Top 7 Financial Products Millennials Are Attracted To
The world of investing has always been dynamic to accommodate investor preferences. Lately, there has been a phenomenal transition in how banking is perceived by Gen Z. With the increased access to information, millennials are redefining how financial products and services are consumed.
Having been a majority, millennials’ interests have been a top priority for the financial industry world over. From cash backs to financial robo advisors and cryptocurrency to collateral-free loans, the industry has undergone a metamorphic change. As the largest growing consumer group in the coming years, it is wise to monitor millennials’ likes and inclinations.
Since there is a massive shift in the attitude of present-day investors, it has to be honoured by financial institutions to thrive in today’s economy. According to a 2022 study by Bank of America, millennial descendants are more interested in alternative investment options than traditional stocks and bonds. Millennial investing is influenced by social, environmental, and convenience factors, so there needs to be a change in how financial products are designed.
Financial institutions now focus on giving millennials a personalized experience based on their profile, past preferences, stage of life, and age group.
Although the market is filled with numerous financial products to cater to the needs of present and future investor generation, the following seven products have successfully garnered much attention and interest lately.
- Impact Investing (ESG)
Millennials are environmentally and socially conscious, so they align their investments with values contributing to a promising future. Such millennial values encourage people to invest in funds, financial products, and organizations/companies that actively address social and environmental causes like equality for all, climate change, sustainable investment, etc. Since impact investing offers both social and financial returns, expect to see more of it in the future.
The PwC forecast echoes similar thoughts where it estimates that investments in ESG funds in the U.S. alone would double by 2026, reaching the $10.5 trillion mark. The choice of ESG funds can include mutual funds, exchange-traded funds, etc., in a wide range of fixed-income and equity-centric options.
One of the most interesting facts about millennials is that they are generally more tech-savvy. They are comfortable using digital technologies and prefer financial products with greater accessibility, customization, and returns. Cryptocurrencies tick all these boxes, making them a desirable investment tool for millennials.
The decentralization and democratization nature of cryptocurrencies and the potential for high returns have primarily attracted millennials, making it an ideal investment option. Although some still consider cryptocurrencies risky, their potential return upsides have maintained their popularity amongst millennials and Gen Z.
- Card As A Service (CaaS)
Card as a Service (CaaS) is a new card issuance and processing application. Companies have started using CaaS to issue virtual cards to their employees, vendors, contractors, etc. Airports and hospitality sector players use it to give pre-loaded virtual cards to compensate customers for service delays. They are time sensitive and can be deactivated automatically.
For example, when a flight gets delayed due to operational or technical issues from the operator’s end, airlines can issue and push a time-sensitive virtual card to cover stranded passengers’ meals and accommodation costs. The system provides users with advanced security and spending control by offering virtual cards for one-time payments, setting spending limits, fixing card validity, and more. The features of CaaS benefit businesses and customers by giving them absolute control over their digital spending, minimizing the risk of online fraud and fund misuse.
USbank is the first to create this technology to provision virtual corporate cards into users’ mobile wallets instantly. These virtual CaaS providers are attracting businesses to use this simple, transparent, and cost-effective product, giving greater control over spending and providing a great customer experience.
- Stock Card
If you stay updated on the millennial trends, you will know how much this generation likes to be associated with their favourite brands. What if these shoppers could automatically own a part of their favourite brand when buying their favourite brands? A stash card allows millennials to shop like investors, owning a certain percentage of their favourite brand’s share.
For example, when companies like Stash issue a stock card to pay for purchases at Nike, Starbucks, Taco Bell, Costco, or other approved brands on the network, you automatically earn back a percentage of the brand’s stock instead of a cashback freebie. This unique financial product is helping millennials transition smoothly from shopper to shareholder. Since it is an excellent way of growing wealth on autopilot through stock acquisition, it is understandable why millennials and Gen Z are attracted to it.
- Bundle Products to Achieve Multiple Financial Goals
Financial planning for millennials can be slightly complex because they try to achieve multiple goals with single investments. One way financial leaders can help them achieve this is to offer them bundle financial products which serve two or more of their purposes concurrently.
Example: An international education loan can accompany future investment services or advisory. A detailed Deloitte report talks about how bundled financial products help the new workforce to make concrete financial decisions. Banks and other financial institutions should be able to map the customer personas and real-time interactions and analyze life goal journeys to do a predictive analysis of what the customer wants in the next phase of life and offer them the same without stepping into the bank.
Bundle products often attract millennials to fulfil multiple financial goals at different life phases.
- Collateral Free Working Capital Powering SMBs
Millennial finance and investing aren’t restricted to traditional investment methods. Many realized the importance of having a side gig or business to keep them financially afloat during challenging phases. Collateral-free working capital can be a lifesaver. The loan sanction decision, loan amount, interest percentage, and tenure are designed with the help of AI tools.
For Example, Drip Capital Financial products that could offer greater flexibility to help Gen Z achieve their goals are the need of the hour. This financial product makes getting a business loan easier without using your property, equipment, etc., as collateral.
Millennials planning to start working in the gig economy are attracted to such products because of their easy accessibility, features and processing time. Millennial investors who prefer to avoid undergoing the long and tiring documentation process at traditional banks or financial institutions gravitate towards these options.
- Banking As A Service (BaaS)
Some millennials view traditional banking as sluggish, inconvenient, and inflexible. It has given rise to neo-banks and other aggregators integrating regulated financial infrastructure into their products/services to offer highly personalized and convenient banking experiences. Neo banks are technology-driven and aim to improve user experience and satisfaction.
Millennials, Gen Z, and other demographic segments looking to manage their finances on the go are primarily inclined to choose organizations and products that leverage BaaS because of the offered convenience, user experience, and flexibility.
Companies like Stripe provide a complete payment infrastructure solution to companies enabling them to bank without having to deal with a financial institution. BAAS, or embedded finance, attract millennials, GenZ entrepreneurs, and millennial users loyal to certain brands. Implementing BAAS gives easy access to a range of banking services in no time integrating credit card services, investment services, greater security (fraud alert, two-factor authentication), financial management (personalized financial service), and more benefits.
Millennials have widely different views, values, and priorities than previous generations on investing. They are more inclined to pick financial products that positively impact the social and environmental landscape while yielding lucrative returns.
Millennials are also tech-savvy and prefer technology-based financial products that offer greater flexibility and convenience. Given these preferences, financial institutions that tweak their products to meet millennials’ requirements will be better positioned to attract and retain this set investor base.
Prioritizing millennial investor views and reflecting them in financial products is no longer just an option but sacrosanct to survive and stand out in this competitive economy. Companies that realize this fast and innovate their financial products accordingly will be on the winning side.