How Can FinTechs Engage Millennials & Generation Z?
November 11, 2020
It is estimated that together, Millennials & Generation Z make up 74% of the global workforce.
For the financial services industry, this makes it paramount to engage them, but much of what defines these generations also determines the way in which businesses have to behave in order to interact with them.
Millennials & Generation Z
It is widely accepted that Millennials are defined as those born between the early 1980s and the mid-1990s to early 2000s, they comprise roughly 23% of the global population (1.8 billion). Generation Z are made up of those born between the mid-to-late 1990s and the early 2010s, and they comprise roughly 32% of the global population (2.47 billion).
From the advent of the home computer and internet to mobile phones, the lives of Millennials so far have run parallel to a timeline of rapid technological development. Gen Z, on the other hand, have never known life without a smartphone or the internet. They didn’t just grow up with technology, they were born into it. Both of these generations are taking advantage of advanced technology, with the rise of artificial intelligence and other new ways of working, communicating and navigating our globe.
Similarly, the financial landscape has been carved out alongside these movements in technology – both Millennials & Gen Z have been hard-hit by the one-two punch of the 2008 and 2020 financial crises; that experience has radically shaped their approach to finances and made both generations more spending conscious than their parents or grandparents.
However, the ways of accessing financial services often exclude these younger generations. Despite technological advances, much of traditional banks’ customer onboarding process continues to be carried out manually and heavily relies on traditional data when performing identity verification checks. High street banks are still utilising multiple forms, paper files, manual compliance checks and in-person identification checks, a process which has long been considered archaic, time-consuming and a poor user experience.
Relying on traditional data to verify identity doesn’t just alienate the modern digital consumer, it can also lead to huge demographics being unable to access the services that they want. Currently, there are two billion people worldwide who cannot access financial services because their data is not held on traditional sources.
As we explored recently in our blog post on Financial Inclusion, 21% of young adults aged 20-34 in the UK live with their parents. That is 2.7 million people who are unlikely to be named on utility bills, have a credit card, pay rent or have a mortgage; 2.7 million people who may not have readily accessible bills or statements that they’re named on. Students are another key population that struggle with traditional identity verification processes; 40% of students say that they would find it inconvenient to provide a paper copy of a bank statement, whilst 28% stated that it would be impossible for them to provide a paper copy of a recent utility bill.
How can FinTechs engage these generations?
Technology-based financial services have been leading the charge to ‘bank the unbanked’, making daily financial operations accessible and user friendly for almost everyone – especially people who had no access to banks before. Implementing a robust digital identity verification process can positively impact the economic opportunities and welfare of those excluded from gaining financial services.
Removing the hurdles created by traditional banking and traditional methods of onboarding can help open doors to financial inclusion for these ‘thin-filed’ customers. Where these customers usually have some form of identification, they often lack the documentation and credit records required by traditional financial institutions to assess creditworthiness and perform consumer due diligence.
This is where utilising a wider range of data sources can be used to draw insights on a consumer’s financial profile. Alternative data is the antithesis of traditional data in that it includes anything from mobile phone usage, monthly payments and social media activity, to biometric identities derived from iris scans, fingerprints and hand geometry.
By leveraging alternative data sources, lenders can construct a richer, contextual understanding of individual consumers, enabling both more accurate risk assessment and personalised customer experiences. Combined with emerging technologies like artificial intelligence and machine learning, businesses can automate manual tasks in the onboarding process, significantly reducing time and cost, and financially enabling previously excluded customers.
Millennials & Gen Z are more open to technology playing a part in their financial relations, but they expect digital experiences to be straightforward, easy to use, and often mobile-first. A report by Osterman Research noted that 56.3% of Millennials would abandon an application for a financial services product if they could not complete it on their mobile and would join a more mobile-friendly competitor.
FinTech companies are capitalising on this willingness to incorporate technology into their banking by creating convenient, intuitive and personalised mobile apps. In our recent podcast episode with Dimitris Litsikakis, Global Head of FinTech at deVere Group, we discussed the wider implementation of ‘super-app’ wallets, which will house customers’ entire financial footprint.
Onboarding using mobile devices opens doors to more technology which can be used to perform biometric and liveness checks, improving the accuracy of verification. But businesses who do not take the customer journey into account when using mobile and ask customers to manually key in numerous and complicated fields which require extensive amounts of information, are likely to suffer from dropouts.
1 in 3 adults under the age of 37 in the UK, say their primary banking relationship is with one of the host of challenger banks now available and according to finder, almost a quarter (23%) of all British adults have opened an account with a digital-only bank. They also found that two-thirds of banking customers say they plan to convert fully to a digital bank in the future.
So, it would appear that there is an appetite among Millennials & Gen Z for alternatives to traditional financial services models. As both generations are digital natives, it makes sense that they are more open and willing to accept digital and technology-based finances. But FinTechs still have some way to go to continue engaging these generations.
How we can help
Here at Acuant, we utilise digital data gathered from a range of sources such as digital footprint verification, document authentication, facial recognition matching, liveness verification, live utility data address verification and CRA identity checks. Working together, these sources can act as a catalyst for creating digital identities and improving financial inclusion. The added benefits for an organisation when using these data sources is that they provide additional insights into a consumer behaviour, likes, dislikes and background.
Traditional checks, such as using credit history mean that many good customers are turned away. A vast number of younger people do not have CRA data so if this source is used, they are rejected. Equally in countries with thin files, where traditional data does not exist or is scarce, our product offering can be used to qualify and verify new customers.
We’ve a comprehensive family of KYC and AML solutions all working together and delivered via a single API integration. Utilising all forms of data, this integrated approach helps increase pass rates in countries all over the world, which in turn increases revenue and customer acquisition with real-time onboarding, creating a better customer experience.
Using this wide range of data, we provide a unique, real-time ID scoring system which intelligently verifies identity and can be sure your customers are who they say they are. Our global ID, KYC & AML platform, Sodium, is designed to help save you time and money, streamline your customer journey, automate your onboarding process, reduce fraud and achieve regulatory compliance. One simple integration; a flexible 360° solution which is scalable and secure.
Utilise a single element or multiple processes – it’s entirely up to you. Learn more about how we can help to automate and simplify your verification processes to help you to learn more about your customers.
Book a demo today and see for yourself how powerful our suite of solutions are.