Mystical Millenials

“The Mystical Millennials are overly romanticized,” said Vic Pascucci, managing partner at VC firm Lightbank. Panelists at Morningstar’s New York FinTech Forum, agreed that FinTech services are overly focused on Millennials, with a tendency to focus on FinTech products over consumer experience.

Recent research bears them out.

“Turns out, millennials are not that unique,” reports
Bank Innovation, in an article on a new study from payments processor FIS. The report shows every generation wants mobile and online banking. Millennials, GenXers, and Boomers all score those services as their top banking preferences.

An excellent study released last month by AARP,
Financial Innovation Frontiers, paints a similar picture.

“Financial services has seen no shortage of breathless enthusiasm for the Millennial generation, with banks and startups clamoring to be the first to understand and serve the needs of young “digital natives” and “the mobile-first generation.” But what about the rest of Americans? Americans 50 and over account for an enormous portion of the traditional banking industry, to the tune of $116.8 billion in revenue in 2017.” The study shows how smart FinTech firms are targeting 50+ consumers, which “represent only 34% of the overall U.S. population but control more than half of the nation’s investable assets.”

Spanish banking giant BBVA also put that in relief by calling Boomers
“late digital adopters with money,” in a recent U.S. economic report that analyzes the generation’s income, technology, and banking habits.

Now for this week’s links:

Up for debate: Should Mac users get better rates on loans?

The growth and development of FinTech may be inevitable, but its ability to produce more transparent markets that create greater wealth for more people is not. Aaron Klein, a fellow in Economic Studies and policy director at the Brookings Center on Regulation and Markets, looks at this FinTech conundrum by asking the question, “When two people apply for a credit card (for example), should it be legal to offer them different interest rates based solely on the fact of whether they are using a Mac or PC?” The nuances may surprise you. Klein’s article provides an overview of anti-discrimination lending regulations since the 1960s and concludes that FinTech will require that regulators rethink how they define and implement anti-discrimination laws. “Having an open and honest conversation about race, lending and financial technology is not easy, but it is necessary if we are to harness the best that FinTech has to offer,” he writes.

Real or a red herring? What should banks think of the FinTech threat?

The FinTech Disruptors narrative is well known by now. Millennials hate banks, and FinTech products are unbundling financial services into bite-sized and more efficient services. Banks are toast. Or are they? “It’s a complex question to answer and one that deserves more data-driven analysis and less hyperbole,” suggests FICO’s Alex Johnson, writing about a new FICO study of U.S. consumers. In short:
+ Consumers don’t hate their banks as much as you hear.

+ FinTech is gaining ground in some areas.

+ Banks are trusted far more than others.

+ Debt management is a weak spot for banks.

New bank strategies require new operating models

Disruptions in banking are pushing banks to make difficult strategy decisions, Bain & Company suggests in a brief. The consultancy uses the disruption narrative to warn banks that take too long in modernizing legacy systems and operations models may be left high and dry. “One key choice with implications for the operating model involves where to compete on the value chain spectrum. Banks can focus on “manufacturing” (creating products) at one end of the spectrum or on “distribution” (managing channels and customer relationships) at the other end. Most banks will choose a hybrid of the two, based on their relative strength in individual products, customer segments, and internal capabilities.”

Digital person-to-person payments in the U.S.: The competitive landscape

The U.S. P2P payments market is showing double- and triple-digit increases, according to a new study by bank research firm Aite Group. “Providing ubiquity is the key to winning the U.S. digital P2P payments war,” writes analyst Talie Baker. Yet not everything is rosy in P2P payment land. Services like Venmo do not provide immediate availability, even when they seem to. Lack of immediate payments in the United States can hurt, as this cautionary tale shows:
Last week I decided to sell my 5k iMac and replace it with a laptop. I did the research, settled on a good price, and put it up on Craigslist. I requested cash, @Square Cash, or @Venmo as payment (2-3/32).