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.
Two thirds (64%) of 18-25 year olds in the UK now use a mobile wallet, according to research released by social money transfer app Moneymailme.
The research reveals that 48% of 18-25 year olds believe that physical money will be obsolete within 20 years, while more than a third (38%) say that we will no longer need it in 15 years’ time. Less than three in ten (28%) say that they don’t think cash will ever stop being used or produced.
The research, which surveyed 1,000 18-25 year olds across the UK, known as Gen Z, revealed that young people prefer alternative methods of payments to cash, even for small purchases. Eight in ten (79%) say that they make purchases under £20 at least once a day, but when asked how they feel when faced with a ‘cash only’ sign at a bar or a shop nearly two thirds (62%) say that they felt frustrated. One in seven (14%) said that they would be frustrated enough to leave and go elsewhere.
In terms of mobile wallet preference, PayPal seems to remain one of the most frequently used online payment services among 18-25-year old’s (52%), while newer entrants to the market like Apple Pay (18%) and Google Wallet (9%) are starting to gain more market share.
While 36% say that they currently don’t use a mobile wallet only 14% say that they have no interest in having one, suggesting there is room for considerable growth in this market for services that appeal to the younger generation.
Nearly half of respondents (49%) say that they pay back their friends up to £10 per month, but almost a quarter (22%) wouldn’t consider a bank transfer for under £10, which currently leaves them reliant on cash to share money unless they have access to a mobile wallet.
Moneymailme CEO Mihai Ivascu said: “This generation of young people has grown up with mobile technology and for many of them using cash seems like a very dated concept, especially with the range of alternatives available to them. In 2015 electronic payments overtook cash for the first time in the UK and as this generation gets older this trend is only going to continue until producing physical cash is no longer desirable.”
Moneymailme, which combines social interaction with the instant sending and receiving of e-money in over 130 countries, recently launched the fintech industry’s first app to offer video calls with cash transfer capabilities to make sending cash to a friend or family member a more personal experience.
(Source: Moneymailme)
