My son and I live on different planets where money is concerned. He's happy to snap a picture of his paycheck and deposit it using his iPhone; I still have my checkbook, and even use it once in a while. He splits a tab between friends using Venmo; I split it using a calculator. And so traditional banking and payment companies are beginning to feel like Goliath in the crosshairs of new financial tech startups.
Figuring out millennials has all the elements of a gold rush in the making. There are 84 million of them, born between 1980 and 2000. That equals a lot of spending power ($1.4 trillion in the year 2020). So, their aptitude and attitudes about money are being dissected and studied as quickly as they're spending.
A new study from PayPal and Koski Research found that millennials love paying with tech and are willing, even eager, to use new payment systems. The study reports that more than one third of millennials consider credit cards to be "old school" and over 70% said that they thought credit cards are not secure. The study went on to say 63% of them do not have a credit card and would find using plastic cards "annoying."
It's a generation of spenders and savers who trust in Google more than American Express. A study from Scratch (a Viacom property) released in 2014 sounded the wakeup call. Citing a great dissatisfaction with the status quo, the Millennial Disruption Index (MDI), gave banking the #1 spot on a list of industries to be disrupted. It reported that 1 in 3 millennials would be willing to switch banks in the next 90 days, and more than half of the 10,000+ respondents didn't think their banks offer anything different than other banks. It painted a picture of millennials looking to financial technolopPy startups, citing over 70% who said they would be more excited about a new offering in financial services from Google, Amazon, Apple, PayPal, or Square than from their own nationwide bank.
Amazon, Google, Samsung and Apple, all high tech household words, have payment systems born from the tech world. But they remain vigilant facing startups like Hello Digit, an app that studies your spending habits and makes savings recommendations in micro-increments. If you've never heard of them, look at the new money tech websites listed and watch them nail the millennial messaging. Think about it, there are already dozens of financial apps for devices like Apple's mobile watch.
Traditional institutions are not playing ostrich. Not only are they responding to the call for more tech, but they have the reach and the wherewithal to make it happen. MasterCard has a number of bold new initiatives for more secure transactions using high tech and credit programs designed at being inclusive - especially towards those with no or low credit. American Express is targeting young entrepreneurs. Capital One customers can now bank with a mobile app and Android phone that uses NFC to transmit a secure payment token at the point of sale.
New startup or big multinational, as companies rethink what a new generation wants, here's a field guide.
Financially savvy do-it-yourselfers
Not counting on the government, workplace insurance or other relics of a different era, millennials expect that they will be in charge of their own financial destinies - from borrowing, to credit, to savings. A survey from The Principal Financial Group Knowledge Center found that 84% of millennials describe themselves as passionate about creating financial security, with most of them believing that Social Security won't be around when they retire.
More apt to trust tech than a human
Why hire an accountant when you've got machines built for number crunching? Why pay a financial advisor when there's a glut of information, personalized to your needs, served up in bite-sized nuggets to help you?
More apt trust a phone than plastic
Informal studies tell me that just about every student or recent graduate has been a victim of some sort of credit card identity theft or fraud. Tech may not be perfect, but as they see it, it can't be worse.
The cool factor
If there's a way to do it with tech, from calling a car to booking a hotel, there's an element of gaming and personalization that millennials have come to expect and enjoy.
Demand real time immediate record keeping
No five days for a check to clear or next day transfer for this generation. They expect their banking to be like their grocery shopping - fast, convenient and immediate-- and open 24/7.
Reward me for my time and loyalty
Free and discounted stuff, points accrued, special invites? Feeling rewarded and special because they're a part of your world is what they're after.
Context/location aware banking
A mobile generation expects their financial institutions to be aware of where they are and what they're doing. Does some activity look unusual? Are they falling behind on some payment? Will you be there offering perks and personalization? We're talking ridiculously good customer support.
How technology is effecting spending habits will be one of the hot topics of discussion at the upcoming Digital Money Forum during the 2016 International CES on Friday, January 8 at the Venetian in Las Vegas, NV.
Robin Raskin is founder of Living in Digital Times (LIDT), a team of technophiles who bring together top experts and the latest innovations that intersect lifestyle and technology. LIDT produces conferences and expos at CES and throughout the year focusing on how technology enhances every aspect of our lives through the eyes of today's digital consumer.