Gen Z Millennials’ Changing Preferences Drive Financial Technology
The overall rise of technology and rapid demographic shifts might end up impacting the modern finance technology world. Finance technology or Fintech has been in existence for several decades. While the concept is not relatively new, its relationship with the conventional banking system had shifted from being significantly symbiotic to highly competitive and disruptive.
As we look at the future, there is a higher scope for the given disruption to be multiplied. Some of the major reasons for the given shift are going to be the increasing middle-class range, significant demographic changes, and further digitization of modern financial services.
Shifting from Symbiotic to Disruptive
The fintech industry across the globe has outgrown itself significantly. Estimates suggest that over $70 billion has been raised in the form of venture capital for supporting the modern fintech industry in the span of the last two years. The given trend is predicted to continue as assumptions of growth range from 8 percent to over 20 percent per annum by the time of 2025. The overall speed of major technological advancement along with the readiness to fund the given development & speedy adoption of modern high-end technology –especially by young-age generations, are the key drivers.
Fintech has evolved from sufficing the existing services that are offered by banking institutions (including online banking and ATMs) to the situation in which they become direct competitors to each other. For instance, the fintech industry has overcome the global share of conventional banks related to unsecured loans in the year 2015. It has served to be the major source for personal loans across the United States of America in the year 2018. Due to this, banks started feeling undue pressure on advanced services like savings, payments, checking, lending, and investment management.
Major Demographic Shifts
While the overall rise of technology has been a major part of the ongoing scenario, significant cultural and demographic shifts have also played a crucial role –not so more than the rise of the generation of millennials. The generation is deemed to be the one featuring individuals born between the span of 1985 & 1995. The given generation is known to have a major impact on the entire society. The generation has a thirst for high-end technology, instant gratification, transparency, authenticity, and flexibility. The impact of the millennials on the modern financial sector is significant as they make up around 40 percent of the working population of the world. As the spending power of the millennials increases, they are becoming highly influential consumers.
While a majority of the millennials have already paid a visit to the banks, they tend to be predominantly mobile-centric. It is believed that around 94 percent of them actively leverage the benefits of online banking services. Millennials make use of online banking services on a regular basis –three times than that of the older generations. When the given statistics are combined with the improved utilization of the contactless payment systems and the reduced focus on using cash, these serve to be the crucial factors delivering rationalization of ATM networks and retail banking branches across the entire world. England is known to have been hard hit by the fact as 30 percent of its bank branches have been closed in the duration of the past three years.
It is still to be observed whether or not the overall effects of the global pandemic will be further accelerating the ongoing trend. However, reports suggest that the concept of social distancing is becoming adopted across the globe, there has been substantial growth in the scope of digital financial services. It is believed that around half of the millennials think that their banks are not communicating with them through the right channels. Eventually, the generation of millennials has reduced preference towards the existing banking institutions.
Amongst the population surveyed, it was observed that around 73 percent of the millennials revealed that they are highly receptive to high-end financial services from leading companies like Apple, PayPal, Google, and others in comparison to the existing bank. Moreover, 33 percent of the millennial population believes that the banks are not going to exist in the span of the next 5 years.
What Does Gen-Z Feel?
While this statistic is highly pessimistic, it only proves the reduced loyalty of the millennials to conventional banking service providers. Another leading generation is Gen Z. This generation has been born next to that of the millennials –between the period of 1996 & 2012. While the given generation is still in its early stages of professional careers and banking experience, there are still some indications of their overall intent. Gen Z is the first generation that is exclusively born in the modern digital age. This makes them super tech-savvy. However, this generation is also highly cautious about money as it has grown during the Global Financial Crisis of 2008.
This is the reason why this generation gravitates towards brands that they already know and trust. They are looking for brands that offer highly personalized experiences. In a recent research report, it was observed that around 50 to 80 percent of smartphone-owners tend to be Gen Z individuals, and they are already making use of the concept of mobile banking.
Just like retailers featuring eCommerce capabilities and physical stores have survived the last few years, traditional banks and fintech companies are required to respond accordingly while focusing on the physical and digital needs of the customers.