This Is Why Millennials Are Choosing Financial Tech Startups Over Big Banks
Traditional banks have long been the primary institutions for saving and exchanging currencies, but since the global recession, the tide has shifted dramatically. For anyone that came of age during the financial crisis, it’s impossible to forget the long list of banks that needed bailouts. At the time of the recession, millennials were either in college accumulating massive student debt, or graduating and entering a harsh job market. So, as it sunk in despair, the then mushrooming Generation Y lost faith in traditional banking systems.
Today, studies show that millennials hold a striking level of disdain for big banks, even as the world makes a full recovery from the financial crisis. According to an end-year report by the Bank of America, 49 percent of millennials believe that the great recession significantly altered how they perceive banks. They witnessed the recklessness, greed, and corruption of traditional financial institutions as they undermined the economy and made it difficult to find jobs or build wealth, and it’s not surprising that most of them are currently uninterested in having conversations with banks.
The Problem with Traditional Banking
If you’re wondering why big banks are so unappealing to the new generation, you may be surprised to learn that they have themselves to blame. Since the turn of the century, traditional banking institutions have incurred £38.5 billion in fines and redress for customer mistreatment. Damaging scandals like the Libor case of 2012 and the Wells Fargo fake accounts in 2016 have been the norm, and consequently, millennials have developed awareness towards the monopoly, control, and manipulation of big banks in the financial sector.
Customers are demanding an end to the hegemony of giant corporations in favor of more transparency, responsiveness, and honest treatment. And although some big banks are beginning to respond by cleaning up their acts, it’s seemingly too late to appeal to a generation that lost trust in traditional transactions at an early age.
New Financial Tech Companies as The Preferred Alternative
The digital age is in high gear, and like numerous other sectors, the financial scene is feeling the effects of the ongoing technological revolution. New-age apps and services running across hyper-connected devices are promising to tear down the vertically integrated banking model, bringing financial companies and customers remarkably closer and renewing trust in the industry.
With big banks too rigid to make drastic adjustments and implement new technologies quickly, it’s smaller, nimbler fintech companies that are driving digital advancements in the banking sector. PwC’s FinTech Report 2017 reveals that cumulative investments in global fintech startups are well above £40 billion with a compound annual growth rate of 41 percent over the last four years.
Unsurprisingly, millennial preferences are among the primary motivators of fintech growth. Tech financial startups can offer Generation Y customers what they want, which is instant, personalized services that integrate with their daily-use gadgets. Furthermore, because these companies are adequately conversant with millennial trends, they’re able to make banking more understandable and exciting to young customers.
Most importantly, however, fintech firms are promoting openness in the sector by giving millennial customers more control of their banking services, reliable customer support, and 24-hour instant access to account statements and reports.
New companies that are upholding 100 percent transparency are significantly disrupting the playing field for traditional banking institutions, and we are proud to be one of them.