Digital Natives
Who Are the Digital Natives?
Millennials, otherwise known as Gen Y, is the first generation that grew up in the Internet age. Millennials were born approximately between 1981 and 1996. They are currently between 25 and 40 years old. In 2019, Millennials overtook Baby Boomers as the largest group (72.1 million in the U.S.). The generation of digital natives is extremely important to financial institutions because Millennials have a fundamentally different relationship with technology.
Millennials Relate to Money Through Apps, Not Banks
More Financially Savvy… And More Technology Savvy
Although millennials earn less than previous generations, they have better control over their budgets. Their secret weapon is FinTech.
Almost half of the millennials in the United States save for emergencies, retirement, future homes, and use apps to manage their budgets and pay off debt. They also use apps to invest.
The majority of personal finance, banking and trading website and mobile application users are millennials.
According to CB Insights, in a survey, 71% of millennials said that they would rather go to the dentist than listen to what a bank has to tell them. Nearly 75% of millennials would prefer to get their advice from mobile device apps, rather than human beings. While banks have been slow to respond to this change, the digital-first challenger banks like Revolut, Monzo, Chime and others (there are currently over 400 active neobanks globally) have jumped on this opportunity. Robo-investment advisers, trading apps and cryptocurrency trading apps are also immensely popular - think of Betterment or Robinhood.
A 2018 study by CG42 predicted that the ten largest banks would lose more than $340B in deposits to neobanks over the following year alone.
Covid-19 has accelerated this trend. Staying away from the branches became a “safer” thing to do. Online banking use increased by 23%, and mobile banking use increased by 30%. Boston Consulting Group predicts an additional 19% increase in mobile banking use and a 26% reduction in the use of branches.
Banks that want to keep and grow their deposit base need to take action:
Offer mobile apps that are simple to use and built as consumer products first - fast, efficient and value-added
Digital transformation - strengthening the systems and infrastructure to the point where they can introduce cutting-edge technology and compete with the challenger banks.
Source: CB Insights