In a fast-moving world, every established and traditional industry faces challenges to its relevance and continuity. The 2020s means a new generation with a digitally-native background is coming of age in all senses — and a new kind of thinking is needed by brands, to engage with these customers and stakeholders effectively.
For banking in particular, a lack of agility and customer-focused thinking is leading to failure to understand their future customers and meet their needs, with legacy institutions focusing marketing instead on a generation which might have greater solvency today, but whose peak of earning potential is past — and dying off with them is the idea of choosing financial and other brands for life.
This demographic time-bomb is accompanied by an explosion of alternative solutions to traditional banking services, which pose an existential threat to the 500-year-old banking industry.
To commit to serving the new generation, banks first need to understand them.
Attempting to appeal to ‘Millennials’ in a homogenous and patronizing fumble towards the ‘youth’ market, is to miss the rich and diverse attributes of a demographic no longer definable by broad generational strokes.
From those in their teens and 20s who are taking control of their finances for the first time, to high-earning professionals in their 30s and 40s who may be yet to be involved with property purchase and retirement planning, there is a broad range of needs for solutions which don’t attempt to pigeonhole people by credit score, life-stage or traditional financial categories — while many banks make no attempt to realistically model their users and their spectrum of needs as buyer personas.
So there’s a real space here for banks to meet a need — to offer relevant knowledge and understanding, rather than a brief marketing campaign.
These young adults are facing unique uncertainties and challenges in their lives, including an awareness of daunting environmental threats, career limitations, and a continual reminder that they are less likely to own traditional assets and material wealth than their parents.
Mental health difficulties are at all-time highs around the world, and a growing disconnect is opening up between them and people from other age groups who still hold many of the keys to resources and power.
These young people don’t think of themselves as ‘digital first’, any more than a fish thinks of itself as ‘water first’. They exist within their lived environment, and value experiences, trust, transparency, and ethical standpoints.
Their parents aren’t inspired or equipped to teach them about money — and their schools aren’t bothering to do so in any meaningful way. So there’s a real space here for banks to meet a need — to offer relevant knowledge and understanding, rather than a brief marketing campaign. Far from nihilistic despair, these young people have unique dreams, desires, and goals — they just don’t define piling up assets as a direct aspiration, and they need education and messaging which aligns with and reflects this.
Many are carving out innovative self-actualizing roles for themselves, from the digital nomad to the environmental activist to the celebrity influencer (frequently categories that banks do not understand and don’t want to deal with).
These young people don’t think of themselves as ‘digital first’, any more than a fish thinks of itself as ‘water first’. They exist within their lived environment, and value experiences, trust, transparency, and ethical standpoints, from the brands they choose to interact with — and from whom they will switch away in a heartbeat if they feel they’ve been let down or misled.
When it comes to banking and financial services they need different things from their parents right now, and banks are increasingly failing to recognize and fulfill those needs. They’re not investing in their customers of the future because they’re prioritizing revenue now over revenue later and, with few exceptions, they’re still primarily marketing to a dwindling demographic cohort.
This may have worked in the past because everyone needed a bank, and would probably trust the ones their parents used. But those needing banking services now may well circumvent the industry altogether, as varied alternatives are now available to them. Neo-banks and challenger-banks like TMRW and Revolut are attracting younger customers with shiny native apps and products built around their needs and interests, and alternative payment providers like Thunes are attracting investment regardless of present economic climate.
They don’t trust the stock market, and would rather invest in digital assets or even commodities, if they can afford to save at all.
Fintech startups like 220 Bank and Karat are embracing the earning and spending potential of those with non-traditional career paths in the creator economy, rather than rejecting them out of hand, and Razer, recognizing the untapped potential of the esports and gaming market, is appealing directly to that audience with bespoke fintech services.
Whether their providers have traditional banking licenses or not is less relevant to a generation for whom saving and investment may be a distant dream; instead, they want accessible credit and straightforward payment tools on their device of choice. They don’t trust the stock market, and would rather invest in digital assets or even commodities, if they can afford to save at all.
New classes of assets also threaten the hegemony of the traditional gatekeepers to wealth and growth, from cryptocurrencies to NFTs to virtual gaming assets — offering empowered users the option to be their own bank, rather than use one.
Increasingly all these services may be provided by retailers and social platforms completely unrelated to banking, who bundle easy-to-access payment rails into their EULAs along with their messaging and shopping — making banks the victim of their own fears of losing control of data, and failure to establish the necessary relationships with tech giants in the first place.
Finally, new classes of assets also threaten the hegemony of the traditional gatekeepers to wealth and growth, from cryptocurrencies to NFTs to virtual gaming assets — offering empowered users the option to be their own bank, rather than use one. This creates entirely new threats that the banking industry has not yet begun to engage with in any meaningful way.
To avoid being completely left behind as this cohort carves out new lives and careers in a post-Covid world, banks need to act now.
They need to get to know these customers and understand them, and be ready to learn from them — their high expectations of customer service experience and brand accountability will have to be met transparently and coherently. Informing and educating the customers of the future must be done in a non-patronizing way, that demonstrates as much willingness to understand from them how, for example, a brand influencer’s income and career develops, as an intent to advise about investment strategies and products.
Only by radically rethinking their strategy to meet their new cohort of customers on their own turf, and talking to them in their own language by creating products and services which are meaningful for them, will banks avoid fading into insignificance.
Their brands need to become visible, to users whose payment method of first choice is their mobile phone, and for whom the institution behind it may be less manifest. If fintech seeks to make the bank brand disappear and merge into the tech experience, this is a gap banks can fill — in sustainable, invested, and authentic ways.
Legacy institutions can create new internal brands, driven by cross-functional innovation teams, cultivating a startup mentality and agility which may run counter to traditional culture — but which safeguards an experimental and responsive user-centered mindset and approach. They can balance an iterative developmental mindset with a commitment to authenticity and staying power that their future customers admire, being ready to pivot when they identify new needs but remaining consistent in the values that matter.
Only by radically rethinking their strategy to meet their new cohort of customers on their own turf, and talking to them in their own language by creating products and services which are meaningful for them, will banks avoid fading into insignificance. At this pivotal moment for the global economy, there’s still a window for courageous institutions to be catalyzed by the challenges of 2020, and transform into relevant and powerful financial partners for a new generation.
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