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How Millennials Are Changing The Way We Bank

Just a couple of years ago, the media took every chance it could to ridicule the Millennial generation. Journalists called them trophy kids, business moguls said they spent too much on avocado toast, and financial experts claimed they were bad with money.

This smear campaign has only just begun its course, and the tides are finally changing in their favor as more reports studying Millennial financial habits emerge.

What once was considered a financially inexperienced group of people have grown up, and they’re banking differently than Gen Xers or Boomers. Rather than relying on the old banking system to meet their needs, they’re turning to a developing sector of data-driven FinTech alternatives.

The Millennials’ history makes them wary of the traditional bank model

The recession was a defining moment for the Millennials. While they struggled with the worst economic conditions—the eldest of the generation graduated college at a time when the country’s unemployment rate was twice what it is today—the banks managed to escape the crisis relatively unscathed. Though it was a crisis of their own making, the Senate awarded them $700 billion in a bank bailout bill in 2008.

Stuck with the economic side-effects of the subprime mortgage crisis, Millennials resentment of the traditional financial system grew, and their experience cast doubt on the biggest banks’ stalwart reputation.

They’re more receptive to tech alternatives

While their distrust of the traditional banking model decreased, their trust of tech increased. According to a report called “Are Banks Losing the Innovation Game?” 41 percent of 25–34 year-olds admitted they wouldn’t trust a bank with something as simple as an e-transfer.

Another survey conducted by LinkedIn revealed 71 percent of affluent Millennials would rather visit their dentist than listen to anything a bank had to share with them. This is while Millennials rank mobile banking as the most important feature of their banking experience.

Considering their reticence to bank in the traditional sense, it would make sense the generation would avoid financial services beyond the absolute minimum daily banking. However, that isn’t the case. Millennials are finding new solutions to old financial problems, including ways to save, borrow, and invest.

They’re turning to FinTech alternatives to meet their needs

As a mobile bank, Chime offers FDIC-insured services over a uniquely online platform. They’re just as easily described by what they don’t offer as what they do.

They don’t have physical branches, they don’t require minimum balances, and they don’t apply fees for their checking or savings accounts. This pivots them as a digital alternative to banking that’s easier, cheaper, and more convenient than a retail bank like Wells Fargo.

Meanwhile, a company like MoneyKey solves the Millennial need for personal loans without relying on traditional banks. Customers can secure quick online payday loans through their phone, rather than visiting a local branch and speaking with an advisor. This eliminates the need for Millennials to apply on the bank’s time. Instead, they can apply for a loan, review their profile, and repay their cash advance online at anytime they prefer. This is just one of many complexities FinTech aims to remove, making it easier and quicker to secure a cash advance than conventional means.

Totalling roughly 80 million people, Millennials represent a huge opportunity for financial institutions. By 2019, this number is expected to surpass the Baby Boomers, the country’s largest living adult generation. Their size makes this generation the focus of the financial industry. Traditional banks who hope to lay claim on Millennial customers will have to appeal to their preference for convenient, online services. Eventually, these banks will offer more data-driven products and services than ever before, cementing the Millennial FinTech effect on the industry.

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