Millennials are an important force in the business world. They make up most working adults, and their money will help drive change in every field, from retail to professional services. This generation is already reshaping the finance industry and will likely continue to be a significant factor as the field becomes more tech-savvy. Understanding how millennials borrow and manage their money can help businesses offer better finance solutions.
Generation Y, more commonly called millennials, is roughly defined as people born between 1981 and 1996. Although there is a tendency in media and general conversation to treat millennials as just kids, they are as old as 40, and the youngest millennials are 24, as of today. So, this is a group entirely made up of working-age adults.
As baby boomers and Generation X retire, millennials are poised to become the most important borrowers. According to Morgan Stanley, millennials are now the largest driver of new-loan demand. Furthermore, loans to millennials are expected to continue to grow at a rate of 4%. By 2030, they will become the largest group of borrowers overall. However, due to growing up in the age of the internet, they have different wants, needs, and preferences than previous generations:
- Millennials manage their lives using technology. Notably, they send and receive payments through apps, use phones to buy goods and even take out loans.
- Similarly, millennials are accustomed to shopping for and making major purchases such as homes and vehicles using apps.
- When making group purchases such as restaurant bills, they use different mobile apps to quickly exchange money at the point of sale.
- Equifax found that millennials are more likely to use credit than other generations. They are also more likely to switch between lenders based on new data. Millennials like to shop around rather than build relationships with single lenders. Plus, they look for solutions that are streamlined and convenient.
- Millennials are more likely to choose credit unions, building societies, and other small institutions. They value customer experience and convenience over brand recognition.
In short, millennials want an experience from banks and financial institutions similar to the overall digital experience: fast-paced, user-friendly, and data-powered. Whether they are opening a new credit card or a business loan, millennials would rather have fast access at their fingertips than make a trip to the bank.
Millennials are also the first full generation to have FICO scores (introduced in 1989) for their adult lives. In a sense, this standardized and technology-powered system for understanding creditworthiness reflects the millennial approach to finance.
New Generation of Customers Call for New Finance Solutions
Unsurprisingly, businesses in the finance field need to adapt to millennials’ needs if they want to thrive in the modern lending market. Fortunately, Generation Z, born between 1996 and 2012, is likely to represent a continuation of the tech-savvy, mobile-optimized millennials trend rather than reshaping the industry.
This need doesn’t just apply to banks. Other lenders and businesses need to be ready for the continuing importance of millennials, and Gen Z. The following are some examples:
- Financial technology and big technology businesses are investing in digital payments. Banks, including local institutions and credit unions, will need to do the same to remain competitive.
- Online and mobile platforms are the way of the future. Any organization offering finance solutions need to have a first-rate mobile experience. This spans from checking accounts to working capital for small businesses to point-of-sale consumer financing.
- All organizations helping millennials with their money should emphasize convenience and streamlined digital services. This needs to be a strategic initiative, not just patchwork responses. Millennials value loan providers that offer comfort.
- Millennials care about finding trustworthy brands and are adept at sharing and finding complaints. Businesses need to invest in brand reputation and positive customer experiences to earn and retain millennial customers.
These recommendations and adopting a more tech-friendly approach to strategy can help spur growth for businesses both inside and outside the finance industry. Notably, many of these strategies can also make businesses more flexible in responding to other significant trends, such as the impact of COVID-19.
Get Your Business Ready for Millennial Customers
Whether you are in the finance industry or any other field, you need to be responsive to millennials’ wants, needs, and preferences. They make up a large group of customers and decision-makers in every consumer and business market.
Adapting to this reshaping of the business world may require additional funding. LQD Business Finance offers business loans, working capital, and financing solutions powered by a tech-enabled platform and end-to-end data integration that allow for a more efficient, transparent, and useful borrowing experience. Learn more about how LQD Business Finance is innovating its technology to meet the upcoming working generation’s interests.