For decades and even centuries, people have put their faith into big, powerful banks to manage the bulk of their financial needs. Lately it seems that the “too big to fail” banking system is now failing many, specifically young people. Millennials in particular are fed up with traditional banks and now turning to financial technology to replace a system they see as outdated and untrustworthy.
Who are Millennials?
Millennials are the largest living generation in the United States, born between 1980 and 2000, and 84 million in number. Heavily influenced by the sudden surge of technology in their time, millennials’ view of the world varies greatly from that of previous generations. Millennials are by far the most educated generation, and are characterized as being more ambitious, open-minded, and optimistic than their predecessors of Generation X and the boomers.
Millennials and Banks
According to a Facebook data survey, only 92% of millennials actually trust banks, and many view them as an unreliable source of misinformation. After watching the financial market go down in flames in 2008, it’s no wonder that millennials have a hard time putting their faith into a seemingly faulty system. Many millennials were advised by banks to take out massive student loans only to find themselves entering into a sparse job market knee-deep in debt.
Notorious for their impatience and desire for instant gratification, millennials are turned off by the complexity of banks. Complicated jargon and formal procedures are a deterrent for your average millennial, who is much more versed in the language of technology. Automatic wealth management services are now becoming increasingly more popular as millennials are more apt to trust an algorithmic code in the form of a robo-advisor than a human financial advisor.
Millennials and Fintech
Having grown up on technology, Millennials report feeling more comfortable using financial technology to help them manage their money than an actual bank. According to findings from the Millennial Disruption Index (MDI), “Over 70% of millennials say that 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.” Names of giant banking moguls such as JPMorgan and Wells Fargo are now being replaced in young financial vernacular by titles of Fintech startups like Venmo (a digital wallet platform), Simple, and Chime (Mobile banking applications).
Millennials feel as though banks do not fully understand their financial needs. Fintech companies are taking advantage of this disillusionment by offering new, far-reaching services that touch on everything from investment platforms (Acorn, StockTwits) to stock trading services (Robinhood), to a debit card and personal money coach (Moven). These services appeal to their young audiences by promising to eliminate “ridiculous” fees added on by banks and replacing “old school” practices.
On the verge of many life events such as marriage, having children, and buying a house, millennials have many financial needs that must be taken seriously. It is clear that this tech-savvy, forward thinking generation needs more than what banks are offering them. Financial technology companies are now recognizing this need and taking steps toward helping millennials feel like they have a supportive partner in their financial quest.