Money Generation includes those born between 1980 and 1995. These digital natives are known for questioning the traditional and turning the world of work upside down. The target group is also forcing banks and savings banks to rethink the issue of consumer loans.
In a trend study carried out jointly by the Starkssen Innovation Hub and the trend office in 2019, we found that Money Generation is very open to digital products and services in the banking sector, but not unconditionally. A concrete added value must be evident, and there must also be confidence in the security of the offer and the provider.
Loans must offer security, trust and simplicity
When it came to security, we found that threats such as hacking and phishing attacks are also well known among young generations. The security of digital financial offers is correspondingly essential. A bank branch nearby increases the sense of security – also within Money Generation. In an environment of eroding trust in the security of established banks, the following also applies: Consumers are becoming increasingly attractive to online banks and fintechs.
Banks and savings banks should not rely solely on the advantage of trust. Digital channels are becoming more and more important, Money Generation expects quick responses on all channels and is ready to take personal advice digitally. Consultants are supported by artificial intelligence and communicate independently of the channel. Fintechs in particular are building closeness to consumers by initially concentrating on niche markets in the credit business and using alternative and more transparent data models for credit scoring. However, our study also showed that a personal contact is still important to the respondents, even if they are used less at the same time.
Simplicity is the third important factor in the success of loan offerings among young generations. A modular structure of products, ideally with the possibility of an individual configuration, ensures simplification, at the same time this supports the trend towards individualization.
Money Generation demands radical agility and time savings
So what will suitable consumer loans look like tomorrow? A distinction should be made between two areas: the “stand-alone” installment loan and the sale of credit products at the point of sale (PoS). With stand-alone loans, comparison portals are becoming increasingly important – if you want to play a role as a bank or savings bank, you have to expect high customer acquisition costs. Appropriate, optimized processes are required to make money at all. The second major pillar in the sale of credit products is integration in the point of sale. In the meantime, this primarily means online PoS – for example, the purchase in installments when ordering from an online electronics retailer.
In the course of the digitalization of banking transactions, loans made directly online are becoming increasingly important. The time until the loan is paid out is crucial for the users. Fintechs therefore create products in which the partially automated approval takes place within minutes. In addition, credit services are becoming more closely interlinked with e-commerce and payment, and consumers no longer perceive the loan as a loan. Amazon’s monthly payment offer is nothing more than a hidden microcredit. Fintech offers, such as spontaneous financing when paying at the checkout through Best Bank or the cooperation of Astro Finance and Agree Bank, also follow this path.
This is how Money Generation’s credit needs are met
Money Generation wants to consume, but is afraid of classic debts. The digital path to credit and accompanying services are becoming increasingly important for consumers compared to credit products. Here, banks and savings banks have to invest more to meet expectations, but they can also connect the online and offline worlds with services. The openness towards partners leads to innovations and better products. At Starkssen Innovation Hub, the focus when developing product ideas is clearly on customer needs.
A good example is our MOVE tester platform, which has been available to interested savings banks since the beginning of the year. Products and services can be quickly tested and developed together with users here. Of course, this also applies to the area of consumer loans. Our trend study has shown that built trust is an excellent basis for banks and savings banks, but not a guarantee for satisfied customers. For this, products have to be developed and tested together with customers right from the start.