At ArCompany we’ve been working with clients in the mobile payment sector, and, since our CEO spent years in the banking industry, we’re acutely aware of how slow that industry has been to embrace social media and the changing needs of its customers. As GenY grows up, this massive generation is already impacting the future of banking. Since many GenXers embraces technology similarly to Millennials, in the US alone we’re looking at 130 million consumers in those 2 generations who are spending differently. The immediate embrace of Apple Pay by many of them should be a wake up call to any institution dragging its feet.
We decided to explore not only banking, but also the spending habits of GenY to get input directly from our Millennials. This week on the panel we had:
- Kiernan McGinnis, young Millennial, 3rd year student at Lehigh University, English Lit. Major
- Joe Cardillo, an older Millennial, Content and Analytics Specialist
- Samantha Estoesta, a young Millennial working in Public Interest Research
- Judy McCloskey, an older Millennial, actor, working as a Digital Marketing Director
- Justin Ta, a young Millennial studying Corporate Finance & Accounting at San Jose State
- Armand Domalewski, a middle Millennial with a background in Economics working in public speaking.
Watch the entire broadcast below, or read on for the recap:
Let’s start with some information from the Independent Community Bankers of America:
- 50% of Millennials think banks treat them like a number (57% of all Americans think like that)
- 74% of GenY says mobile banking is extremely important to them
- Millennials are the fastest growing customer segment for the entire banking industry
- GenY wants to learn about their finances more than any generation
- 54% of Millennials would rather use locally owned banks
Besides rent, what’s your single biggest expense?
Samantha, our incredibly organized young Millennial, is spending $12K a year on her Masters. When her husband starts his Masters in the fall that figure will double, and they have a car payment. Apart from that their money goes to transportation costs and food.
Kiernan, who is on a full academic scholarship to Lehigh University, names his single biggest expense per month is his internet connection.
Justin spends most of his money on technology, and held up his new iPhone6+. He also blogs about technology and gives reviews on his personal blog.
Joe Cardillo said that his spending habits have changed as he’s gotten older. He buys mostly organic and local food as often as he can. He doesn’t have a lot of expenses and tries to live very cheaply. Cell and internet bills are probably his second largest expenditure after housing.
Armand named student loans as his second biggest expense, and he’s trying to pay them down aggressively and ‘get under the mountain of student debt.’ He’s making a decent amount of money and knows that the economy may face another down turn, so he wants to get as much paid down as he can while he’s in a good situation.
How do you keep track of your expenses?
Not surprisingly Samantha and her husband have a budget for all of their expenses, which she tracks them by hand, and then enters them into a program to track. Kiernan is at the other end of the spectrum and behaves much like a lot of students, just keeping an eye on his account. Justin follows a similar pattern. He does make sure that he has a cushion before spending, and doesn’t overdraft his account. He has savings goals, but will dip into them periodically if he has to.
Joe uses mint.com, but knows exactly what’s in his account at any moment. He receives text notices when money goes into or out of his account from his Credit Union. Joe also has savings goals, so he puts a set amount of money away monthly.
Armand grew up fairly poor, so having money to live was an adjustment to him. Now, he has an app. online, and has his bank statements go straight to a spreadsheet. He has regular expenditures and savings goals, and whatever is left is there for him to use.
So, out of our entire panel only one person doesn’t have a current savings plan.
Give us your view of the banking industry as a whole:
Armand: They don’t really care about their customer; they make their money off of people who have a lot more than I do. They try to screw us over at every opportunity.
Joe: That, plus Big Banks use shitty credit practices on smaller consumers to make us pay for the risks they take in the market.
Justin: It will grow a lot; mobile payments will grow. The standard for America is going to change into EMV – tap to pay will be huge. People, especially the young, will spend more and borrow from each other more.
Kiernan: I think they’re horrible; I’m about to Occupy Wall Street. If I was paying off student loans I’d be scared. There should be more government regulation on student loan interest rates in particular.
Samatha: Capitalism was meant to be a straight competition – if you sold better apples, you’d beat the other apple dealers. In the US particularly, the banks decided that you could sell other things, like derivatives, that aren’t based on apples or anything concrete.
Judy: Horrified by the banking industry, she sees banks as a necessary evil.
Do you see Apple Pay and Mobile Payment Apps as better to spend?
