March 25, 2015
America's millennials could potentially represent a huge market for alternative banking, according to the results of the most recent FICO survey. Financial institutions looking to stay abreast of the latest shifts in the rapidly changing banking industry might benefit substantially from gathering further detail on these customer preferences.
Alternative payment services
The youngest segment of this demographic - those between the ages of 18 and 24 - are embracing alternative payment services like PayPal and Venmo enthusiastically. More specifically, 56 percent of such respondents in the poll indicated they either use these services already or are quite likely to do so.
In addition, a far greater fraction of millennials are likely to use mobile wallet services like Google Wallet or Apple Pay in the next 12 months than those 35 and older, with 32 percent of the younger bracket indicating this response compared to 16 percent of the older.
Another area of alternative finance that is drawing America's millennials is online and peer-to-peer lending, according to CNNMoney. Figures provided by a recent Bank of America survey showed that 14 percent of small business owners in this age demographic have harnessed nontraditional lending services.
Additional data from the poll shows that 3 percent of entrepreneurs aged 35 to 49 and 1 percent of those between 50 and 68 years old received funding from these sources, CNNMoney reported. While many millennials first look to friends and family to get the funding they need, further expansion may prompt them to look elsewhere.
"Millennials are on the earlier curve of their small business ownership and entrepreneurial paths," David Solis, who works for Bank of America as a sales performance manager, told CNNMoney. "It makes sense that they're going to be pursuing alternative forms of lending."
The FICO survey confirmed their openness to alternative financing, as well as the sharply lower interest of those in other age groups. Of the millennials responding to the poll, 23 percent indicated they will look at P2P lending in 2015, twice as high as the fraction of Generation X members providing this reply and 10 times as much as the portion of Baby Boomers indicating this response.
Financial institutions interested in tapping into this burgeoning market for alternative banking could benefit from speaking with Garnet Capital Advisors, which has done substantial research in this particular area. By working with Garnet, an experienced loan sale advisory firm, banks can benefit from reviews and understanding of the banking and internet marketplace arenas.