Part 2 of a series on millennials and personal finance. You can read Part 1 here.
We’re currently conducting research with a group of twentysomethings – our Millennial Cohort – to find out why millennials aren’t engaging with their personal finances in the same way as previous generations.
They’d already told us that they felt underserved by current budgeting and day-to-day financial management tools, so we challenged them to create their own. We asked them to visualise their personal finances however they wanted, using a variety of pens, paper and physical tokens (oh, and glitter and Play Doh).
What we discovered should be of interest to banks. Our four key takeaways were as follows:
1) Millennials distrust financial services companies, and struggle to care about their personal finances
“I don’t trust investment companies or insurance or that kind of stuff and I don’t really care about those issues”
This is what one participant told us, and the same sentiment was expressed by others. Millennials’ distrust of financial services companies is likely to be one reason why they are less loyal customers – and more willing than older generations to switch to neo-banks or potential services by firms such as Google and Amazon.
2) The ‘one size fits all’ approach to personal financial management is inadequate
An inflexible approach to digital person finance services is also restricting banks from building loyal, engaged relationships with millennial customers. One participant commented:
“Usually with financial stuff it’s very restrictive. This was all completely under my control – the paper and everything was completely blank and I liked that.”
What they produced is below – and it’s certainly unlike any of the digital interfaces available from major banks today. Aesthetics aside, its focus on goal setting and future spending is in contrast to the historical transactions emphasised by most major banks’ personal finance tools.
The current statement- and spreadsheet-based personal financial management tools that banks offer are impersonal, one-size-fits-all approaches that provide plenty of raw data, but little in the way of interpretation or analysis. For a generation which are already disengaged with their finances, the need to do the heavy lifting in terms of translating data into actionable strategies is a major barrier.
3) Budgeting is hard, scary and emotionally difficult to deal with.
Whilst millennials want to be able to financially plan, these are still a source of stress for many in this generation. Participants commented that they are “scared that [they’ve] spent more than they ought to” and that in the future they’ll realize “[they] should have been more careful”.
Reflecting this, some participants used the project as an opportunity to simplify the process of keeping track of their expenditures. Below, a box of beads gives an at-a-glance view of how a participant’s money was spent, with each colour representing a different type of purchase.
There was a common consensus even among those who professed not to currently care about their finances that they were aware that understanding and managing them would be important for the future. But finding personal finance, in the words of one participant, “a complicated, tangled thing”, full engagement often felt out of reach.
4) There are no associated specific ‘real world’ goals with personal financial planning.
A struggle to make the personal data provided by their banks feel tangible or relevant to everyday life was a common thread among participants.
Several used the research project as an opportunity to start planning towards both long and short-term spending goals, such as trips abroad or reducing the amount they were spending on incidentals such as coffee.
One participant commented that bank data “is quite bland, because it’s just digits” while another added that the project’s visualisation challenge “made me more creative in thinking about my finances”. These insights are borne out in how participants approached the project, choosing to focus on representing specific goals rather than dealing with their financial data in the aggregate.
These four learnings indicate banks are missing the mark for millennials – and in world of open banking and booming fintechs, that’s bad news for those unwilling to change. Find out why banks should be worried about these findings.
If you’d like to understand how our research techniques can help your business understand its customers better, contact us at www.experience-lab.com/#contact.