsing history. It’s the next logical step in the chain. Facebook already knows the connection to your friend’s accountant why wouldn’t it set you up with them to relay transactions, Amazon already has your retail purchase history, whats one step further if it helped you buy insurance?
These may seem farfetched for social networks, but fin-tech companies are already exploring these mediums and doing this at scale. Focusing on customer needs and touch-points is the only way to remain relevant. Setting a course for affording things, establishing personal connections, helping you get the things you want are the new table stakes in the banking industry. Banks know they are not the center of your lives and they’re starting to acknowledge they shouldn’t pretend to be. This isn’t the last supper or the curtain call for traditional banking but this is an inflection point at which they can reimagine how they service current and future customers.
