Frustrated by big banks, millennials are hoping for innovation from outside the industry.
Tax season is the one time of the year everyone, even those who normally don’t scrutinize their finances, take a closer look at their financial situation and evaluate how they’re doing.
As I was filling out forms and checking receipts I began thinking there must be a better way. It got me wondering about the tools I use online to get paid (PayPal) and how I feel my bank isn’t nearly as connected as I want it to be. My frustrations range from ATMs that still only dispense 20 dollar bills to hours that seem dated even to me (with my flexible work schedule) and it turns out I’m not alone.
According to the Millennial Disruption Index, a three-year study of over 10,000 millennials born between 1981-2000, the banking sector is the industry most in need of change.
High Risk of Disruption
If banks needed a wake up call, here it is. According to the Millennial Disruption Index, 71 percent of millennials would rather go to the dentist than listen to what banks are saying. Ouch. And brand loyalty? The results show 53 percent don’t think their bank offers anything different from other banks. Scratch, the company that commissioned the study, ranks banking as the industry with the highest risk of disruption, ahead of other industries like household goods.
In the end, one in every three millennial Americans is open to switching banks in the next 90 days.
What Needs To Change?
What exactly does disruption mean, in this “Disruption Index?” It’s an over-used jargon term that doesn’t have a lot of meaning, but dig a bit deeper and some ideas start to form.
The popularity of traditional retail banks might be waning because millennials are using their money differently. The study shows 68 percent of millennials say the way we access our money will be totally different in five years, while 70 percent say in the same amount of time we will pay for things in a completely different way.
Those trends are already starting to evolve. Recently we’ve seen companies like Apple and Google release systems that let people pay for their purchases with just the swipe of their phone or watch. And these aren’t the only systems around. Certain retailers, like Starbucks, have been letting users pay for their orders by scanning a barcode on their phones for years.
Some banks, but certainly not all, are letting their clients deposit cheques by taking a picture with their smartphones. Convenient, sure, but the adoption rate for tech like this has been painfully slow.
In fact, for millennials, a great mobile banking app can be a big difference maker. A recent survey showed a better app would convince a majority of millennials to switch banks. The same survey also reported 53 percent of millennials found their current bank’s app lacking.
So what’s to come? Some banks, like Tangerine in Canada (which was acquired by Scotiabank — a large traditional bank in Canada), have found success in online banking with no retail locations. And banking apps for regular banks are still a long way from perfect, but they are getting better.
In the meantime, trends like virtual currencies and payment systems like Apple Pay will continue to make inroads with this generation, even if these tools are seen as a competitor by traditional banks. Don’t expect banks to disappear completely, but according to the Millennial Disruption Index, 33 percent believe they eventually won’t need a bank at all, and 73 percent would be excited about financial services from companies like Google, Amazon, PayPal and Square.
However this landscape changes in the future, millennials need to make sure they are keeping track of their spending as payment and banking becomes more convenient.
Do you use a mobile banking app? How do you think banking and financial services will change in the future? Share your thoughts in the comments.