The Future Rol of Financial Entities and Millennials

The Future Rol of Financial Entities and Millennials

I did an introductory post about millennials 4 months ago. In that post, I introduced some of the idiosyncratic characteristics about Millennials such as idealistic, competitive, pragmatic, cautious, tolerant and single. But above all, Millennials are impatient and interactive.

I’ve also raised some questions about how the future jobs or businesses models would be (if they still exist) in 5 – 10 years from now, and what possible role would Millennials have in the evolution of such businesses. And in today’s post I am writing about it.

In this infographic, opinions of american millennials regarding banks are shown. The banking network in Spain has been until now mainly based on physical offices and employees serving you in person. Here, in Spain and in most countries. The more offices the bank had, the more accessible it was considered. Therefore, it was the best candidate for you to open a bank account.

However, it is predicted that physical offices will have an unhappy ending to this whole movie. We, as consumers, are willing to commute less and less to stores. We even buy clothes online, when is still sacred to many people to try the clothes on. But it seems that this is becoming less important, because it can be returned. And for Millennials, time is more valuable than money. That’s not the case for Baby Boomers.

Although being aware of this change, it is still shocking to read this survey about Millennials and banking.

Millennials don’t care which banks they have their payroll in. They don’t see the difference between one bank or another. Or could it be that Millennials -although being the best informed generation- do not have any information at all about financial entities, couldn’t it? Or maybe financial entities know very little about differentiation and marketing strategies.

The only positive point that Banks have, is that in terms of shopping, Millennials prefer listening to other consumers’ experiences and their opinions online. For Banking, Millennials seek instead relatives’ opinions.

In this other article, there’s a list of things that Millennials won’t spend a cent on from their pockets. They’re better off without TV, share investments, cars, houses, weddings, kids… So they really are a pragmatic crowd. Nor they will spend a dime on what you tell them directly to buy. They’d buy the opposite thing, just for pride. Don’t be surprised… Elizabeth Bennet was already a proud person.

It seems that in many of the articles, Millennials are seen as superheroes, with amazing skills for obtaining and retaining information. However, they’re also known as not able to manage their budget wisely. They’re aware of how much money they have, but that’s as much as they’re aware of. They’re willing to spend their money into products that are loyal and honest to their same values (AND organic). Translation: instead of buying a 0.70$ coffee, they order a Dirty Grande Chai Tea Latte with Soya Milk for 5$.

The problem is that they do not know when they’re budget is over. Well, they know it right after their card prevents them from buying more stuff and make fool of themselves in the organic food store for not being able to pay cereals, some biscuits and birdseed milk for $23. That’s when they realize their budget is over.

Banks should offer solutions to that. A didactic one. And if it’s a smartphone App, the better. Because no matter where their bank account is, Millennials like to control their account through their smartphones. It’s not that they don’t use their bank services… but they’d use them more if they wouldn’t have to commute to the physical office.

84% of Millennials (between 18 and 34 years old) use Online Banking to check their bank accounts and their last activities of their credit cards. Thus, they constantly come back to the bank website (or App). And considering that everyday we check our phones 150 times (every 9.6 minutes), at least once, it would be for checking our bank account. That makes a daily impact.

This means there’s still hope for the banks. Not only they can integrate their services to online channels, they can also create Apps to help managing their own budget. Just like Level Money and Mint, which are both very famous in the US. And I’m not sure that el Recibox of La Caixa, the Catalan version, is a fair comparison. It’s on its way, but only for accounted debits.

Will banks still exist in the future? Maybe not physically

How will they capture Millennials? Online

And there’s only one way available at the moment: Apps that are user-friendly to a better personal management of our budget.

What will future bring us? Or, will currency still exist?

Maybe Dan Ariely brings us some light to this issue. He did an empirical study in the MIT with his classmates, some years ago. He explains this in his book Predictably Irrational: The Hidden Forces that Shape Our Decisions in chapter number 12.

I can make you a quick briefing about it.

The study wants to understand why people is dishonest. And what makes us act dishonestly. The sample are random MIT students, with similar mental faculties. They’re asked 20 questions, and the more correct answers, the better. They even get a little prize for each correct answer.

