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Generational approaches towards finance technology

Age does not define digital savviness

Have you ever tried planning a holiday which includes three generations: you, your children and your parents? How difficult was it to plan that trip for people who are in different phases of their lives and who have, therefore, a different view on what an ideal vacation is? You probably discovered, the hard way, that there is no ‘one-size-fits-all’ vacation for a family. Well, these generational differences also apply to the way people manage their household budget and to the way they are willing to replace human interaction with their banking partner by online activities.

Spending too generously

People from different generations take a different stance when it comes to spending. Older generations – especially the ones that remember the post-war economy of the 1950s will typically not be big spenders, while the generations that grew up in the boom-decades of the 1970s and 1980’s are not only making more money (remember, that’s the generation where both partners started earning wages), but also spending it more liberally. That’s the kind of attitude towards money that their children are inheriting as well. Unfortunately, it is quite clear that the baby boomer generation has overspent, plundering the earth’s natural reserves and, in many cases, also eating up the inheritance of their children. So while the younger generation – at least in the upper middle class – have been taught to think money grows on trees, those trees may no longer bear fruit for future generations.

The economic conditions in which people made their career and earned their wages will certainly make a difference between generations. But there’s more to it than just the economic climate and people’s ages.

Age does not define digital savviness

Although market research studies reveal that we are all part of the information generation – a community of digital citizens living in a global network, always connected with the world’s information at our fingertips – not everyone is a digital native yet. In fact, the boundaries between different attitudes towards technology don’t run along the lines of the traditional generation segmentation like ‘Baby boomers’, ‘Generation X’, ‘Generation Y’ and the latest ‘Generation Z’ (that is slowly entering maturity and the workforce). You’ll find baby boomers that love digital technology just as much as their ‘screenager’ kids, and you’ll also encounter Generation Y that don’t give a toss about the latest apps or technology gadgets. What age someone is, does not define his or her digital savviness.

Let’s face it, not everyone is as welcoming to the digitization of processes that used to require a human interface. This applies to many vertical industries, but also to the sector of banking and insurance. Let alone that everyone embraces digital disruption. As Gartner researcher Alistair Newton explained during one of his presentations at the recent Gartner ITXpo Symposium in Barcelona: “for customers, digital disruption equals stress.” One of the digital disruptions Newton referred to is Denmark’s plan to ‘ban’ cash and become the first ‘cashless’ nation – as early as 2016. While research showed that one third of the Danish citizens prefer to use Danske Bank’s official app MobilePay to pay for services and transactions, that leaves another two thirds that may still prefer to let the coins roll. This regulatory disruption may well mean that a lot of Danes feel left behind by their financial partners.


Multimodal

For financial institutions in general and banks in particular, dealing with these differences in digital maturity between customers will also mean that not one strategy will suffice. Trying to build a one-size-fits-all solution will not work, just like trying to book the same holiday for three generations will not satisfy everyone. While some customers will love to see a new app to deal with their financial transactions every other month, others will prefer to perform their financial business through a less intuitive system on their PC – or even at the counter of the bank.

The same applies to financial advice and wealth management. Digital advisers and ‘bots’ will gain traction and may be very acceptable to a large proportion of a private bank’s customers. However, another audience will still prefer to have face-to-face meetings with a wealth management adviser – and will probably even be willing to pay for that extra service. Yet both audiences will still have some common requirements, for instance the ability to check on the current value of their investment portfolio at any time of the day, wherever they are and regardless of the device they are using.


Flexible infrastructure

For banks this means that a segmented strategy is the only way forward, unless a bank wants to serve only a niche in the market and focus only on one audience. Banks will need to develop a multimodal strategy and build the internal systems that support such a segmented strategy. This will require internal systems that disseminate information through different channels, with different levels of sophistication. Systems that support both the newest app platforms and ‘legacy’ platforms while, at the same time, providing a robustness that guarantees continuous availability. Systems that provide flexibility at the front end, while offering stability at the back end.

Compared to the complexity of getting this right, booking a multi-generation summer vacation may look like a walk in the park…