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How tech savvy millennials are changing the payments landscape

Unlocking value

When accountancy giant KPMG recently announced that it was changing its graduate recruitment process to help it compete “for the best brains and talent leaving university”, it validated the idea that millennials, the generation born between 1980 and 2000, are a little different.

KPMG is not alone. A recent PwC report about millennials reshaping the workplace revealed what many of us know already. Young people ‘get’ technology and they are starting to influence businesses with new ideas and ways of doing things. Millennials represent the first generation that has grown-up, at least in its more formative years, with gadgets, computers and the internet, and that is having a significant impact.

One of the areas apparently ripe for millennial-driven change is payments. According to the Millennial Disruption Index (a survey of over 10,000 millennials by Viacom agency Scratch), the banking industry is at the highest risk of disruption right now. Millennials, it says, are ripping up the traditional rule book and not being subtle about it.

No more banks?

In five years, 68% of millennials believe that we will access money differently and 70% believe the way we pay for things will be totally different. Interestingly, 33% of respondents believe they won’t need a bank at all. It’s fighting talk. But the stats bear some of this out.

The Capgemini BNP Paribas World Payments Report 2016 reveals that global non-cash payment volumes have reached record levels over the last ten years and that immediate payments have huge potential to drive growth as an alternative to cash and cheques. Cards, it says have been the fastest growing payment instrument since 2010 and, although the adoption of technologies such as mobile payments in corporates have been slow, technology will drive change.

“More banks,” says the report, “have begun to expand their offerings beyond pure payment processing, and are recognising the need for Fintech partnerships in order to thrive in an increasingly digitised transaction banking environment. Complexity of the regulatory environment remains a serious obstacle, but RegTechs may help them achieve a holistic compliance vision.”

Shifting skillsets

Certainly the pace of technology adoption will vary across markets, but what is certain is that change will happen as the demands of the workforce and indeed customers change. Banks not only need to be aware of this, but they need to embrace it. The challenge, of course, is the demand for new skills. Fintech is a shift in thinking and skillsets. But it also opens doors to new services and capabilities. There is a value there that’s worth investing in.

After all, millennials believe that innovation will come from outside of the industry and are looking towards the likes of Apple, Google and Amazon for inspiration. Banks need to retake this ground, this idea of innovation or face losing business to disruption.

So there is an opportunity here to use technology to enhance existing services and to create new ones, perhaps inventing services that attract the next generation of banking customers. All is certainly not lost; after all it is the banks that are still fulfilling the new digital-driven payment methods. It’s all about perception – threat or opportunity? Why not ask a millennial and see what they think?