Millennials are no longer just the “younger generation” or a segment of your customers… they are your customers. The millennial generation now surpasses baby boomers as the largest generation–and their value is increasing to a slated $30 trillion wealth transfer over the next three decades. So, why then are their demands for simple banking services still seen as nice-to-haves or future state for many banks and credit unions?
The millennial generation, now 23-38 years old, has had the majority of their lives intertwined with technology, and they’re not afraid of change. In fact, this generation is two-to-three times more likely to switch their primary financial institution, leaving many banks and credit unions feeling imprisoned by their outdated technology and unsure of how to keep this generation of customers happy. Why? Yesterday’s technology is making it nearly impossible to deliver on the needs of the modern banking consumer.
The financial industry still falls behind other industries in terms of innovation because of a single factor that other industries conquered years ago: conversions.
The painful reality
For banks, conversion pain is a real issue. In 2018, only 2 percent of all financial institutions took on a core conversion, followed by 3 percent of an online conversion and 4 percent mobile conversion. It would be nice to believe that all these other institutions are simply happy with their current platforms, but that’s simply not the case. In fact, many liken a core conversion–the most painful, dangerous, and scary of them all–to a heart transplant. In other words, it’s something you just don’t do unless you’re forced to.
Now the stakes are higher than ever. However painful, conversions can no longer be used as an excuse for today’s financial institutions. Innovation is occurring across the industry and the fact of the matter is that your clients don’t see the back-end changes. Instead, they see companies like Venmo and Capital One’s Café Banks, where they can receive all the digital features they want, all without fees.
Banks and credit unions can’t innovate fast enough to keep up with the fintechs, who are built for today’s devices, or with the “Big 5” banks who have the power and resources to develop technology. It’s why $1.2 trillion in assets have been won by the Big 5, and another $158 billion in capital investment for fintechs over the past five years. Additionally, it’s not just big banks and fintechs that today’s financial institutions need to worry about. Enter companies like Apple and Amazon, who are raging into the financial sector with their own innovations. Meet your new competition.
Just solving problems has not proved profitable. Bank and credit union reactions to new technology aren’t enough to keep deposits growing. Until API development for the financial sector, this has been the only way.
To beat them, join them
APIs are the new wave of connectivity, breaking digital commands into pieces and enabling infrastructure to be reconfigured in mere hours, eliminating the fear traditionally invoked by conversions. You know APIs well. In fact, they are used to populate your weather forecast in seconds and populate your home searches when you’re on the hunt for a new property to purchase. They are even used to log your nutritional data by doing something as simple as taking a photo of your meal.
With APIs, your bank or credit union can open the door to not only changing the industry playing field, but redefining it completely. Your bank can now build something that might normally take years in a matter of hours.
Get to the cloud
If APIs are the first piece to technology freedom, the other piece is getting into the cloud.
Data is heavy. So heavy, in fact, that our country is spanned with three million data centers, which equates to roughly one data center for every 100 people. Data centers are also expensive. The financial industry spends millions of dollars to keep its data secure and accessible. These centers are fallible, however. They are pervious to natural disasters, they are rigid in scalability and they require a lot of maintenance, translating to large upkeep costs in addition to regular assessments.
Cloud services like Amazon Web Services have made data storage accessible at a fraction of the cost it once was, backed by security-first methodology and immediate scalability to meet the needs of your organization. Unlike data centers, cloud services are not penetrable by natural disasters and changes can be made in real-time. Imagine never having to worry about your data during an event such as a hurricane.
The Financial Times (FT) uses AWS to cut data warehousing costs by 80 percent and completely revolutionize how they offer content to customers: running real-time analytics on all their stories, personalizing their digital products and giving readers a more tailored reading experience (Laura Mullan, Gigabit Magazine).
With the perfection of the API and cloud approach, banks and credit unions can not only exceed the demands of their consumers, but they can continue improvements as new technology emerges. They can become both the fintech and the friend to the fintech, becoming the advocate and deliverer for the needs of today’s consumer.
Change your institution’s path and direct the future of banking. Contact our team to learn how we can help you get there.