The latter can be considered being made of the Generation Y (born between 1990 and 2000) and the older end of the Generation Z (born after 2000), as opposed to the Baby Boomers and Generation X (born before 1990).
There has never been such a considerable generational gap between the NewGen and the previous ones. This disparity is anchored in the significant technology boom that formed a modern generation of tech natives. The way the NewGen is consuming banking services and products is shifting: the expectation of service quality is rising and the banking consumption is changing.
First, the commoditization of banking services alongside with the rise of high standard user experiences and shortening attention span are major trends among the NewGen. It became a generation of demanding customers that attach more value to the service provided than to the institution providing it. As a result, the reach of GAFAs could constitute a credible threat for banks on some market segments and financial institutions are starting to partner up with technology companies to mitigate risks of customer loss. For Instance Visa decided to tighten its relationship with Apple in ApplePay.
One of the keys for banks to unlock the potential of the NewGen is data. According to a 2018 IBM study, 90% of the world’s data has been created in the last two years. Digitization enabled banks to progressively accumulate considerable volume of information about their customers. Banks that will be able to leverage the new black gold will build a cutting edge to capture the NewGen customers. Applications range from efficiency gains in operations to development of highly personalized user experiences. Fintechs constitute here a great opportunity for banks to integrate effectively innovation in their organizations.
Second, banking consumption is changing. For instance, values from the NewGen are shifting towards an increasing environment consciousness and demand for sustainable investment products is booming among them. According to a 2018 Morgan Stanley survey, around 90% of the NewGen state investing with a focus on ESG (Environmental, Social, Governance) impact is a central goal for them.
Another illustration is that the NewGen has a tendency to trust complete strangers (see Uber) and prefers indirect communication like texting. Hence millennials are ten times more likely to consider peer-to-peer lending than people over fifty year old. In the same lines the interest in cryptocurrency among the younger generation as a mean of storing and transmitting value will have to be taken into account by financial institutions. Some have already started.
The NewGen tends to consider that banking should be as simple as posting a picture on Instagram. The gap for banks is wide and new technologies keep coming to the market like Artificial Intelligence or Voice Recognition. There is a bright future ahead, but only for those who will choose their battles and stay the course.
Authors: Philippe Wery (photo), CEO; Denis Costermans (photo), Lead Advisor Banking; Niels Ozerée, Business Advisor.