Veryday White Paper - Finance & Millennials

© Veryday 2015

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Banking & Millennials The future of finance in a collaborative society Millennials are the young people of today – born from 1980 to 2000, they are now in their teens, 20s and early 30s. Since many millennials are just beginning their careers, they’ll remain important engines of the economy for decades to come and are a highly relevant financial target group. But according to several studies, millennials don’t currently relate to traditional banks.

This whitepaper will offer insights and guidance useful for anyone working within the financial service sector and looking to create change and innovation within their organization.

For professionals & leaders in Banking Finance Customer Experience Business Development / R&D

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Daniel Sjöblom

Digital Design Director Veryday daniel.sjoblom@veryday.com Daniel has over 18 years experience of delivering Executive Project Management, User Experience Design, Branding, Business Development and Digital Design Strategies in most industry sectors. Clients include Ericsson, Samsung, Warner Music, Swedish Government, Dubai Government, and Telenor. Daniel has a passion for bringing a business perspective to digital design- and user experience.

Millennials And the new values that will shape society

Stefan Moritz

Service Design Director Veryday stefan.moritz@veryday.com Stefan’s background is in design with a focus on service innovation and management. He has worked with governments, public sector organizations and blue chip brands such as adidas, IKEA, Disney and Philips. Stefan regularly gives keynote speeches, runs workshops, coaches executives and teaches at universities. He is Veryday’s Director of Service Design and a spokesperson for the global Service Design community.

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About In a study Veryday conducted in the spring of 2015, we asked young people to describe what they thought a typical bank would look like in ten years. Here’s one answer:

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I don’t think banks will exist anymore.

A much more decentralized and democratic system will emerge.

Respondent

Banks need to reinvent their offerings to become more relevant and attractive to this age group, especially the younger half of the generation. Like every generation before them, millennials have been shaped by previous generations and the state of the world as they have grown up. Their values will define the society of the near future, and these values are very different from those of the young adults of the 80’s. So, things will inevitably change - the question is, who will drive and benefit from that change?

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The target group

Who are the millennials?

Millennials were born from 1980 to 2000, they are now in their teens, 20s and early 30s.

The first digital natives Millennials are the first generation of digital natives, that is, the first to have had access to the internet since their formative years. This fact (as well as the socioeconomic conditions of recent decades) has shaped the way they live and work, and how they relate to and what they expect from the banking sector. As a group, they’re skeptical, diverse, community-oriented and more highly educated than any other generation before them.

Millennials choose services and brands with their hearts, but they’re also a pragmatic bunch. And they move fast; their loyalty can be lost without much consideration should a better alternative come along.

Millennials value entrepreneurial thinking and look outside the box. They’re much more inclined to trust individual and collective efforts rather than large, established corporations.

Non-traditional careers Due to the chaotic job market stemming from the 2008–2012 global financial crisis that framed their early working lives, many millennials became serial career changers. Combined with the advent of social media, smartphones, mobile computing and other new technologies, a generation that’s quite comfortable with uncertainty and change was born. Coming into the job market with fewer prospects yet higher expectations than their parents make them highly entrepreneurial.

These are entrepreneurs and self-employed workers, and even if they’re full-time employees, they don’t necessarily expect a steady income month after month. However, they also have the potential to make both significant changes to society and large amounts of money thanks to innovative ideas and do-er attitudes.

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If I took a loan to buy an apartment (I live in a rental at the moment) it would be much more important which bank I have as interest rates and loan terms would dictate.

Respondent

They are racially diverse and socially liberal.* *

Pew Research Center, “Millennials in Adulthood” 3

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So why don’t they like banks?

68% of millennials say that in 5 years, the way we access our money will be completely different.*

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The Millennial Disruption Index millennialdisruptionindex.com

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There’s a big hole in the area of banking services specifically aimed at young adults, and this is a great opportunity area for innovation.

Many young adults don’t hesitate to use Apple, Google, Facebook or Amazon for banking. These businesses have entered the financial sector in entirely new ways and may become major competition for traditional banks in the future, mainly through how they manage their services. Their offerings are digitalized in ways that are more suited to this generation.

Banks that still work rather conservatively will most likely be overtaken by new digital services such as Tink and Klarna in Sweden, iZettle and Paypal worldwide.

