Say what you want about millennials and their strange values and behavior. They, just like the generations before them, are different and will affect a shift in the world around them. You may choose to continue moaning about it, but it’s making you look really old. Just accept it. Every generation has its revolt. That one sacred pillar of the world their parents handed them that an entire generation turns around and gives the collective middle finger to. For millennials, that institution is banks.
I’ll let sociologists explain the why of millennial bank hatred, but between you and me, you don’t need a PhD in social science to understand it. Truthfully, we all hate banks. Only someone suffering Stockholm syndrome could have any amorous sentiments for the powerful, merciless financial institutions that control and direct every aspect of our lives. Our credit rating, mortgage, paychecks and pensions. They enslaved us in a never ending rat race and kept us up at night worrying. Young adults want a different financial life and they are using new technology to make it happen.
1. Credit & Checking
Their parents were obsessed with their credit score and credit debt. The endless maze of fees, interest rates and points based reward systems were confusing and helped quietly coax and entire generation into dizzying credit card debt.
Affirm - PayPal co-founder and CTO Max Levchin decided to disrupt the credit market and launched Affirm to offer a refreshing alternative. Affirm uses social media and other data to give young adults an instant credit score. Then offers users transparent, point-of-sale installment plans with adaptive pricing based on data that can price marginal risk and generate a unique risk score for every transaction.
Previous generations remember learning how to balance a chequebook as an essential life skill. They (OK, 'we') were given a physical paper booklet by the bank to help us keep track of deposits and checks written to make sure we never went over the funds available in our checking accounts. Less than meticulous accounting could lead a customer to mistakenly overdrawing funds and the dreaded phone call from the bank for 'bouncing a check'. Millennials want easy to use account management tools, low fees, amazing customer service and (you guessed it) all of that on their mobile 24/7.
Cheddar - is a new mobile bank account, debit card, and business model to free the world from underpowered checking accounts.
2. Savings & Financial Management
Everyone knows they need to save more, but new mobile technology is making it easier to furrow away extra pennies into efficient savings tools. Acorns automatically rounds up pennies from every purchase and invests in a commission-free diversified portfolio of index funds.
Acorns - allows individuals to automatically round up daily purchases and invest the change into a commission-free diversified portfolio of index funds managed by the 'world’s top asset managers'.
digit - Every few days, Digit checks your spending habits and removes a few dollars from your checking account if you can afford it. Easily withdraw your money any time, quickly and with no fees.
SigFig – an easy way to manage your money - simply connect your accounts and they will tailor a portfolio based on your goals.
Simple – web and mobile application that unifies various accounts into one accessible bank card.
Mint - aggregates all your financial life in one, easy-to-understand place. Mint also gives you free advice on how to save money.
The BMW driving stock brokers are notorious for making themselves rich, not their clients. Millenials have seen enough sleazy images of these guys in movies, TV shows and headlines to make up their minds to do things differently.
Robinhood - is commission-free, mobile-first stock brokerage. Zero-dollar commissions are available for self-directed individual or joint cash brokerage accounts that trade listed and OTC equity securities via web or mobile devices.
Personal Capital – the leading digital wealth management firm.
Everyone dreads the day they need to ask their bank for a loan. The tensions, the humiliation, the waiting for an answer that can seem like an eternity. If approved, the terms can be killer, but you have no choice but to accept them. Young adults are turning to a new breed of loan options that let them use the internet to side-step the old school financial institutions and give or take a loan directly from peers.
Lending Club – Online, Peer-to-peer marketplace for better rates on personal loans up to $35K
LoanNow – uses the latest technology and statistical methods to make better credit decisions and motivate positive repayment behavior in the challenging subprime loans market.
CircelBackLending – an Internet-based platform connecting accredited investors to prime borrowers..
Prosper – a peer-to-peer lending marketplace, allowing people to invest in each other in a financially and socially beneficial way.
Zopa - Zopa is the UK's largest peer-to-peer lending service. It matches savers with individuals who want to borrow, leaving out the bank and offering better rates all round.
5. Mobile Wallets
Apparently young adults hate carrying wallets. Again, our first reaction may be to scoff at how incredibly lazy and spoiled they are, but actually they are right. Open your wallet and look inside. Is their anything there that can’t be digitized? Cash, credit, club cards, even keys and your pictures of your kids. Damn, the millennials are right again. Soon digital payment solutions will be built right into smartphones, watches and connected devices.
Apple Pay and Google Wallet are the 2 biggest players, but other contenders will try to give them a run for their (your) money.
Apple Pay – available on iPhone 6, iPhone 6 plus, Apple watch. Payments accepted at over 700K retailers including Walgreens, WholeFoods, Staples and McDonalds
Google Wallet – available onfiOS6 and up and Andriod 4.4 and up. Payments accepted at millions of merchants including Walgreens, Subway, American Apparel, McDonalds.
Samsung Pay - available on Galaxy S6 and S6 Egde. Payments accepted at the majority of credit card accepting merchants (over 30 million).
CurrentC – App available on all Android and iOS phones you scan a QR code to pay. Payments accepted at a growing network of merchants including Best Buy, Dunkin Donuts, Kmart, Walmart, CVS.
Android Pay – Any NFC-enabled Android device. Payments accepted at 20 merchants including McDonalds, GameStop, BestBuy and American Eagle.
Hive Wallet - bitcoin mobile token wallet on iOS and Android.
Alternative finance has traditional financial institutions breaking out in a cold sweat. The companies listed here are just the beginning.
Which alternative finance technologies are you using?