At Good Rebels, we just presented our study “Are banks the future of banking?” This study is the result of a joint research project between the United Kingdom, Spain, and Australia that will extend to Latin America over the next few months. For months, we’ve been talking with all the stakeholders in the financial sector’s transformation: young people, banks, fintechs, and new digital players.
Young people between the ages of 16 and 24, whom we have baptized as iGens, compose Spain’s first cohort of digital natives. An age group that has not been paid much attention to as consumers, or at least has been less observed than Millennials, exhaustively analyzed because they are the first generation whose consumption habits have seen modifications due to the internet.
iGens bring with them a cultural rupture. It involves a cohort firmly established in the “co” concept: they share, connect, cooperate, collaborate…They have grown up in an environment of economic uncertainty that has conditioned the time-horizon of their decision making which, coupled with the internet’s influence, has reinforced in them values like exploration, participation, or self-learning.
All of this, together with their familiarity with the digital world, turns the iGen into a new kind of consumer. Far from the materialistic obsession of their parents and grandparents (and even their older siblings), the iGen chooses temporary enjoyment over possession. The iGen, not in vain, has grown up alongside services like Netflix, Spotify, Uber, Airbnb, or Car2Go.
In our study, we have been able to confirm that the iGen consider their cell phone to be their most valuable possession, a tool firmly settled in the center of their lives that determines the consumption patterns and sociability. Always connected, the iGen appreciates, above all, the value of the moment, and demands an instant gratification that can only the most innovative services can provide, closer to the values that define their way of life: immediacy, utility, transparency, mobility.
iGens and banks: a thorny relationship
And here we get to the brush with the financial industry. As digital natives, iGens are used to sublime experiences through screens. That’s why they don’t conceive that banks don’t try to build links with the same level of quality.
Our research shows that the banking system has set aside the interests of young people between 16 and 25, or at least, that is the perception that pervades across much of this generation. What iGens don’t understand is why banks, or the majority of them, that have an enormous and treasured amount of data about their consumers, have not used that knowledge to improve their relationship with them, through products and services adapted to their expectations and demands.
In the study, we’ve identified the primary pain points in the relationship between iGens and banks, which get synthesized into three areas: poor communication, a lack of trust, and an impersonal treatment. What’s more, 66% of young people believe that banks aren’t interested in their due to their low incomes. Only one out of three young people feel that the bank treats them well, considering them as a future customer at the margin of their income level.
A grave strategic mistake, because digitization is not the exclusive property of the youth. It could be that they currently are the minority, but in the future, all customers will be eminently digital. Digital is an attitude, not an age group: only in the last few years, the banking system has started to be conscious of the fact that the iGens’ demands determine the future of the entire sector.
Another double-threat weighs on the traditional banking establishment. On one end, the emergence of two new players in the sector:
- Fintechs: startups often started by iGens themselves, that know their generation’s financial demands first hand, and incorporates them into a value proposition based on customer needs, improving user experience and reducing the points of friction related to money.
- Pure Players: those known as GAFAs (Google, Apple, Facebook, Amazon) already have a huge mass of users. The next natural step leads towards an increasingly more relevant role in financial service offerings. To do this, they count on three big assets: a large capacity for innovation, an enormous amount of customer data, and a good reputation on which they can base an emotional connection.
And on the other end, Open Banking is close to becoming an imminent reality. The PSD2 European Directive, which goes into effect at the beginning of 2018, forces banks to share data about their customers with third parties (always with prior approval from the client), which will facilitate competition in financial sectors by fostering an environment of disintermediation and openness.
PATH to the Bank of the Future
Which all of this, we at #RebelThinking have synthesized in the PATH acronym the qualities on which the iGen’s bank should be based, and by extension, the ideal bank for all customers in the future, given that everyone will demand the same treatment.
- People-Centered / People First: its product and service offerings must be useful, valuable, personalized, educational. And always formulated in natural language. The iGen wants to perceive that the bank has no other purpose than to help them, satisfying them as a customer.
- Agile: all the bank’s services should be fast, portable, intuitive, always available from any device. The bank shares screen space on smartphones with the iGen’s favorite apps: if they can use social media platforms wherever and whenever they want, why not do the same with their money?
- Tech & Data savvy: data, companies’ best-guarded treasure, gives the bank the advantage of continuing to have privileged information about the client. A dialogue between technology and their customers’ history not only lets the bank remain up to date but also better anticipate their customers’ needs in every life moment.
- Honest: the bank must be honest, transparent in their internal processes, always showing an untouchable moral procedure. Initiatives like incubating entrepreneurs and startups, scholarships for students, social work, support for third-world countries are highly valued. The bank, through initiatives like this, that it understands and cares about the world we live in.
Banks are not important in their lives, but money is. That’s what the iGen wants the management of their finances to become a fun, intuitive, and useful experience. We should be able to see it in the future, within horizontal cooperative structures, Open Data-based marketplaces organized around comprehensive customer service, the new ecosystem’s true epicenter.