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They are innovative and could give me new solutions for banking products, but are still reliable.

Respondent, when talking about Google

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The opportunity

What can banks do about it?

Providing flexible services for a generation with multi-faceted lives and non-traditional careers.

Flexibility

Treating young customers as valuable individuals and championing small initiatives.

Trustworthiness

Loyalty Technology

Supporting millennials in whatever task they want to achieve by taking advantage of new technology.

Relationship to Money

Understanding millennials’ relationship to money as a means, not an end.

At Veryday, we believe that what makes us loyal is deep emotional and human bondings.

More information on True Loyalty on our website: veryday.com/aspect/caringabout-your-customer-createstrue-loyalty/

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Flexibility Employment types Old banking formats based on regular income and long-term employment don’t apply to this generation, and younger millennials could really do with some help in dealing with financial ups and downs and juggling their multi-faceted lives. Typically, they blend work and play, hobbies and freelancing, projectbased employment and entrepreneurship.

33% of millennials believe that in 5 years, they won’t need a bank at all.*

A collaborative approach Flexibility here is key, and this is something large banks today are not very good at providing. They prioritize creativity and innovation, which predicts future economic growth, and their unprecedented enthusiasm for technology has the potential to bring change to traditional economic institutions as well as the labor market. For millennials, flexibility is key ¬– but large banks are not very flexible these days. Case in point: rather than relying on traditional banking sources, crowdfunding now enables many entrepreneurs to raise capital from online sources to grow their businesses.

We asked millennials to describe their dream bank of the future. Here are some of the replies we got:

“ “

Maybe I, as an individual, am a bank. Through the power of a cooperative network, myself and multiple other people can offer and receive services from each other.

Respondent

[I’d like to] borrow/invest/co-own companies and from other people.

Respondent

To be a part of this collaborative new society, traditional banks must understand the people-overcompanies mindset and the freedom and flexibility that millennials need to get things done. Millennials show an appreciation for small initiatives and admire the agility and vision of start-ups while they see larger companies as slow moving and old school. By partnering with the small guys, banks could also facilitate and help small initiatives connect the dots.

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The Millennial Disruption Index millennialdisruptionindex.com

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Trustworthiness Gaining trust as a large company Millennials do not perceive a company’s size or longevity as a signifier of quality or trustworthiness.

When looking for financial support or advice, many young people turn to independent financial advisors. They often don’t trust that banks will provide the best advice and believe that banks promote whatever financially benefits their own interests. There is also a sense of just being seen as a number by big institutions, while smaller companies generally offer more personalized experiences.

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Sometimes I feel that I’m met with a rather superior attitude when in contact with the bank.

I understand that I am not the world’s most interesting customer right now, but everyone needs a bank.

Respondent

Seeing customers as individuals To keep these guys, banks will have to relate to millennials in a new way – showing them that they matter and that banks are partners they can count on. Inheriting young people from their parents as customers may seem like a safe business model, but these well-educated and skeptical young workers will earn more as they age and are more inclined to be pragmatic rather than loyal to corporations.

Best practice:

People strive to express individuality through fashion, lifestyle, and communication. Our consumer decisions depend on aspects that are matched to personality. We are on the front line of exploring how emotions influence attention, decisions, behavior and, most importantly, wellbeing and happiness. veryday.com/aspect/apersonal-touch/ 7

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Relationship to money We use Service Design to help our clients find the new revenue sources, added value and unique solutions that set them apart from the competition and create outstanding success. More information on Service Design on our website: veryday.com/design-impact/ service

A means, not an end Millennials may seem “fluffy” to older generations, but don’t let their external casualness fool you.

Hipsters of today are very different from the hippies of the ’60s. They’re not embarrassed about making money – they just don’t see it as a goal in itself (as did many young adults during the ’80s). In our research we found that “working hard” and “remembering what is important” were the two factors that millennials valued most in life.

They’re willing to work hard to earn money and then use it to reach more purposeful and fulfilling goals.

There’s massive potential in working with this generation, and, in particular, looking at how relationships between banks and millennial customers could be framed. The dialogue isn’t about the accumulation of money; it’s about using money intelligently and making it grow. Banks have the potential to become active partners in this journey.

