It is baffling the disproportional amount of interest fintech firms have for the Millennials market. I recall an interesting discussion with one particular entrepreneur last year that ended as follows:
“What do you think of the non-millennial market?” I asked.
“What about it? They don’t use tech,” the entrepreneur said. “We are a millennial company building solutions for the Millennials.”
A bit short-sighted, I’d say. I wonder what they plan to do when their customers get older, start a family, and buy a house. Successful businesses learn to grow with their clients and anticipate their evolving needs. And this applies to all businesses and operations across different demographics. Retail branch banking is a good example. Although we may still have over 80,000 branches in the U.S. today, the roles that they play have greatly evolved.
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50-Plus are Tech Pioneers
In one of the tech conferences I attended not long ago, someone asked me: “Who is Steve Case”?
Let’s see… How should I respond? Should I say “The person behind AOL?” Or “the visionary who made it easy for the general public to access and exchange information on the Internet?”
I went with the former explanation.
“Oh yeah!” he said. “I’ve heard of AOL.”
As it turned out, he was not alone. Since then, I have run into multiple younger founders who had no idea who Steve Case was. (Fun fact: There are still around 2 million AOL dial up accounts today. Raise your hand if you remember the CDs we used to get.)
A few years before AOL began introducing its own email addresses, British scientist Tim Berners-Lee created the World Wide Web at CERN. He received the 2016 Turing Award “for inventing the World Wide Web, the first web browser, and the fundamental protocols and algorithms allowing the Web to scale”.
Without innovators such as Tim and Steve, both born in the 1950s, the way we communicate and share information across the geographic divide today would have been drastically different. Can you imagine a world without Internet, without the ability to access information instantaneously, whenever we want and wherever we are? Remember the sound of the dial up modem? What about the infamous “You’ve Got Mail” phrase when AOL became popular in the mid-90s and provided access to the Internet for the masses?
I read an article on Reuters by Anna Arrera about how the banking industry is relying on COBOL developers to come out of retirement and help keep the machine running. Apparently, we still have about $3 trillion transactions per day running on infrastructure that relies on COBOL.
The point I am trying to make is, those age 50+ is the generation of digital pioneers who birthed the mobile-first era that many of us now take for granted. Question is: What are we doing for them in return?
50-Plus Face Unprecedented Financial Complexity
According to a recent Pew research study, over half of American households experienced a financial shock in 2015, with the most common being automobile repair/replacement, home repair, illness/injury and loss of income.
Furthermore, the typical family spent almost half a month’s income to cover its most expensive shock. Not surprisingly, many respondents, including over half of Gen Xers and Boomers, indicated such events made it difficult to cover their regular expenses. To complicate matters, 47% of adults in their 40s and 50s have a parent aged 65 or older and are either raising a young child or financially supporting a grown child.
Meanwhile, the Federal Reserve reported that collective debt has reached levels not seen since 2008.
As the most recent AARP Financial Innovation Frontiers Report points out, Americans aged 50 and over are facing unprecedented financial stress due to caregiving needs, rising healthcare costs, burden of loans, and loss of defined benefit plans. Trillions of dollars are in play; opportunities abound for entrepreneurs and innovators who can help the older adults better manage their financial lives, and avoid or catch up from financial setbacks due to job instability, unexpected life events, and student loans.
It is time for us to innovate for the generation that is approaching or has reached retirement age.
What Can the Banking Industry Do For the 50-Plus Segment?
Consumers in the 50-plus age segment are active users of digital devices, with over 99% owning a tablet, laptop, and/or desktop device. With only 1 in 4 being highly confident they can meet their financial needs in the next five years, the most obvious place to start is to provide digital tools to help this segment make better financial choices and take charge of their financial health.
Provide an integrated solution around life events. Many consumers leverage multiple channels when they research and consume services. They may start the journey with mobile device and complete the process online; or vice versa. However, if you look at the account opening experience today, very few allow end-to-end completion through a single (digital) channel. Worse, different product types may have different experiences and consumers are expected to pick and choose different products though different interaction points and channels.
Providers should carefully study the user’s needs around life events and structure an integrated solution that can service the customer through a single interaction point. USAA is an excellent example.
When appropriate, leverage and foster opportunities to involve other trusted parties (such as adult children). According to AARP, 45% of 50-plus consumers have unofficially authorized a partner or family member to access depository and investment accounts by sharing login credentials. A more secure and thoughtful approach is needed to enable family caregivers to perform financial tasks for their loved ones and to safeguard against fraud and exploitation.
Empower consumers to establish healthy lifelong financial habits. Provide consumers with a comprehensive picture of their financial health with actionable insights (beyond pie charts). Leverage behavioral economics principles to help them set goals, save automatically, and minimize impulsive decisions. Gamification can go a long way to motivate people.
While technology is important, one must not lose sight of the human factor. Providers should promote digital tools where consumers can easily initiate interactions (such as click to call) with financial advisors for advice on comprehensive financial planning.
Protect consumers from fraud and financial exploitation The average financial exploitation victim loses $120,000, which is almost the same amount the average 50-plus household has in retirement savings. Banks also lose more than $1 billion per year in deposits from financial exploitation. Older adults, in particular, are more vulnerable due to increased likelihood of cognitive decline with longevity.
Machine learning and artificial intelligence hold great promise in helping financial institutions detect changes in patterns that can be flagged for review. In the fintech space, EverSafe and Guide Change are good examples of startups helping to protect older adults from scams and financial exploitation.
We are a melting pot
AARP held their annual LivePitch to shine a spotlight on entrepreneurs innovating for the older adults. Looking at the fintech founders gathered around for the event, I was a bit taken aback (and delighted) by the diversity of the group, not just in terms of gender, ethnicity, and cultural backgrounds, but also the cities where they came from and the ages of the entrepreneurs. As I have often noted, I am a big fan of “melting pot’, which enables diversity in thinking and problem solving, and in solutions offered to address diverse needs.
“Never interrupt someone doing what you said couldn’t be done.”
– Amelia Earhart, American Aviation Pioneer
And this is critical. The America that we live in is a melting pot of ideas, with people from different ethnicity and hailed from various backgrounds, gender, and age. For those of us who are in the business of innovation, we must be mindful and appreciative of not only the commonalities that brought us together, but also our differences. Only then, will we be able to spark innovation to properly address the diverse needs of our constituents.
The diversity of the founders represents the diversity of the America that we live in today. Let’s bring our collective minds together and think through how to leverage technology to make a positive impact in consumers’ financial lives. Together, it can be done.