This is a sponsored article from Jupiter Asset Management.
Digital transformation for banks involves much more than simply putting information into a digital format. That’s the easy bit. The hard part is delivering that information in a way that appeals to customers — and there is no more demanding audience in this respect than digital natives in their 30s and younger who have grown up with smartphones and social media.
Millennials and particularly their younger counterparts, Generation Z*, are fundamentally different from the rest of us. Many of them have never used a landline, rented a DVD, or bought a CD.
These seismic shifts in social behaviour are reverberating through the financial services universe, and present myriad challenges for banks and others hoping to tap into the wealth of those entering the workforce or in their first jobs and facing the age-old dilemma of who to trust with their money.
The first challenge is that any modern banking relationship has to be both totally digital and mobile.**
Younger clients want to bank with their phones — only older people call them mobile phones — in the same way they use phones to communicate with friends, watch videos, listen to music, and conduct most of their social and professional interactions.
They won’t pop in for a chat and meet the manager before opening an account. The idea of sending identity documents by mail is seen as either quaint or an unnecessary and significant inconvenience, while hanging on the phone for 20 minutes to a remote call centre is a definite no-no.
Banking apps need to be designed accordingly — that is, to handle all finance-related interactions while also being best in class and as visually appealing and easy to use as the most popular apps that inhabit people’s daily lives such as WhatsApp and Spotify.
Take something as simple as mislaying a debit card. Young customers don’t want the hassle of phoning a call centre and going through security checks before another one can be ordered. The best apps allow users to freeze a mislaid card and then unfreeze it once it’s been found or order a replacement.
A second challenge is banks can no longer rest on loyalty and legacy as a draw for younger customers. Traditional appeals such as ‘We’ve been around since 1825’, ‘We’ve got trillions of dollars in assets’, and ‘Your grandparents banked with us’ simply will not work.
The arc of banking history for younger consumers stretches back no further than the global financial crisis of the previous decade. Millennials and Generation Z see a story of banks mired in calamity and lurching from one government-backed bailout to the next so they want to know that the businesses they deal with and entrust their money to are doing the right thing to make the world a better place for them to live in.
This attitude is reflected in an increasing willingness among younger people to switch their spending to companies which positively promote attitudes that chime with their own thinking.
Indeed, a recent Bloomberg and Morning Consult survey showed that relative to their older counterparts, millennials and Generation Z consumers would pay more for a product from a business that was committed to ethical initiatives, such as environmental protection and racial justice.
Would you pay more for a product if the brand or retailer promotes ethical initiatives?
None of this is inexpensive or straightforward to respond to, but the potential rewards are immense.
The parents of millennials and Generation Z enjoyed decades of wealth creation after the Second World War, stockpiling vast sums that will pass down through inter-generational wealth transfer.***
Banks that really want to make an impression on younger generations need to re-engineer their business and IT processes from top to bottom — from building apps that both work well and look good, to adopting genuine ethical initiatives that are not perceived as token gestures to look cool to younger customers.
Those that get it right have the opportunity to lock in millions of future customers from a generation that is highly adept at passing on recommendations about what works best for them through social media.****
Those who view millennials and members of Generation Z as just another entitled customer cohort not worthy of any special effort or attention, on the other hand, may soon find themselves left behind by a vibrant and fast-moving digital revolution.
Read More: https://bit.ly/2Oz3sTc
* Definitions vary but researchers generally regard millennials (or Gen Y) as being born between 1982-97. Some split these into Y1 (1990-97) and Y2 (1982-89). Today’s Generation Z consumers are defined as being born between 1998 and 2001.
** In 2015, Vision Critical found millennials spent an average of 14.8 hours a week on their smartphones and Gen Z 15.4 hours. The figures are likely to be even higher today.
*** PWC estimates US wealth transfer alone at US$30 trillion.
**** Businessweek/Morning Consult found 42% of millennials and 52% of Generation Z find out about new products via social media. Older generations are much more likely to rely on TV or print.
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This is a sponsored article from Jupiter Asset Management.