How millennials are creating a financial technology revolution
It’s clich to discuss the ways in which millennials are changing the world, but as the largest generation in America according to census data, companies avoiding addressing their market do so at their peril. They’re handling their money differently too, as proven by the fact that over 42 million of them continue to live at home with their parents, even as unemployment falls. While some claim them to be entitled and demanding, they’re immensely thoughtful and outspoken about money, as proven by Talia Jane, a former Yelp employee that spoke out about the troubles of being a young person trying to live in a big city, even working for a huge company.
“Now some of the most exciting companies out there are springing up to help you keep control of your wallet and your financial future.”
This has bred a new culture of startups that have jumped in to help this large, money-conscious generation take advantage of their finances in a way that their elders haven’t had the chance to. While you’d imagine a successful millennial-focused saving system would have an app, Digit operates via a website and text messages. It connects to your bank and analyzes your spending, and then uses an algorithm to save tiny little amounts of money ($5 to $50 depending on your situation) without you thinking about it.
Users can withdraw at any time and check up on the account using a text message, and the company offers a guarantee that they’ll never put you into an overdraft. The Next Web’s Lauren Hockensen raved about the app turning her into a “money-saving machine” due to its automated yet comfortable way of putting money aside.
FutureAdvisor is the natural step up from a program like Digit, a so-called “robo adviser” that uses a combination of human interaction and algorithms to invest and re-invest your savings without the stodgy, confusing use of a financial advisor. For free, FutureAdvisor will analyze your current portfolio, giving you advice on where to put the money you have, or for a fee of 0.5% of your assets a year, they’ll do it for you out of TD Ameritrade or Fidelity. While it may be a startup, FutureAdvisor distanced itself from the competition through this maturity; your money isn’t just kept in a random bank but with trusted custodians. This may have been what attracted BlackRock, an investment management corporation with over $4.6 trillion of assets under management, to acquire them in 2015.
This culture of maturity continued under BlackRock, with FutureAdvisor forging partnerships with RBC Partners and BBVA Compass while competitors focused on marketing. According to Corporate Insight, FutureAdvisor and BlackRock are onto something; just 30% of financial advisers are looking to take on clients under 40, leaving the floodgates open for a respectable yet approachable alternative.
This is also why the bank Simple has grown by leaps and bounds, even after their own acquisition in 2014 by BBVA. As well as providing a slick user experience built for the new generation of workers, Simple will also tell you intelligently what you’re able to spend using their safe-to-spend calculator. This doesn’t just factor in your transactions, but also lets you set clear goals (saving up for a car, for example) so that you don’t mess up your big plans for the future. Intelligently (and in a way that makes sense based on how spending occurs), Simple also lets you create spending pools for particular activities like going out to eat, so that you can budget to not over-spend on things you do regularly. The millennial spender also can also write down notes on each transaction so that they don’t forget why a transaction was much higher (or much lower) than usual, and Simple users can transfer money between each other for free.
This new generation of financial technology is vastly different to where the industry has been for many years. Ten years ago the idea of a financial startup would seem dull, but now some of the most exciting companies out there are springing up to help you keep control of your wallet and your financial future.
The article first appeared in the Inc Magazine.