The expectations of the young professional Gen Y cohort must be embraced by the financial services sector, as this group of future ‘mass affluents’ are the customers to attract now, and retain as they travel through life.
KPMG’s latest and third Banking on the future report shows some patterns are developing regarding how these young, mobile and digitally savvy professionals are banking, and what they expect as customers.
KPMG surveyed over 1,400 young professionals between the ages of 18 and 30 across Australia, with common traits including university education, relatively well-paid jobs and digital aptitude – making them a strong indicator of a future ‘mass affluent’ demographic. They were not aligned to any one bank and so provided us with a broad range of experiences and preferences.
As highlighted in previous studies, we believe the attributes of this digital native group are profoundly different to their peers of previous generations. Therefore, the economic importance of ensuring products and services appeal to this group cannot be underestimated.
Although many of this group are approaching the historically typical age for home buying, it is important that providers understand the evolving nature of their priorities and ways of interaction. This group is actually delaying home buying – instead looking to build wealth. They are prepared to go to great lengths to manage their financial wellbeing. Banks should consider ways to support, understand and facilitate the short-term goals of this generation – with a view to creating the genuine trust that results in long-term loyalty.
Here are eight dominant forces shaping the way Gen Y professionals want to bank, and what they demand as customers.
‘Invisible payments’, as experienced with Uber, resonate well with this group and are a growing expectation for the Gen Y professional. They want the convenience of making a payment without having to take out their wallet and prefer do-it-all apps on their phone or watch.
Gen Y professionals are spending on average two hours per month managing their finances, with many acknowledging this is not enough. The noble savings account remains the primary investment tool for Gen Y professionals due to its perceived liquid nature. Wealth products relevant to their goals are not particularly well formed in many incumbent financial institutions and consequently, we’re seeing new fintech players step in and fill that space.
With the rise in social media and the ‘sharing’ culture, Gen Y professionals are spending more on luxury items, experiences and travel. They are delaying big commitments such as property ownership. Instead, they prefer to pay for access on an as-needed basis at a fraction of the cost, rather than buy services or items outright.
Gen Y professionals’ evolving perception of value has driven them to hold multiple products with multiple banks, picking the offers with the best features for their needs. The decider could be anything from interest rates or lower fees, to cash back or frequent flyer points. This group isn’t being disloyal for the sake of being disloyal. As the digital barriers to multi-banking are relatively low, people are simply choosing products that tick all the right boxes for them.
Digital banking experience has remained the most highly coveted banking attribute by Gen Y professionals. Online has held on to the number one position, with mobile banking en route to overtake it in the immediate short term.
Capabilities for when they are travelling or buying internationally are seen as particularly important for this group. There is an opportunity to support the ease of travel by tailoring product features, benefits and reward programs to maximise the experience of customers while they are both planning, and going on holidays or buying overseas.
Driven by their desire to be independent and innovative, many Gen Y professionals perceive entrepreneurship as the new way to get ahead. Over half of our focus group participants indicated that they consider themselves to be entrepreneurs, with many of them already owning or planning to start their own business.
Over half of the respondents would consider banking with a tech giant – if the offer was right. Privacy and security are a key consideration for the group, and means not all tech giants are seen as equal. Google and Apple would be more seriously considered, whilst Facebook is not seen as a preferable banking option.
These eight trends show there is no single route to capturing and retaining the custom of Gen Y professionals. However, it is clear that banks must urgently consider their high expectations, particularly around digital aptitude and wealth, and step up their level of delivery to attract them. Failing to act will ensure competitors, or up-and-coming fintech disruptors, move in and take the prize.