Banking
It’s time that banking apps flag financial liability to further trust with millennial customers
By David Vanek, CEO and cofounder of Anorak, the award winning independent online broker for life insurance, income protection and critical illness cover.
Globally, millennials are the largest users of financial banking apps, with 97% of millennials using mobile banking (compared to 79% of baby boomers), with the pandemic leading to a further 54% boost in people using financial apps, compared to the same period last year.
A dependence on these digital tools, combined with an existing underlying distrust in large financial institutions means that millennials’ attitude to their money is frequently shaped by digital resources.
So why, at this time of immense financial anxiety for millennials (with 78% feeling stretched between present and future planning), are so few apps willing to outline where financial liabilities lie for their users?
The pandemic shed light on how an inability to work, the death of a loved one, reduced earnings or how losing your source of income, can dramatically impact quality of life. Financial providers have an obligation to cater to young earners in the best way possible, even if that means adapting their services to suit the needs of “digital natives”. With a third of our users citing the pandemic as the sole reason for looking into life insurance, we feel it’s time for apps to give financial liability the attention it deserves and the information users need.
Why financial apps are suited to demonstrating financial liability
Aside from an in-person adviser, financial apps are in an ideal position to best demonstrate where a users’ financial liabilities lie, through the sheer amount of personal data these apps have access to and significantly, mobile technology’s ability to personalise information to an individual’s needs.
Complicated products that vary from person to person depending on their specific financial needs (such as income protection, critical illness cover and life insurance) are typically handled by a financial adviser. However, financial apps are in a unique position to calculate and demonstrate an individual’s financial risk, helping users to better understand what kind of protection might benefit them, before starting to look into the plethora of products available, or approaching an adviser in person.
Over the pandemic, access to personalised financial resources has been limited, with many bank branches reducing availability and face to face advice also being restricted.
With more millennials seeking protection in light of depleting savings and financial hardship, 55% of people Anorak asked didn’t know what income protection insurance was, let alone if they needed it. Financial apps have the opportunity to help fill this “protection gap” by acting as an educational tool or starting point to securing the financial certainty young earners and families desperately need at this time.
Why apps are avoiding the issue
As financial apps become ubiquitous across the financial services industry, it’s the providers’ duty to cater to client’s needs across the board, even if that means highlighting uncomfortable truths. There’s a theory that financial apps are reluctant to focus on a user’s liabilities in an effort to be more fun to use, as a result of operating within a highly competitive and saturated marketplace. The gamification of finances also has something to answer for here. Whilst harmless in theory, if risk isn’t balanced and addressed it can be easy for financial apps to simply become a mode of tracking earnings and outgoings, as opposed to representing an individual’s full financial situation, eventually leading to greater risks in the long run.
Balancing risk adverse millennials’ reluctance to address financial vulnerabilities, but desire for transparency when it comes to managing money, is up to the providers to achieve, through developing a model that accounts for both of these important factors. The alternative is to work in union with a provider who does focus on protection, to provide users with a realistic representation of their risk, along with potential solutions to help protect young earners’ interests and dependents.
Fostering trust through transparency
It’s important that financial liability is referenced in some way or another by financial app providers. With different facets of a user’s finances stretched across a variety of platforms, taking the lead on highlighting risk will help you win the trust of your millennial users.
Many of the larger financial providers such as national banks have already started incorporating financial liability as a key element of their advice offerings. Having fared the worst of the pandemic, younger earners are wising up to the benefits of protection products like income protection, life insurance and critical illness cover, against the backdrop of an unpredictable economic landscape.
Over the last year and a half we’ve seen an increase in the number of millennial enquiries into protection products, along with a spike in distributor interest from existing financial services providers looking to offer “embedded insurance advice” as part of their app services. This increase in awareness represents a golden opportunity for agile providers to connect with millennial customers by providing a vital service, one highly converted within this demographic.
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