Digital financial services: have lockdowns shrunk the generation gap?

Usage of online financial services rocketed last year. But do our attitudes to them still run along generational lines? Delving into the detail, this blog finds consumers of all ages now have far more in common, and financial firms will be increasingly looking to outsource to colocation suppliers. Not least because it lends them the flexibility and scalability needed to handle the behavioural shifts of people coalescing around a digital next normal.

Millennials may shape the mould

Back in the day, people’s lives were more predictable. Each generation followed in its parents’ footsteps, often choosing the same providers and products. Technology has thrown all that in the air, its disruptive waves whipped up by ‘quakes like deregulation, the gig economy and COVID-19.

We don’t yet know how Generation Z will react to the pandemic’s economic fallout. However, there’s a clue in research that’s found while Millennials are more inclined to shop around, they’re building up cash reserves and managing money more carefully (as the heaviest users of budgeting apps of any generation[1]).

Mobile versus online: the new generation gap?

Before COVID-19, take-up of digital services was already rising in all age groups. In 2018, more than two-thirds of UK adults used online banking and 48% used mobile banking[2]. Superficially, each generation seems to conform to stereotype. In 2019, research[3] on the three most-used banking methods in the USA found:

Mobile was most popular among 18 to 34-year-olds (51%) and 35 to 44-year-olds (40%), with online banking ranked second (used by 28% and 35% respectively)
Online banking was most popular with 45 to 64-year-olds (49%) and people aged 65+ (56%), with mobile apps ranked second and third respectively (used by 22% and 11%)
Branches came third with all except the 65+ group, 21% of whom ranked them in second place.

These figures show inter-generational differences aren’t clear-cut. It’s truly striking none seem to be shying away from new technology although, in later life, mistrust plays a part. TSB[4] found fear of fraud to be a major barrier for over-55s with a smartphone, only 50% of whom use it for mobile banking due to security concerns.

Mass digital moves for over-55s

By June 2020, three months into the first UK lockdown, TSB[5] had received 25,000 registrations for online and mobile banking from the 55+ age group. Meanwhile the bank’s average number of registrations per day had trebled from just over 1,270 to up to 4,000. In 2021, industry watchers believe new behaviours adopted last year will stick. TSB, for instance, reports 25% of all British consumers intend to use online and mobile channels more than previously, mainly for convenience and 24/7 access.

Logic dictates that greater numbers of Baby Boomers and previous generations registered for digital services during the pandemic because fewer among them were onboard previously. This is borne out by McKinsey research[6], which found that during 2020 larger numbers of older consumers in the USA were starting to use fintech than younger people.

Personalisation trumps generalisation

The picture is equally blurry when it comes to younger cohorts. Pre-pandemic, for instance, a significant 28% of tech-savvy Millennials in the USA used a bank branch regularly, compared with 33% of Baby Boomers[7]. Amazingly, digital-native Gen Zers were found to visit branches at quadruple the frequency of people aged over 55[8]. (This was attributed to a need for financial advice combined with snack-food provision during consultations. Seriously!) It’s clearly a mistake to assume younger consumers don’t want to engage face to face with financial providers.

In its 2019 Global Financial Services Consumer Study[9], Accenture grouped respondents’ behaviour into four personae: pioneers, pragmatists, sceptics, and traditionalists. That model confirmed the key to attracting and keeping customers of all ages is to understand what they want and deliver it as brilliantly as possible. Personalisation trumps generalisation every time.

The same applies to the variety of channels used. Today, the focus is on a consistently excellent omnichannel experience. A smörgåsbord from which people can pick and choose. And just about any part of it modified to suit individual taste. Savvy financial providers imbue this channel-rich offering with a keen appreciation of salient differentiators for each age group. We know, for example, Gen Zers like bank branches to look more like cafes or social hubs. And both Millennials and Gen Zers exhibit distinct preferences within their digital-first orbit, such as the former being devoted to social networking while the latter prefer visual apps like YouTube.

Inter-generational sales opportunities

No generation functions in a vacuum. Indeed, contact between different age groups can be fertile ground for attracting new business. Millennials and Gen Zers are heavily influenced in financial matters by their Baby Boomer and Gen X parents. So, the latter form an obvious route to younger consumers who are predisposed to trust Big Tech and fintech[10] more than traditional firms.

Conversely, it’s easy to forget people can benefit from lifelong financial advice. In 2017, the Financial Conduct Authority[11] found 24% of adults had little confidence in managing their money and only 35% aged 45 to 54 had given much thought to retirement. This suggests educating customers is as vital as understanding them. It also presents opportunities for cross-selling: for instance, incentivising Gen Zers with rewards for helping relatives adopt digital services.

Colocation set to power the digital world

The huge online uptake during the pandemic has accelerated many financial providers’ digital transformation programmes. And, increasingly, they’re looking to outsource infrastructure to colocation suppliers like Telehouse. This gives them infinitely greater flexibility to handle shifts in customer behaviour.

Choosing Telehouse brings other benefits. We’re fully equipped to provide the cybersecurity financial firms require to meet regulatory requirements. We’re also extremely well connected as hosts to major Internet hubs, including the London Internet Exchange (LINX) and a wealth of other platforms. Financial providers can thus ensure their customers have fast and always-on access to digital services.

The trends we’ve described look set to continue. Baby Boomers and Gen Xers were the first to use technology widely in the workplace and at home. As they reach retirement, they’ll be the first truly tech-savvy pensioners.