70% of millennials say that in 5 years, the way we pay for things will be totally different.*

The financial discussions

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The Millennial Disruption Index millennialdisruptionindex.com

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Although nothing to be ashamed of, it’s still rather uncomfortable to discuss money among friends.

Tools that help lessen the awkwardness of financial issues have recently been created – and more are certainly welcome. For example, when friends want to split an Uber bill they simply press a button on the app and Uber figures out the rest. In this way, Uber helps manage relationships by stepping in and getting rid of the discomfort of asking a friend for money.

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Technology Being where your customer is Millennials want to be empowered to get things done instantly. Waiting, queuing and receiving generic information has become pointless when technology is available to facilitate more efficient experiences.

Mobile banking needs to offer more than simply the ability to check an account balance on an app.

Increasingly, younger people have no interest in visiting bank branches in person so banks need to offer all their services online. Whether it’s applying for a credit card, making an international transfer or paying a bill, millennials want tools that support every banking task.

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[My bank] should be with me wherever and whenever. I shouldn’t have to call but instead be able to do everything I need digitally. It would be nice to be able to talk to a representative about my economy. Today it feels like you have to want to talk about loans in order to get an actual meeting with a banker.

Respondent

In contrast, millennials wouldn’t mind going to a bank so much if these brick-and-mortar spaces were more flexible and welcoming. A common sentiment from our respondents was that bank offices and staff today are stiff and intimidating while millennials are looking for more of a financial coach.

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“[I’d like the bank] to just be there (invisible but functional) but that I can go there to a more relaxed environment and to talk with a financial coach to help me with the vision and the use of money.

Respondent 9

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Best practice:

Ideas demand multi-disciplinary collaboration to be realized. Innovation Labs bridge the gaps between departments, partners, consultants, scientists and experts, and the end customers.

Based on a common understanding of the prerequisites, propositions turn into business cases and differentiating products and services.

Now what?

How to seize the opportunities At Veryday, we see this scenario as the beginning of banking geared toward the millennial generation.

Ethically conscious and relationship-oriented young people open up great opportunities for new services that will improve their loyalty and quality of life, including peer-to-peer lending, money pools, social savings and microloans. We believe in putting people at the center of the process, so by focusing on flexibility, trustworthiness, technology and understanding this generation’s relationship to money, banks can be sure to stay relevant in a changing society.

This is no easy task, especially considering that many banks are built around channels and delivering on features, not integrated services and end-to-end user experiences. Ancient legacy systems and endless regulations add to the burden. But changes in the banking system can be made, and should be made, or someone else will pick up where traditional banks leave off.

Three steps for future-proofing your offering

1 2 Delivering on future customer expectations differentiates offerings and drives category leadership.

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A one-day workshop to align thinking within your organization, create a position and identify the opportunities that have the biggest potential impact for your business.

We have created a playbook that draws on our long experience of design strategy and business development. It can empower your entire team - IT, HR, Business Development, Strategy, Research and Project Owners - to leverage concrete opportunities. During a three day immersive workshop, we train your team and together develop a customized playbook that fits your specific needs.

With your input, our designers create a pop-up Millennial Banking Lab that runs for three months. We build a life-sized model of a banking office and bring in millennials to evaluate and co-create solutions that fit them and their lifestyles. At the end of a rigorous, iterative process where all stakeholders are involved, we will have a clear view of the right direction to take for effective innovation.

Contact or Daniel SjĂśblom (+46 709 716 550 daniel.sjoblom@veryday.com) Stefan Moritz (+46 730 610 414 stefan.moritz@veryday.com) for more information.

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Your notes:

Veryday is one of the top-ranking design consultancies in the world. We have a strong commitment to people-driven innovation as a means to enhance quality of life. Based on deep people insights, our 70 design specialists create innovative solutions through products and services in the physical and digital world. We are a company with an impressive track record that has helped build remarkably successful businesses for our clients since 1969. Our headquarters are located in Stockholm, and we have offices in New York, Shanghai, Dubai, and London.

veryday AB / Box 14004, SE-167 14 Bromma, Sweden / visiting address: Missionsv채gen 24 / phone: +46 8 506 672 00 / Web: veryday.com