THE FUTURE OF MONEY: PANNING OFF PENSIONS AND BOOTING OUT BANKS
Students worry about money regularly but aren’t getting the help they need because they don’t have the most positive view of banks. They love fintech but are risk averse so aren’t ready to bet their hard earned money on it just yet. In the meantime they want to take control of their financial futures and are using smart tech to help them invest and save.
There’s no doubt that young people are the biggest supporters of fintech. Challenger brands have been able to break into this traditionally slow-moving and inflexible sector with seamless digital experience and a more vibrant proposition. Although students are definitely embracing fintech as the future of money, it’s an area that has traditionally not been very high interest for them, so the question is why?
One reason is trust. Older generations worry about the lack of bricks and mortar attached to the new banks. But only 3/10 of students said they were concerned about the security of their money with mobile banking, whereas 8/10 said they trusted mobile banking technologies to keep their money safe.
There are areas where technology can’t replace the human touch though. For example, customer service is something time-poor students expect but 64% of them want it to be through a person, not an intelligent chatbot. And although they love tech and AI, they don’t trust it entirely to look after their finances. Only 20% agreed with the statement ‘I trust AI more than real people to look after my finances’ whereas 43% disagreed.
There is a difference in their perception of fintech brands and tech brands. Search and social media fall into the latter. They used to champion these but due to data scandals, fake news and questions over ethics, they are feeling less trusting of them. At the moment, fintech hasn't been involved in scandals that have eroded students' trust so they are occupying a more privileged position.
“It isn’t whether I trust the new technology but whether I trust the brand with my finances and personal data.”
Let’s face it, banks have a reputation problem - especially with young, idealistic students - whereas brand like Monzo, Venmo, Revolut etc. have gained trust. They are so ingrained into young people’s cultural language now that there are memes about them, a Twitter account dedicated only to messages of love for Monzo, and the NYTimes has even weighed in with a etiquette piece on Venmo! It seems that students love the smart tech, the slick design and the promise of ‘a better way of doing things’ that they are missing from banks.
“One reason I’ll switch to Monzo very soon is because I’ve been hearing very good reviews regarding their schemes to help students save money.”
The end of 2018 saw one of their heros, Monzo (as yet an unquoted company), raise £20 million in three hours - most of it from their young users through crowdfunding. Monzo’s smart features (splitting bills, spending breakdowns, budgeting tools etc.) seem to have struck a chord and at the heart of it all is a feeling of more financial control - no matter how small the balance in the account. 7/10 students want their bank to use technology to help them save through features such as goal reminders, piggy banking by rounding up transactions etc. When it comes to keeping control of their finances, students are increasingly turning to smart banking tools.
“I have recently been using Chip, which monitors my spending habits… and withdraws a regular payment which I am unlikely to notice. I find this less intrusive as it allows me complete access to my spending and savings.”
Young people’s wages have still not recovered from the 2008 crash but cost of living, higher education and pretty much everything else has gone up. So it’s not surprising that students coming into the world of work are very aware of their financial insecurity. 63% admitted that they worry about money regularly (women more than men) but only 19% of those have sought financial advice. Is this a space where brands can help? Young people feel judged by banks when they run into problems with their money. If as a brand you can help alleviate worries and keep up a conversation that gives information and help in a non-preachy and fun way, surely you will be the go-to for any financial concerns.
“The most important thing is that you don’t have to have interaction with another person… because often people get intimidated when they have to talk to a bank official.”
Students may not have faced the financial crisis of 2008 themselves but they saw what their parents had to go through. They’ve also seen the impact that pension scandals and low savings interest rates have had on their families. More than a decade later they still aren’t seeing enough change to make them feel comfortable or secure yet. Traditional banks have lost their hold on the youth just as the youth have lost their faith in traditional banking institutions. A third of students think that traditional banks have let us down and 4/10 just don’t know what to think. The oldest of our students had the most negative view, over indexing significantly.
So they aren’t happy with traditional banks and they aren’t ready to bet it all on new fintech brands. Where does this leave them?
Most students will start their working lives with a combination of student loan, overdraft and credit card debt that will need to be carefully managed. Thankfully there’s more transparency and help out there when it comes to debt management. Because even though 7/10 feel totally in control of their finances, the same amount acknowledge that it is really easy to get sucked into debt. And as we have seen, students are vastly underestimating their debt (see Budget to Blowout).
“It’s kinda hard to predict where you’re going to be when you retire, like how much is your day to day spending going to be, but I like playing things safe and having financial security so I believe you should build up a nest egg over the years.”
Many are looking for solutions themselves and trying to tackle this current and future financial pressure in extreme ways, like the growing US trend of living FIRE (financially independent/retire early) lives. In order to avoid debt, live within their means and as a result not have to be stuck in an office for the rest of their lives, students want to be able to take control of their savings and understand how to make the best of their investments. We found 40% of our students would rather figure out how to save for their own retirement than trust a pension plan.
An area we explored was that of the role of cryptocurrency in their worlds. Surprisingly, only 10% of students have or have had cryptocurrencies and most (44%) are unsure whether it is the future of money. But they’re curious and they don’t feel like they understand enough about alternative or emerging currencies. They’re keen for knowledge from a trusted source. Nearly 8/10 think they should be taught more about cryptocurrencies.
This is an area that the right brand could create a meaningful conversation around, opening channels for information and education. These findings show that just because students love and use your product, it doesn’t mean they automatically trust you. They are more prudent than we think. Being transparent and willing to help them navigate the confusing world of money means that even with all the new bank options out there, your brand could be the one they decide to trust with their own finances.
“When it comes to financial planning, I like to take a 10 year view.”
When it comes to investment, interest from a Natwest savings account isn’t going to allow them to retire at 40. And it’s nowhere near as fun as playing the stock market from their phones on Nutmeg or managing big cryptocurrency wins on Cobinhood and Jaxx! 8/10 students wish they understood more about investing and stock markets, and this figure rises significantly for those in London or studying law.
There is an opportunity here for those brands brave enough to pioneer it. Balancing quality of life with quality of work is a constant battle for students entering the job market. Perhaps soon we’ll see the rise of FIRE movements here too.
To find out more, get your hands on the research or to book in a workshop, email us at hello@seedmarketingagency.com.