While Barbarians might be too strong a word to describe Fintech startups, the truth is that Fintech entrepreneurs and their innovative solutions are involved in a savage battle to disrupt the way traditional banking works. Many of them have already proven hugely successful and have garnered the support of their most loyal clientele, the so-called millennials.
For those of you familiar with the analogy behind the title of this article, you might be wondering why I have compared RJR Nabisco’s leveraged buyout 27 years ago, to Fintech startups nowadays. The reason for the comparison is simple: FOMO or fear of missing out. This particular emotion can cause rapid price changes and was responsible for the price of RJR spiralling during a bidding war 27 years ago. This is the same growing concern that many banks are experiencing due to the pressure being exerted by Fintech entrants and is the reason why Fintech startup funding has grown significantly over the last few years with banks making major investments in some Fintech startups.
When Goldman Sachs estimates $4.7 trillion in Financial Services revenue is at risk, it seems reasonable to be concerned by Fintech startups.
So what is behind this potentially huge revenue shift? A good portion of it has to do with consumers’ behavioral changes over the years, particularly the previously mentioned millennial generation. Millennials have a completely different perception of what a Financial Services firm should offer them and how it should be offered, but many banks seem singularly incapable of wooing them.
Here are 5 interesting facts that show the gap between banks and Millennials:
- On average, millennials spend 35 hours a week with digital channels. That’s 50% more than the average of the other combined demographics. However most banks still have poor mobile UX and way too many non-profitable branch offices
- 52% of millennials have already used mobile as a way of payment, and it is only now that some banks are launching their Wallets
- 73% of Millennials would be more excited about a new offering in financial services from Apple or Google than from their own nationwide bank.
- Millennials are 10x more likely to use a P2P lending platform than any other demographic
- 43% of them believe their bank does not communicate with them through their preferred channel/device
These are just some brief thoughts from the “Financial Revolution, Digital Banking & Fintech” event organized by the European Commission and Foro de Innovación. What do you think? Is it feasible to follow a two-fold strategy, digital (for millennials) and offline banking (for other generations) or is it better to specialize only on one?
Sobre el autor
Paula Blázquez Cuenta con varios años de experiencia en Capital Riesgo, habiendo trabajado anteriormente como Analista para Hercules Technology Growth Capital en Palo Alto y como Asociada en Axon Partners Group, fondo de Capital Riesgo Español. Actualmente es la Startup Competition & Acceleration Manager en Finnovista.