The banking industry is on the brink of major change. Like so many other sectors, the financial industry is feeling the pressure of the massively influential Millennial generation. Millennials, with their distrust of the financial sector and increasing desire for digital experiences, are creating substantial demand for banking and finance applications. Traditional banks are already facing changes, and the industry as a whole could soon see digitalization giving it an overhaul.
The new trends in banking
Millennials show less affinity for cash. They like easily managed, mobile transactions. In fact, they don’t even really go to physical banks anymore.In a recent survey, 38% of Millennials stated they do not go to banks at all, and 26% reported going only one time a month. With such a large segment of the population rejecting the traditional banking visits, many branches are being forced to close down. JP Morgan Chase closed 138 branches in the last year alone.
The trend isn’t limited to American banks. Banco Santander closed 29 branches as well. Countries around the world are showing increasing desire for a mobile banking experience. The Netherlands has a large percentage of mobile banking users. In China, people use apps like WeChat to manage their purchases.
Banks are quickly taking notice. They realize if they do not get ahead of the trend, they will become obsolete. 58% of banks say they plan to increase their IT spending in an attempt to digitize their brands. They are developing their own mobile apps, which offer a range of services, from transferring payments and depositing checks, to developing a monthly budget for you.
Who is the competition?
Banks wouldn’t have to much to worry about if all that was changing in the industry was people moving away from traditional buildings and onto the bank’s very own mobile app. But this isn’t the case. Apps are popping up to fill many of the roles banks have usually carried. There are apps for lending. Foursquare is an app for making payments. They are using apps to manage their investments. Everything people used to make a trip to the bank for is being outsourced into apps.
After the financial crisis, Millennials have lost confidence in big banks and have more trust in startups. In Europe alone, online lending increased by over 200%.
Banking in the future
The bank of the future may not be a physical building. The bank of the future will be in the palm of your hand, conveniently in your smartphone. With apps to manage every aspect of your financial life, the need for a bank will decline. For this traditional banks are pouring their resources into developing the best apps they can. Because that is where Millennials want everything–on a simple app at their fingertips.
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