Justin explained that mobile apps are still tied to the current banking system so they aren’t really an alternative as much as they are a more secure way to pay. Since Apple Pay uses your thumbprint, it’s much more secure for the consumer. Samantha likes the fact that the mobility really benefits small business, and pop up shops in particular.
I had to ask the panel what they thought about the big retailers who pulled out of Apple Pay within days of its launch.
Justin, our most knowledgeable panelist on mobile apps, thinks that the big retailers like CVS pulled out early out of uncertainty rather than some other agenda. The idea that iCloud was being hacked also may have motivated them. Joe prefers the idea of Apple Pay and Square because he doesn’t trust the banking industry to create apps that work.
Kiernan brought a bit of humor to the discussion saying that he’s rather just hand cash to his friend when he’ buying something from them than use an app.
How much cash do you have on you right now?
So much has been written about Millennials not having cash I had to ask, and the answers weren’t supprising:
Samantha: $7, which Kiernan pointed out was Canadian and therefore even less.
How do you physically make small purchases?
Samantha uses her gold Starbucks card, never going over her budget for coffee. Physically, she uses cash for smaller purchases, and so does Kiernan due to minimum credit card transaction fees.
Justin uses his Starbucks card or his debit card, as does Judy. Joe uses cash and debit.
Armand rarely pays in cash; when he was at a restaurant that didn’t take credit he was offended because he knew they were trying to avoid paying taxes.
How many times in the past month did you physically walk into or drive up to a bank?
Armand, Justin and Joe only go monthly when they have to pay rent. Judy goes twice a month to deposit her check, but, since she just got her direct deposit set up she won’t go at all. Samantha gets paid by check and has to physically go in, but other than that she doesn’t go.
Do you use crypto-currencies?
Kiernan and Armand both have Bitcoin, mostly for the novelty factor. Samantha bought Bit Coin as well, and pointed out that there is demand for a Bitcoin ATM in Vancouver. The panel also taught me about Doge Coin, which was made into a real currency after a Meme.
In general, our panel was amused by crypto-currencies, but not spending a lot of time considering them as a real way to earn, spend and save.
Do you have an investment plan?
Of course Samantha has an investment plan, and she invests in ethical mutual funds. She also makes sure that her savings accounts are invested in the type of companies that she respects. She learned to invest from her parents.
Kiernan, whose family was quite poor, has never learned to invest, and doesn’t really understand how the investment system works. Armand, whose family background is similar to Kiernan’s, took Economics in school to learn about how the economy works. He invests in a low cost stock index fund, believing that the economy will grow over time.
Justin is still in college, but plans on going into Investment Banking and does plan to have an in depth investment strategy.
Joe, like many Americans, has an investment that primarily consists of a 401K. He doesn’t expect to ever have an employer who contributes to his 401K in the future. He sees most investment as a form of gambling. Judy has a similar savings plan; coming from a poor background, she learned how to survive, but not become wealthy. The albatross of her student loans makes her think that it’s irresponsible to invest while she hasn’t paid her loans down.
How could banks make you feel like a customer and not a number?
Joe thought that less predatory behavior is necessary – giving an 18 year old a credit card was an example of that behavior. If banks taught customers how money and the economy works it would change his perspective. When I asked if that was a bank’s role to educate their customer, Joe believes it is. Justin sees them as a business, but thinks they should have to educate the consumer when they are offering credit. Samantha agreed that a bank should be forced to be more open with their consumers, and held them to the same standards that doctors are held it would change things dramatically.
Kiernan sees this as contradictory; if a bank makes money off of your poor spending habits, how would we trust them to teach us? If their business model is based on our bad habits, why would we turn to them for education?
- Not one of our panel said mobile payments when asked about how they spend.
- The physical size of banks should be shrinking in the future, since the face to face banking of old is evaporating.
- Our Millennials definitely don’t see banks as a partner, but more as a necessary evil. If banks did more to educate their consumers they could start to shift this mindset.
- There is a real need for investment instruction for GenY; they are receptive to it.
- Millennials are saving.
- Mobile payments may not have taken over as a payment method for Millennials, but it will become much more popular.
- The great recession did have a huge impact on this generation; Armand specifically chose Economics because he wanted to understand what was happening to the world around him. The entire panel, in general, is more tuned into the economy, and more suspect of financial institutions than preceding generations.
This post originally ran on ArCompany.co.