The upcoming generation of digital natives born around the millennium will soon start to open their first bank accounts, if they haven’t done so already, and before you know it they will be entering the workplace and demanding that their technology needs are met. Adam Ripley, chairman of the Certeco consultancy, thinks that it is time to start thinking about the financial services firms of the future are going to accommodate them.
Almost as soon as they can walk, children these days are using iPads, iPhones and all sorts of mobile devices. In the UK, almost half of three and four year olds are now technologically savvy, according to research conducted by Ofcom, the UK communications watchdog. The study found that one in ten pre-schoolers are using an iPad to visit websites, play games and watch TV. This means that a burgeoning number of children are au fait with the Internet and the hardware they need to access it, well before they even start school.
The fact that this generation – 'millennials' as Forrester, the technology analyst group, terms them – are growing up with this innate, inherent technological knowledge means that technology is a 'given' in their world, in a way in which it isn’t for Baby Boomers or Generation X. For those, older generations the use of technology has been a behaviour adopted much later in life.
Forrester has researched the issue of the 'digital native' assessing how this millennial generation, complete with its grasp of new technologies and skills in social media will affect the businesses of the future in different ways, including how they will shop, bank and want to work.
When considering this flow of technology-minded individuals into the work force you might think about the future of IT departments – whether they will exist in their current form in years going forward is up for debate. The fact that so many more people will have this inherent technological knowledge could mean that technology is much more devolved within the business and not a standalone, specialist function anymore.
Financial Services Impacts
So when considering the financial services industry, how will this digital native generation change the landscape?
As digital natives reach maturity, they’ll certainly still need banks and insurance companies but their demands and requirements will be very different from older customers. The banking crisis has caused many people – particularly of the Baby Boomer and Generation X age groups – to lose confidence in their bank and question their loyalty. Many are clamouring for a return to old style banking values and demanding a more personal service from their banks. Captain Mainwaring style relationships with bank managers are not necessarily for digital natives, who by their nature will want to communicate with their bank in a different way. So how do financial services companies reconcile this dichotomy in customer needs and keep everyone happy?
This is a big issue for banks that they need to address over the next few years. And there are lots of challenges when they consider the question. Retail banks need to plough money into innovation of their services, but there are obstacles when it comes to merging new technologies with the complex legacy systems, which underpin the operational running of many financial companies. They need to reinforce their presence on the High Street, if they are to satisfy the call to action of their older customers. So how do they balance all this investment against increasing requirements to shore up their capital reserves and improve liquidity ratios, under the Basel III regime? It’s a conundrum facing all banks.
Changing customer patterns are definitely impacting banks’ business drivers. And most are responding by ploughing money into mobile. Look at Barclay’s Ping It mobile peer-to-peer (P2P) payment app, or HSBC’s Fast Balance. Banks are realising that the customers of today – and most definitely the customers of tomorrow – are demanding this faultless mobile integration of banking services. For digital natives, next generation banking won’t be a nice to have – it will be a must.
So from an employment point of view, how can banks harness digital natives to provide future insight and keep them at the front of the curve when it comes to informing their business drivers? All financial services companies – and the consultancies that work with them – need people who can predict what the 'tomorrow customer' is going to want and help banks to respond. Employing digital natives needs to be at the heart of financial services companies’ strategies and those of their consultants. Not working in isolation, of course, but this innate, fresh knowledge of the younger generation, combined with the experience of older employees, is a failsafe combination and one that few banks can choose to ignore.
The risk is – in this current economic climate and with graduate employment at an all-time high (recent figures gauged UK youth unemployment at 20%) – that banks will drag their feet over employing the customers of tomorrow and putting digital natives at the heart of the business. If they do procrastinate and delay, they will inhibit their ability to crystal ball gaze and predict what these digital natives - these extremely technologically proficient toddlers, as they are now – will demand as banking and insurance customers of tomorrow. As a result, they could be jeopardising their future success.