Millennials, those born between 1980 and 1994, are embracing alternative banking with gusto. Compared to earlier generations, they more likely to use mobile wallets online peer-to-peer lending and alternative payment services, such as PayPal and Venmo. Currently the largest generation in American history, their openness toward nontraditional banking could represent a huge potential market for alternative banking providers.
Young and Current
Tech-savvy and convenience minded millennials are nearly twice as likely to choose nontraditional payment companies than people over the age of 50. A survey of 908 U.S. banking customers by FICO showed millennials choose these payment methods thanks to mobile support and ease of use. The youngest of this generation, those aged 18 to 24 at the time of the survey, are especially inclined to use alternative payment services; 56 percent of respondents in that age group said they are already using, or are very likely to use alternative payment services.
Young and Mobile
While the mobile payment is still in its infancy, millennials are poised to be the catalyst for change. They are four times more likely to use mobile payment providers over the next 12 months than baby boomers (born between 1946-1964), and two times more likely than Gen X (born between 1965-1979) to go mobile. Current usage of mobile payment technology is low across the board, regardless of generation. Just 5 percent of millennials are actively using a mobile wallet right now. There’s not an overwhelming demand for mobile payments at the moment, but offering mobile payment services could provide a point of difference for banks looking for an edge with the millennial consumer.
Young and Entrepreneurial
Alternative lending is growing fast. Lots of new players have entered the market and values are climbing fast. According to a recent press release from alternative assets data aggregator Preqin, the alt-lending market is closing in on a $500 billion valuation. Millennial small business owners are already taking advantage. A 2014 Bank of America survey revealed 14 percent of millennial small business owners have turned to non-traditional lending services, just 1 percent of business owned by baby boomers and 3 percent of businesses owned by Gen X have followed suit.
Peer-to-peer (P2P) lending is particularly interesting to the soon-to-be majority in the American workforce. Twenty-three percent of millennials are currently using or very likely to turn to P2P when in need of capital, the FICO survey found. That’s more than 10 times more likely than baby boomers. Alternative lending is well-suited to startups and other early-stage businesses, a good fit for young entrepreneurs. “Millennials are on the earlier curve of their small business ownership and entrepreneurial paths,” David Solis, sales performance manager at Bank of America, told CNN Money. “It makes sense that they’re going to be pursuing alternative forms of lending.”
Young and Connected
As millennials take on greater responsibility in the workplace it’s not just attitudes toward banking and finance that are shifting. When it comes to buying habits, Millennials approach things differently and prefer to work with suppliers that follow their lead. Collaboration, data and transparency are a few of the values most important to millennials, a recent study from The IBM Institute for Business Value reveals.
As consumers, millennials rely heavily on data and the opinions of their peers. The results of the IBM study show when it comes time to buy, the opinions of friends and family are just as important as analytical analysis. Millennials’ confidence in the thoughts of others, whether online reviews or recommendations from their personal networks, poses a challenge for those trying to gain their confidence and loyalty. Businesses must consider not only how their goods and services are perceived by buyers, but look for ways to expand their positive impressions to the personal networks of potential clients.
The latest generation of American workers is digital-first and Internet enabled. Millennials’ comfort conducting business online increases the market for alternative technologies. As the youngest millennials begin to enter the workplace, alternative payments are positioned to move from niche to mainstream. Millennials are looking for financial services that are as tech-savvy as they are, those who don’t keep up may get left behind.