Dan makes three rounds of exams with three different groups of random students (remember: they’re different but with similar knowledge). The first group is requested to deliver the exam when finished, and for each correct answer, they’re given 0.50$ back.

The second group is given the same prize as the first group. But instead of delivering the exam right after finishing it, they have to break it into pieces and tell “the court” how many answers they had. Obviously, the average of correct answers mysteriously increases.

Finally, the third group is asked to also break the exam into pieces, but instead of receiving money directly (0.50$), they receive a token that they can later exchange for money. Each token is worth 0.50$. So, apparently, it’s exactly the same as the group number 2. The only difference is that there’s been a step introduced into the process of getting the money.

So the initial thought would be that the results between group 2 and 3 are similar. Maybe a subtle difference in the average responses. Or that maybe that people would lie less because there’s no direct money involved.

It was not the case. Group 3 turned out to be the one with far more correct answers from all three groups. There even were people who affirmed getting the 20 questions right (being almost impressive considering the level they had).

This whole study means that when we get the chance to lie, we do it. And if we get a monetary compensation, better. But if this monetary compensation is a few steps farther from the immediate lie… we perceive this as a less deceptive scam. We’re not stealing. We’re not lying. And it turns out that in a while, I’m getting money. But I’m not stealing. It’s curious, isn’t it?

It’s about quantifying the percentages that people are willing to cheat in order to get a compensation. Back then, people valued money over time. They’d rather get a monetary compensation now than in a month. No matter what.

What’s frightening is that for the mere fact of associating a prize with a symbolical object, not as physical money, makes us act more dishonestly. Because we’re not stealing anymore. That Token, prize, whatever you want to call it, it’s not physical money. It works the same as when stealing a pen or a stack of papers from your office. You’re not stealing the 3$ or 5$ that it’s worth. Because that’d be stealing. You’re just taking the pen. That’s not stealing, right?

Well… that’s how apparently we trick our minds.

Hence, going back to the study, the longer it is the moment you lie from the moment you get the physical money, the magnitude of the lie hikes.

That’s how the great accounting scandals happened. Such as Enron and the Pyramidal Scheme by Bernard Madoff. They were not associating the present decisions with the physical money they’d get in the near future. Does that mean that, according to Dan’s study, they were not scammers but just a collateral effect of how human brain works? Absolutely not.

Maybe I am too naive or optimistic (another Millennial’s feature) or maybe a blind trust that people are good by nature. So these people did it intentionally. Because money was coming, and they kept doing it.

Therefore, with this behavior pattern, think about how this could affect the new banking system in the next few years. With digital technologies and smartphones, currencies will soon become a relic. A museum piece.

And according to Dan’s study, if banking operations are done by smartphones and other digital technologies (that we may wear underneath our skin)… this means that financial frauds will be psychologically easier to commit, because the dishonesty level will be greater.

But maybe there’s still hope for Millennials. At the end of the day, honesty, ethics and innovation are some of their values. Then it will be only a matter of how Millennials will manage our generation and the coming ones (i.e. Gen Z) to avoid frauds. From accounting to investment frauds.

It’s hard to believe how human brain works in front of these situations. Whether how predictable is the event that’s happening or for the great influence that money has on our decisions. Predictability of situations can be controlled by playing them in your head over and over again before they actually happen. That way, we are prepared to react better.

So here’s the question: what are we going to do when we lose sight of the physical money, by replacing it with virtual money, such as bitcoins? Will we be able to steal easily? To commit fraud easily?

The advantage of consumer behavior study is that it’s passionate and interesting (at least, for me). The disadvantage is that it’s unpredictable.

But either way, we’re able to study most of the alternatives where we could become threatened from our own actions.  Watching closely the alternatives that could lead from the disappearing of physical money, could be a great initiative to see how future fraud would look like. Therefore, we’d be prepared from solving these different scenarios safely.  

It’s better to prevent than to cure.

So new businesses can also think about their security policies and codes of conduct so that no one gets trapped from doing good business. Also to have a better coexistence. And I think that with Millennials’ values, we’d be able to achieve that.

Main picture taken by me in Plaza Molina, septmenber 2012 through Mirrorgram.