Young people are at the forefront of today’s consumer landscape, and their preferences are shaping a new economic dawn. The popular rhetoric of millennials destroying industries includes traditional banking, as they are the largest age group that prefers non-traditional financial technology.
Distrust of Banks
In 2020, the largest age group in Canada was 25- to 44-year-olds, which makes just under ten and a half million people who would have been newly entering the workforce and relying on traditional banks to keep their money safe during the 2008 global financial crisis.
The 2008 crisis solidified millennials’ distrust of the traditional banking system that had failed them, just as it had failed their parents during the financial industry crisis in the 1980s and their grandparents during the Great Depression.
Gen-Zers are now joining the workforce during the COVID-19 financial crisis and are all too aware of the past failures of traditional banking systems.
An Expanding Market
With distrust in traditional banks growing and regulations decreasing, new ways to bank are emerging. Neobanks don’t have physical locations; they are completely virtual. Less overhead means lower costs, no fees, and more flexibility for consumers who don’t care if their bank is a monument of classical architecture. Millennials and Gen Z want value and convenient service, which usually means mobile banking.
The issues surrounding traditional banking methods prompted a distrust of banks among young people, who are now the largest consumer age demographic in the world. Their reluctance to go to physical banks left a gap in the market for less traditional ways of banking, which was promptly filled by neo-banks and fintech start-ups.
These new banking companies got their seed money from the deep pockets of venture capital financing, and while many still put their customers’ money in existing, reputable banks instead of holding it themselves, they don’t face the same hurdles as older banks. They are leaner, with lower operating costs and less overhead, while having the credibility of being backed by venture capital and larger national banks. The failure of traditional institutions sets the bar low for credibility, allowing for new banks and finance companies to market towards young people by offering them the low-commitment, no-fee options they desire.
New banks target social media as a primary ad space, counting on satisfied customers to post, share, tweet, and blog about their new, better ways to bank. Rave reviews and hyper-young marketing techniques — like partnerships with influencers and ads that don’t look like ads — gives a product or service the social stamp of approval.
New financial institutions are building trust among their customers by reinventing the banking experience and by giving millennials and Gen-Zers the products and services they want in today’s digital market. Value for young customers is created and curated by fintech’s participation in digital spaces to market and appeal to millennials and Gen-Z specifically. Word-of-mouth gives them credibility from real people praising their value, and digitally convenient user experience that is nothing like the traditional banking methods that bankrupted previous generations.
Selina Barker | Contributing Writer