With abundant statistics that more and more young people are using mobile payments and that hardly any go without using social media, despite a disinterest in finance, there are still plenty of opportunities to invest in the future generations of banking. Finance Monthly here benefits from exclusive insight, authored by Kerim Derhalli, founder and CEO of invstr, into exactly why financial institutions and young people are ever more detached than ever, and how that can be changed.
Banking has an image problem.
Almost a decade on from the financial crash, the big institutions are finding that young people simply aren’t switching on to finance as a career or, for that matter, a passing interest.
The upheaval of financial institutions in the months and years since 2008 has meant that traditional talent pools have been dwindling, while hedge-funds, who tended to snap up the top bank-trained traders, have been left with next-to-nothing to pick from since the Dodd-Frank act came into place.
The industry still suffers from years of scandal and poor reputation which has caused young people to switch off.
Plus, notwithstanding the imminent and widespread deregulation being pushed forward by the newly-elected President Donald Trump, even a retracted Dodd-Frank would take years to have a positive effect on the talent pool.
Financial Times research into the changes in popularity of investment banking as a career option, among students at the top international business schools, shows that interest has plummeted – in some cases by more than 50%.
The banks represent the old way: untouchable institutions, unapproachable for those who aren’t in the right set.
As distrust in the markets has risen, popular interest has dwindled. It’s not just the professionals; where once it was the norm to invest in stocks, it has become a rarity among the person on the street.
In the UK, native individuals own just 12 per cent of shares in UK-listed and incorporated companies.
Mirroring the statistic across the pond, a report released by Gallup last year found that just 52 per cent of Americans now own stocks – that number drops to 38 per cent for those aged 18-34.
Yet, there are opportunities for upstart fintech disruptors to reenergise young people, and encourage a fresh enthusiasm for the markets and investing.
In consumer banking, digital-only start-ups such as Atom Bank are gaining traction – the UK-based challenger recently reported £100m equity investment – by providing a simple, mobile-based proposition which average people, particularly young ones, can identify with.
It may now seem obvious to raise social and mobile spheres as areas of opportunity, but both avenues remain largely untapped by the large banks.
The Office for National Statistics currently reports that the internet is used daily by 82% of Britain’s population, with 70% of adults accessing the web using a mobile or smartphone last year – up from 66% in 2015 and nearly double the 2011 estimate of 36%.
The same report also states that 63% of UK adults use social networks on a daily basis, with 91% of young adults (aged 16-24 years old) engaging in social networking in 2016.
The banks are missing a trick.
Despite massive spending and development power, they have been surprisingly lethargic when it comes to using technology to engage millennials, identify new talent pools and unearth the financiers of tomorrow.
Prompted by a need to identify new talent outside of traditional hiring pools of economics and finance graduates, it was as late as November 2016 when Deutsche Bank became the first major bank to use social media feeds to find promising candidates who may consider a career in finance.
This is where the innovative disruptors have stepped in and found their niche. We’ve seen through our work at invstr, the trading game app which is dedicated to engaging more people in the positive possibilities of savvy investing, that given the right tools, young adults will certainly show the enthusiasm in finance that the big institutions are trying to draw out.
Meeting those young people in the space that suits them – social and mobile – has been one of the key starting points. To date, the invstr app has been downloaded more than 200,000 times, with many of those being young people looking to discover more about finance without the fear of losing real-world money.
We’ve now taken that to the next level with the launch of the Student Investing Championship – a virtual trading tournament which directly engages students from business schools across the globe. The idea is simple: help students learn about the art of trading and investment in a competitive arena, developing the financiers of tomorrow.
invstr has also sought to bridge the gap between the finance employers and the extended talent pool of candidates, by introducing prizes such as access to internships at top companies in London and elsewhere, and connections with finance experts and training partners. The engaging, educational facet of the championship is a crucial theme for the industry to take note of.
The talent is certainly out there. We were impressed – yet not surprised – by the incredible trading talents of those taking part in the championship. For example, the top eight performers in the inaugural tournament in November turned over $13.5bn and made over 140,000 trading transactions in the four week competition period. The second iteration launched on February 6 and we’re excited to see bigger and better results.
Plus, having the possibility to engage business school students directly through seminars and presentations, without the burden of the reputation of the banking olde worlde, has provided invstr with an opportunity to excite young minds with the possibilities of the interwoven worlds of finance and technology.
It’s a beginning, but we’re just one fintech startup example that the big banks should learn from. At the moment, many appear to be running scared of the possibilities that new technology can offer; changing consumer trends could have as big a negative impact as they could have positive, and the public distrust in institutions as a whole (read Brexit and Trump), prompted by the social revolution, have meant that traditional banks have a lot of catching up to do in the reputation stakes.
There may be an image problem with finance at the moment, but with the help of the digital innovators, leading with direct engagement with young people through mobile and social, the industry’s reputation can be repaired and we can see a whole new generation of enthusiastic bankers, investors and financiers ensure its health into the future.