Millennials are stated to be the key customer segment for almost every new business model in the Fintech space. WealthTechs are addressing the needs of Millennials and hence are expected to change the investments sector, as we know it, substantially. But are Millennials and WealthTechs really powerful enough to disrupt the whole investments market?
Millennials don´t have the money yet!
Millennials are defined as people born between 1980 and 2000. Given this, most of them currently still don´t have the financial background to be a potential customer for banks operating in the investments-space. However, Millennials are going to be the most tech-oriented generation so far and they differ significantly from previous generations, e.g. they have the highest density of young academics and are the first generation growing up with digital devices and the Internet. Thus, Millennials are an attractive segment for investment-providers, online or offline. This leads to an enormous potential for WealthTechs – in the future.
Millennials have the highest potential lifetime value and WealthTechs are aiming for them
The new wave of WealthTechs addresses their potential customers – primarily Millennials – through simplified client onboarding and investment processes, intuitive interfaces and entirely new customer experiences due to digital processes and 24/7 customer service. On top of that, new digital technologies offer unprecedented (theoretical) scaling potential, hence they´re able to more rapidly acquire new customers compared to traditional banks. Especially older Millennials like HENRY´s (High Earnings Not Rich Yet) are targeted as an ideal customer subsegment for WealthTechs.
Adopt and gain spill-over effects!
WealthTechs primarily address Millennials, but their features and use cases appear to be also compelling for more profitable customers from older generations, hence we will expect substantial spill-over effects into a broader audience. Traditional banks are on the way to create attractive digital propositions for Millennials as well – based on an existing customer base and financial resources. Nevertheless WealthTechs may change the investment sector substantially, if they are able to remain quicker and closer to the needs of the Millennials.
This article has previously been published on TheWealthTechBook.