The dominance of Millennials in the business world is imminent. In fact, they represent 44% of the workforce in 2022. This mobile and tech-savvy generation demands a transformation in banking. Millennials want digital solutions that enable them to manage their money more efficiently. Millennial banking significates a shift towards digital banking, and it is revolutionizing the industry.
A bank in their pocket – anytime & anywhere
The digital world is now a reality. 72% of the interactions between clients and the bank happening online according to a FIS consumer banking report.
In fact, the American Bankers Association found that Millennials are 3 times more likely to open a bank account with their phone (e.g. mobile app) than in person. Furthermore, 67% of Millennials want digital budgeting tools from their bank. However, if an institutional bank app is too slow, 38% of Millennials will abandon it (study by Jumio and Javelin Strategy & Research). Therefore, this generation is used to exchanging emails and receiving instant replies. The old age of receiving a reply by mail and waiting for a few days for your financial planner is over!
The Millennials’ habits on the mobile application are 24/7:
- Plan payments between friends and family members
- Manage wire transfers between different accounts
- Check transaction history
- Budget tools to plan more efficiently their future
Millennials banking significates the use of video, geo-location, social engagement, and other supporting technologies. Indeed, everything is to facilitate a proactive, personalized interaction with bank experts. According to a study from CGI, this is the key feature to develop.
Capital One Bank’s office.
New face for physical proximity – multipurpose & convivialThe physical presence also needs to be rethought for proximity to kill the ancient codes. Capital One understood this major shift. They proposed a different banking experience targeting Millennials with their desire for flexibility and non-formal. In its flagship branch in Union Square (Manhattan), the first floor of its three-story operations includes a Coffee Shop. It is adjacent to a seating area to facilitate impromptu meetings, temporary wait, or recharging phones or laptops. The coffee shop displays a warmer tone with natural textures and wood. It reveals a quieter workspace contrasting with the community tables in front of the 3 ATMs. For creating this modern feel, the design agency CallisonRTKL won the Gold Awards at the 2017 Shop!.
Online banking service
New product needs vs. older generation – rough start, earning less & risky culture
Millennials do not have the same financial ease as previous generations. According to AB, 75% of college graduates have student loan debt in the U.S., with an average $29k balance debt.
Millennials are working to build their finances with two top priorities:
- Put money into savings each month (86%)
- Paying down debt (43%)
Consequently, Millennials tend to delay major life events. Only 26% are married before the age of 32. Furthermore, 70% wanted to get married and 93% desired to buy their home. However, they are to inherit $30 trillion over the next 30 to 40 years. Consequently, banks are capitalizing on their willingness to take risks to increase their wealth.
CGI found out that 55% of Millennials wished to be oriented toward financial products. Consequently, banks have cleverly exploited the popularity of online trading and facilitated online access to it.
In 2018, J.P. Morgan unveiled an investing mobile app with an eye-catching and disruptive price: free. With this new offer called “You Invest”, any bank client who downloads it or uses its website can get at least 100 free trades in the first year. Before, Wall Street was reserved for the elite. But now, it is becoming affordable.
A new era for retail bank, change or die – neobanks, rewarding & AI
Neobanks are becoming popular. When Millennials become unhappy or dissatisfied with their traditional retail bank, they are not afraid to look for specialized fintech (financial technology) alternatives. According to a Gallup poll, Millennials are 2.5 times more likely than Baby Boomers to switch banks.
Rewarding matters. As mentioned in a Kasava Survey, 80% of Millennials would be willing to switch banks for better rewards. For example, these include a higher interest rate on deposit accounts, cash back on purchases, and foreign ATM fee refunds. In addition, 94% of Millennials are prioritizing a no-fee banking offer.
Artificial Intelligence (AI) is a key differentiator. Chatbots were the beginning of AI for companies to ease customer service. But when completely automatized, it often lacked self-learning capabilities―quickly becoming frustrating. As Bill Gates said: “We always overestimate the change that will occur in the next 2 years and underestimate the change that will occur in the next 10”.
AI has the potential for many practical applications for traditional banks and the Fintech industry, including:
- Reduce payment fraud.
- Improve service leveraging predictive analytics and real-time personalization.
- Assist consumers with financial decisions by suggesting opportunities based on the user profile, habits, risk, and financial situation.
Mercator Advisory Group recently published a study of 80 start-ups utilizing AI for the fintech and banking industry. The study includes our company, NextUser. We have developed personalization applications to help banks stay relevant to the consumer. Research from Business Insider has identified most of the use cases for AI in finance, as demonstrated in the diagram below. They feature NextUser’s key AI partner, IB Watson.
The maturity of uses of artificial intelligence in banking and payments. The bank is looking to leverage the technology in its trading, lending, and risk management divisions. Banks can use AI to protect themselves from new types of risk. Source: Bi Intelligence.