Last week we took a look at the key trends that ruled the payments and fintech industries in 2017. Arguably the biggest driving factor behind the trends and changes we saw this year are the needs and demands of the current consumer base. And you can’t talk about the current consumer without taking a look specifically at millennials. At more than 77 million, millennials now account for one fourth of the U.S. population.
As of 2017, millennials outnumber Baby Boomers and are about triple the size of Gen X. They also account for $1.3 trillion in U.S. spending power. This monstrous scale means that looking at any market trends in any industry is inherently tied to looking at millennial trends, habits, and preferences. Because of this, in keeping with our 2017 wrap-up and 2018 look-ahead, we thought a quick overview of millennials and the role they play within the payments industry was a perfect addition to our year-end recap.
The End of Cash as We Know It?
Cash is definitely not king anymore. A recent study conducted by Paysafe found that some 54% of consumers anticipate they’ll be taking up more digital formats of money over the next two years. On average, Americans now carry approximately $50 in cash/coin at any given moment and less than that in Canada. About half of consumers surveyed visit an ATM monthly, and mobile wallet adoption is up to one in three.
This shift towards increased mobility is significant. Visa estimates that mobile pay will be the new standard by 2020…which is only two years away! With millennials driving the shift towards more convenient, streamlined checkout experiences both in-person and online, it’s easy to see how this rapid swing towards mobile pay has kicked into high-gear in 2017. As payments become increasingly digital, banks are scrambling to shift and adapt to the needs and demands of this new and vital consumer base.
Banking Goes Mobile and Social
As the shift towards greater mobility continues, banks—like all other industries—are struggling to find ways of staying ahead of the curve. PayPal’s P2P app Venmo and other similar P2P options have been especially popular amongst millennial and Gen Z consumers. The ease and pace at which consumers spend and transfer money has rapidly gained speed. 2017 consumers want to be able to move and spend money in real time, whether at stores, among friends, or online.
Fall of this year saw the launch of Zelle, American banks’ answer to Venmo and its kind, with mixed opinions on its success. Zelle (which integrates with a staggering number of major banks in the U.S.) operates in the same way other P2P offerings do. The idea is that Zelle offers consumers the better product since it directly integrates with your existing banking app. Have an account through PNC? Rather than looking at your bank statements in one app and your mobile payments in another, the Zelle plugin is now just a part of your PNC Wallet experience.
Venmo, in turn, shifted its focus in time for the holiday shopping season this year and began offering the ability to pay in-store through the app, moving it out of the strictly P2P realm.
The speed and convenience at which consumers now move money is continuing to accelerate and evolve. This drive for speed and ease of use has been a driving force behind massive changes in banking that will only continue in order to meet the demands of millennials and Gen Z following behind them.
One of the most interesting developments to come out of the rise in millennial and Gen Z consumers is the development of influencer culture. The concept of celebrity influence is in no way new; famous individuals have been crucial in advertising for centuries. However, the rise of the social media star has created a new category and market within this long-standing influencer culture.
Where social media influencing differs from traditional celebrity advertising is it’s often unclear that advertising is happening. Influencer posts generally appear to be regular posts where the celebrity simply includes a product…without stating clearly that they are being paid for this inclusion. 2017 has been a big year in influencer culture. In April, the FTC sent out more than 90 letters to major influencers stating that all posts must clearly and explicitly state if they are being paid for the content on their page.
Amazon saw an opportunity in this. With influencer advertising now more clearly marked, many are now able to create custom Amazon shops curated with the brands and products they were already promoting. This new approach means sending followers to one central location (Amazon) which simplified the experience for both the influencer and their followers, who are able to directly access the products being promoted.
As influencers increase their foothold in sales and advertising, more and more companies will need to find ways of channeling this influence via streamlined, mobile-friendly ordering and checkouts like those existing through Amazon already.
2017’s payments landscape is one marked by speed, convenience, and mobility. All of these developments are intrinsically linked to the rise of the millennial working class and consumer base. As the largest segment of the American population continues to expand its grasp of the U.S. economy, these trends will only continue. Next week we’ll be ending the year with some predictions about what to expect from 2018, so be sure to check back!