millennial finances

Deep Dive: Why Legacy Payment, Disbursement Issues Compound The Millennial Investing Gap

The investment industry managed to weather the beginning of the COVID-19 pandemic with few major issues, even as initial stock market declines led to dips in existing portfolios. Interest in financial investments is experiencing a resurgence, too, with one recent study showing that 61 percent of millennials believe it is a good time to invest. This represents an intriguing shift from previous insights into millennials’ investing habits, with one 2019 study revealing that 93 percent of them had reservations about making investments, for example.

There are several large-scale factors that have traditionally kept millennials from investing, including widespread student loan debt and lingering financial apprehension stemming from the 2008 recession. Another industry aspect that may be preventing this generation from participating concerns how legacy financial institutions (FIs) and investment firms handle payments and disbursements, such as withdrawals or dividends.

Many investment firms still use legacy infrastructure to handle incoming investor payments as well as disbursement requests. These processes can fail to satisfy millennials and Generation Z consumers, who are often accustomed to instant disbursements in other facets of their daily lives. The following Deep Dive examines how outdated disbursement methods and legacy payment systems can affect younger generations’ interactions with banks and investment firms. It also reveals why innovating these payment systems is critical for firms’ futures as younger consumers consider entering the investment ecosystem.

Keeping Millennials’ Preferences In Mind

The COVID-19 pandemic is proving particularly detrimental to millennials’ finances, with about 5.6 million members of this generation in the U.S. facing unemployment as of April. Tapping into long-term savings could give millennials some relief, as they have about $26,000 saved on average. Many do not have any income or wealth from outstanding investments, however, with 43 percent of millennial respondents in one 2019 study noting that they had never made an investment. Their general payment behaviors and preferences have left them wary of this activity, and a significant share simply do not have extra funds to invest as 41 percent are tackling student loan debt.

Even millennials who have decided to take the plunge may be experiencing problems when they attempt to collect on their investments. Firms still tend to pay out dividends via paper checks, but this method is presenting numerous challenges during the pandemic. Checks take weeks to arrive and recipients must often wait several days for the funds to finalize and become available to use once they are deposited. Dividend checks may also expire after 90 days, for example, meaning banks will not accept them for deposit after that time. Brick-and-mortar bank branches may accept these stale checks, but even visiting physical locations can prove difficult because many remain closed during the pandemic. Innovative tools designed to mitigate some of the existing frustrations attached to check disbursements, such as mobile check-capture features, may also be unable to deposit such checks, further compounding these issues.

Innovative Investments Need Innovative Disbursements

Millennials typically eschew paper checks in other parts of their lives in favor of digital tools, and a large share of these consumers routinely interact with their FIs through online or mobile channels. Millennials as well as Gen Z consumers are also more likely to use person-to-person (P2P) payment apps that enable near-instant payments to be sent and received between two parties. Seventy-five percent of the latter report using P2P apps each month, for example.

The members of this generation who do invest are searching for more financial flexibility, which means firms must determine how to innovate the initial investment process as well as the disbursements they offer to win millennials’ business. The investment space may have been somewhat spared from the economic shock waves that hit the general financial industry during the beginning of the pandemic, but the downturn could have serious impacts on how firms in the industry communicate with and ultimately pay their clients.

Having swift access to funds is a necessity for many consumers during the pandemic, and millennials are bracing for another wide-scale financial hit to their long-term wealth. Leveraging instant disbursement methods and P2P solutions to more quickly send investors their funds could be key to drawing younger consumers into the space, especially as they seek to grow their nest eggs and financial cushions.



Banks, corporates and even regulators now recognize the imperative to modernize — not just digitize —the infrastructures and workflows that move money and data between businesses domestically and cross-border. Together with Visa, PYMNTS invites you to a month-long series of livestreamed programs on these issues as they reshape B2B payments. Masters of modernization share insights and answer questions during a mix of intimate fireside chats and vibrant virtual roundtables.