Feb 1, 2021

Financial Technology and millennials: How digital natives are disrupting the finance industry

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Financial Technology and millennials: How digital natives are disrupting the finance industry

Perhaps no one could understand technology better than millennials, given that they grew up witnessing the rapid evolution of the internet, smartphones, computers, and more. 

Data from Pew Research Center even showed that younger people, such as those ages 35 and below, in both advanced and emerging economies tend to be more digitally connected than older generations. In Japan, 96% of citizens ages 18-34 own a smartphone. India reported to have the least amount of millennial smartphone users among other countries surveyed at 37%, which is still more than the percentage of Gen X smartphone users in the country.

With this in mind, it’s no surprise that millennials are also largely involved in financial technology or fintech as well, what with e-wallets and other mobile fintech apps helping them complete transactions in their daily lives. With millennials making up nearly half of the world’s working population in the next 10 years as well, their generation’s spending power will continuously increase over time, making them highly influential consumers.

Shifting from manual to digital processes

Millennials have the power to revolutionize the finance industry with just their simple spending behaviors, and generally change the way finance is done in the next few years. Just in 2018, millennials are seen as the generation using both online and mobile channels for banking, prompting banks and finance companies to realign their solutions towards the youth.

Millennials also expressed that they’ll likely anticipate financial offerings from tech companies such as Google, Amazon or Apple than their nationwide bank. This shift is due to many reasons, some of which start at millennials being frustrated with many banking fees, difficulties in resolving problems with traditional banks, and standing and waiting in long lines. 

Financial institutions now take these factors into consideration when improving their products and services and developing fintech solutions.

The younger generation now also employ the automated and artificial intelligence-powered solutions, such as mobile apps, of fintech companies to simplify and fasttrack their goals for investments, savings, loans, credit, and more. About 34% of people ages 18-34 have at least one budgeting app on their phone.

The Asia Pacific region, in particular, is seen as a hotbed of fintech innovation. Studies show that financial technology adoption in the region surged to 63% in 2019, which is bigger than anticipated. There are big players Alipay and WeChat Pay (China), Paytm (India), and GCash and Paymaya (Philippines) that make it possible for ordinary people to send and receive payments with their smartphones.

There are also the likes of Bowtie Life and OneDegree in Hong Kong, both of which provide insurance services through digitized end-to-end processes. 

Financial Technology also enables both individuals and organizations to manage their loans and credit scores, both of which were previously hard to attain through traditional processes. Our company, Credolab, for instance, provides AI credit scoring and credit risk management solutions to help companies speed up credit score determination methods. We use alternative data sources such as smartphone metadata to assess the creditworthiness of loan applicants as well.

Financial Technology catalysts in the future

With millennials continuously seeking innovative ways to use their money, fintech solutions will remain instrumental today and in the future. They have already proven effective amidst the COVID-19 pandemic, where people are refrained from going to banks and transacting in cash to prevent the spread of the virus.

Of course, trailing behind millennials are the Gen Z, which are also considered digital natives. Some of the older Gen Zs are now entering their professional lives and consequently experiencing financial freedom. While they have yet to experience the depth of the finance industry, there’s no doubt that they will also be catalysts of change in the next few years.

The shift of the finance industry from analog to digital is becoming more and more apparent each day. With advanced solutions such as artificial intelligence, machine learning, internet of things, data analytics, and even blockchain―as well as changes in the spending and overall lifestyle behavior of the world’s working population―financial technology will certainly continue to progress and eventually further connect the unbanked to the rest of the world.