Cisco's Internet Business Solutions Group (IBSG) recently conducted a study of 1,055 American consumers to get a sense of what they want out of their bank and how they want to interact with them. The study made several interesting findings, and I'd like to outline just a few before explaining how this may affect your bank, regardless of your age.
- Generation Y's main concerns are (in this order): to reduce debt, to better manage their money in general, and to receive more financial education.
- Generation Y wants more help in managing their finances. More than one-third of Generation Y (and Generation X) customers feel they need assistance in managing their money. Less than one-fifth of the baby boomers and their elders (the study calls them "silvers") feel the same way.
- Generation Y values advice from friends and family three times as much as the boomers and silvers do.
- Generation Y values advice from professional advisers more than their peers, their own research or automated tools.
- As a whole, Generation Y likes their bank. Some 85% of Generation Y, according to this study, are satisfied or very satisfied with their financial institution.
So what does this mean to all of us? Maybe nothing, if banks don't heed the information from Cisco's study. But if they do, we may be seeing banks offering more financial advice, and perhaps not in person but increasingly virtually through web cameras.
"As you can imagine, this generation interacts with the world very differently," Philip Farah, director of financial services practice at Cisco, told WalletPop in an interview. "Fifty percent of them own a web camera, compared to less than a third of baby boomers. They access YouTube multiple times a day compared to their older counterparts. Almost all of them want advice delivered to them differently."
Farah also predicts that banks are going to start creating online communities at their sites where people can go to exchange ideas and where a moderator can dispense financial advice. He also predicts that banks will be offering more automated financial advice, "advice on demand," where, just like at sites like Mint.com, you can get a quick analysis of where your money's going. If you're spending more on restaurants than most people in your peer group, for instance, your bank may send you a text, alerting you to that fact.
Does Farah see banks adopting some of these ideas in the near future, maybe even as soon as five years from now?
"Absolutely, banks will do this," said Farah, "but I think it's going to happen much sooner than five years from now. More like 18 or 24 months."
So what inspired this study anyway? "Baby Boomers are spending less," said Farah, "and Generation Y's earnings are quickly coming equal that of the boomers and silvers. There's been a strong disconnect with Generation Y, and we wanted to understand them."
Generation X, meanwhile, is pretty much ignored in this study. Figures. Story of my generation. I asked about that, and Farah said that Generation X's comfort and tastes in banking technology are closer to Generation Y than the baby boomers. He predicted that while Generation Y will be the first to adopt the new technologies that banks will ultimately debut, Generation X will soon follow.
Cisco predicts that if banks do start adopting these technologies soon, they'll see a 5% to 10% bump in annual revenue, which pretty much seals the deal. It's all coming: virtual financial advisers, online banking communities and automated financial advice sent directly to your smartphone: "Sure, go ahead and buy that movie popcorn, but it's irresponsible."
Geoff Williams is a frequent contributor to WalletPop. He is also the co-author of the new book Living Well with Bad Credit.