October 21, 2021
Young people are at the forefront of today’s consumer landscape, and their preferences are shaping a new economic dawn. The popular rhetoric of Millennials destroying industries includes that of traditional banking, as the largest age group in the country turns towards nontraditional fintech.
Distrust of Banks
In 2020, the largest age group in Canada was 25 to 44-year-olds, amounting to just under 10 and a half million people who would have been between age 12 and 31 in 2008 during the global financial crisis, just entering the workforce and trusting traditional banks to keep their money safe.
The 2008 crisis solidified millennials’ distrust of the traditional banking system that had failed them just as it had failed their parents during the financial industry crisis in the ‘80s and their grandparents during the Great Depression.
Gen-Zers are now joining the workforce during the Covid-19 financial crisis and are all too aware of the past failures of traditional banking systems.
An Expanding Market
With distrust in traditional banks growing and regulations decreasing, new ways to bank are emerging. Neo-banks don’t have physical buildings, opting for as virtual an experience as possible. Less overhead means lower costs, no fees and more flexibility for consumers who don’t care if their bank is a monument to Roman architecture, because they don’t want to go anyway. Millennials and Gen Z want better, more convenient service, mobile banking, and value.
Credibility and Marketing
The exposure of the problems with traditional banking methods caused a distrust of banks among young people, who are now the largest consumer age demographic in the world. Their move away from banks found a hole in the market for less traditional ways of banking which was promptly filled by neo-banks and fintech startups.
These new banking companies got their seed money from the deep pockets of venture capital financing, and while many still put their customers’ money in existing, reputable banks instead of holding it themselves, like PayPal, they don’t face the same hurdles as older banks. They are leaner, with lower operating costs and less overhead, while having the credibility of being backed by venture capital and larger national banks.
With the bar set low for credibility because of the failures of traditional institutions, new banks and finance companies marketed towards young people and offered them the low-commitment, no-fee options they wanted.
New banks target social media as a primary ad space, counting on their own satisfied customers to post, share, tweet, and blog about their new, better way to bank. Rave word-of-mouth reviews and hyper-young marketing techniques like partnerships with influencers and ads that don’t look like ads gives a product or service the social stamp of approval, if it can beat the odds.
New financial institutions are building trust among their customers by simply not being traditional banks, and by giving Millennials and Gen-Zers the products and services they want in today’s digital market.
Value for young customers is created and curated by fintech’s participation in digital spaces to market and appeal to Millennials and Gen-Z specifically. Word-of-mouth gives them credibility from real people praising their value and a good, digitally convenient user experience that is nothing like the traditional banking methods that bankrupted previous generations.