NEW ORLEANS -- What do millennials really want from their financial providers? Bankers with average customer ages in baby boomer territory puzzle over this question every day. At this week's PayThink conference, payment entrepreneurs whose products are reaching the “born digital” generation offered pointers. Here are ten.
1. Some consider the word "millennial" an insult, or at least unhelpful. "Millennial is a pejorative term used by Generations X and Y," said Mike Laven, CEO of CurrencyCloud, which provides technology for banks to make cross-border payments. "The term we've started using is 'digital native.' What you're trying to do is understand people who at six months old, were exposed to the digital world.”
Chris Britt, CEO of Chime, which offers a mobile-first bank account geared toward millennials, offered a different alternative term.
"We talk about digital natives, the reality is they're early adopters," he said. "It's not that this generation is behaving differently, it's that they're leading the way and starting to train people to be comfortable in understanding the security of mobile apps.”
2. Millennials (for lack of a better word for the 18-to-35 cohort) care every bit as much as you'd expect about faster payments. "I was talking to millennials about payments today and the point I heard about Venmo is that the pace of the payments is too slow," Laven said, referring to a popular money-sending app. "You've got your bank account and card linked to Venmo, you've got multiple layers that's just taking a long time. The trick is cutting out those layers so that it's streamlined." The focus group he talked to said they prefer Zelle, the person-to-person payments service run by the bank consortium formerly known as clearXchange, which the millennials perceived to be faster.
3. Venmo has won millennials' hearts and minds for the foreseeable future. "I use Venmo a lot, I'm forced to by my friends," said Jon Carder, CEO of Empyr, a startup with a card-linked offers platform. "I'm 38. But it's starting to work its way up, the way Facebook started in colleges and now my grandma is using it. And even though it's slower, that doesn't matter because it's being used by 80% to 90% of my friends, mostly in their thirties, and their friends in their twenties and it will continue to go on. I think they'll continue to see incredible growth.”
Britt agreed. "Almost everyone uses Venmo, literally," he said. "People want to split bills and I think Venmo will be using that as part of their pitch to merchants to accept Venmo. Imagine buying your tickets on Ticketmaster. Why should I pay with Venmo? Well, with Venmo, you can pay and with one click share it with all your friends. They're just getting started and they're going to continue to keep momentum. If you think they're worried about a consortium of banks trying to create a money movement service, I highly doubt that that's the case."
He sounded less impressed by the bank consortium's efforts than Laven's focus group. "If you've ever seen the execution or implementation of clearXchange, it's pretty clear that designing a consumer experience for younger people has not yet been perfected by large institutions," Britt said.
It would be hard for traditional institutions to close the gap with Venmo unless it seriously blundered, Britt said. "When you have a business with a network effect and a true vitality to it, it is incredibly difficult,” he said. “You could have all the same elements but you'll never catch up."
He does see some room for competition. "That game might be over but I don't think it's a winner-take-all market," he said. "You'll see a second, third, fourth, fifth player but they'll be significantly smaller."
Dennis Jones, CEO of Judo Payments, provider of a payments platform in Europe and the U.S., also sees room for alternatives. At a recent dinner, he said, he received money in four different ways--through PayPal, Venmo, Square Cash and plain old cash.
"Venmo's network effect is not necessarily going to be the only way of moving money," he said. "In the U.K., it's almost nonexistent. I think Venmo will continue to grow and do well, but it's going to see fragmentation as technology moves faster."
Square Cash and Facebook Messenger are already gaining some traction with millennials, Carder noted.
4. Millennials' commitment to the sharing economy calls for new types of payments. Airbnb, Uber and other ride services have tapped into this generation's interest in peer-to-peer commerce, Laven noted, and this affects payments. "When you move to a sharing economy, there's a whole different concept of what has to be paid," he said. "The mechanisms the banks use don't meet that requirement. I think that's the biggest transformation."
5. Millennials’ sense of security comes from the people around them. Surveys show that security is No. 1 barrier to people adopting any sort of mobile money, even among young people.
But Jones said that for millennials, "security internalizes into, 'what are the people around me doing?' If other people are doing it, it's ipso facto secure," he said.
6. Not only are millennials more willing to share information than any previous generation; they are even willing to have mobile apps figure out where they are at a given moment. Carder said that Empyr's 20-to-35-year-old customers give their geolocation in real time, in return for location-based offers like 10% off at a restaurant that's a block away. "They are worried about security, but they're also much more willing to trust," he said. He noted that even though Empyr is small, it still has to comply with Payment Card Industry and other security standards.
7. Millennials are not all layabouts. "The biggest myth is that there is this one prototype millennial who is a slacker and believes the world should be delivered to him," Britt said. "We've done a lot of research and talk to our members and found this population segment wants to be responsible. Ninety percent of them in a recent survey understand the importance of getting in a healthy savings habit."
8. Millennials don't like big banks. Chime recently conducted a survey of 1,200 millennials who gave their bank an average net promoter score of minus-6. "That's lower than United Airlines and other customer service-challenged organizations," Britt said. “It's a great opportunity for startups that are well-run and create products that are transparent."
Jones noted that startups don't necessarily own trust among this generation any more than banks do. "I highly doubt many people in the millennial generation outside San Francisco or the tech world really care whether or not they're working with a startup," he said. "What they do is engage in experiments, they hear about new things in their general engagement with the world, and social media."
9. They like a lot of feedback and interaction. "In the U.K. there are a lot of challenger banks, which right now are a glorified prepaid debit card," Jones pointed out. "The reason they're liked so much is because they designed the app in a way that interacts with that user frequently. Just that small response a tiny improvement, creates a magical moment."
10. They want to do things that are, as Steve Jobs would say, purpose-driven. Empyr provided customers with a platform for raising money for any school, church, charity or even a friend who needed help. When Carder hires people in their late 20s and early 30s, "one of the reasons they want to come work at Empyr is because we have this, we're not just about making money, we're also trying to make the world a better place," he said. "That goes a long way toward feeling like their job means something. If you want to get people to use your product, you could tap into that purpose-driven mindset and you will see some moving of the needle."
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