U.K. Millennial Wallets Are The Target: Digital And Mobile is the Key

October 3, 2018 / Comments (0)

The battle is on among financial institutions for the hearts and minds — or at least the wallets — of U.K. millennials. According to a report just out, this demographic grouping has an “average wallet size” that is now 40% more than that held by U.K. adults as a whole.

Telstra Global, which today published its report, defines “average wallet size” as total balance value of deposits and lending held by millennials. It says the average wallet size of U.K. millennials is currently worth US $81,990 compared to US $58,709 for the total adult population.

As millennials drive interactions and demand mobile engagement in a manner never before seen in financial services, traditional institutions need to adopt a mobile-first digital strategy or risk disruption from burgeoning digital challengers, says the report.

Students looking at their smartphones during a class at the Yiwu Industrial & Commercial College in Yiwu, east China’s Zhejiang Province. Johannes Eisele/AFP /Getty Images March 14, 2017

“Millennials, their consumption of mobile digital and wallet size have undoubtedly become lead indicators of performance for financial institutions,” said Rocky Scopelliti, Telstra’s Global Industry Executive for Financial Services.

Telstra commissioned the inaugural Millennial, Mobile, Money Index (3MI™) to observe how well financial institutions are transforming their businesses and models in response to demographic and digital disruptive trends. It found that Barclays Bank has the largest proportion of millennials among its customer base at 42%, and the largest main bank market share at 16%.

Barclays Bank millennial customers “are most likely to engage with the bank via mobile banking — over 70% do so each month” says the report. Barclays UK has been leading a national drive on digital safety, covered here on Forbes. Barclays has, however, also been embarrassed by the lack of a savvy approach to a digital world demonstrated recently by Jes Staley, its American CEO.

“It’s encouraging to see the digital transformation of our business making a real impact with customers. People in the U.K. are living increasingly connected lives and the rapid adoption of our mobile services is a great strength for Barclays in the U.K.” said Ashok Vaswani, CEO of Barclays UK.

“I believe that a mobile first approach is making banking easier, more convenient and more intuitive for customers as we connect them to new services and value…..this can be a winning strategy not just with millennial customers, but for all the customers we serve” he added.

Barclays is not alone in targeting the young – or seeking to woo a customer base that has not really trusted the traditional banking sector for almost a decade now since the financial crisis. We also have a younger, poorer, generation that is facing its future amid a prolonged crisis of leadership and that is unlikely to result in patience, or loyalty.

As for the banks — in the U.K., Barclays and four former executives have just been charged with conspiracy to commit fraud during the bank’s 2008 capital raising from Qatar as it sought to avoid a bailout.

And then there’s Lloyds. Yesterday the Financial Times published a story by Jonathan Ford which began: “Evidence uncovered by the Financial Times has cast doubt on Lloyds Banking Group’s longstanding claim that it was not aware of criminality at HBOS’ Reading branch for more than a decade after a £1 billion fraud at the unit.”

Documents “cast doubt on Lloyds longstanding claim it was not aware of wrongdoing” said the FT. That is unlikely to help in the critical restoration of customer trust in the U.K. banking sector.

Lloyds Banking Group chief executive, Antonio Horta-Osorio, listens to a speech during the Lord Mayor’s Banquet at Guildhall on November 14, 2016 in London, England. Carl Court/Getty Images

Today Lloyds has unveiled a massive shake up of its top management team in a restructuring that is designed to cut costs and focus on expanding digital services as part of a strategic plan. Zaka Mian has been appointed to a new role as Group Director, Transformation. This is a division that the bank says will comprise all business and IT change, data and IT architecture, customer insights, innovation and applied sciences, and be responsible for the ongoing development of the digital channel.

The FT reports today that speculation has grown in the City over the Lloyds Bank CEO António Horta-Osório’s future at the bank after the U.K. government sold off the remainder of the taxpayer’s stake in Lloyds in May. Among today’s management changes, Andrew Bester, head of the commercial bank, is to leave to “pursue other interests”. But the paper cites City insiders as having seen him to be a potential successor to Mr Horta-Osório.

While the machinations continue at senior management levels, the problem of digital transformation remains a very real one — as covered here previously on Forbes.

Recent reports have suggested that in the U.K., challenger and specialist banks saw a 56% growth in gross lending in 2016, increasing their market share by 2.9%. U.K. banks are also facing low interest rates eating into their profit margins.

The challenge of moving ahead with digital and mobile may be particularly acute in the U.K. which has struggled with creaking infrastructure.

As digital challengers continue their relentless growth in the U.K. market, leveraging programmable disruptive technologies to transform and compete against new breeds of organizations is “an imperative for traditional institutions,” said Mr Scopelliti.

But Telstra’s additional research of 164 global financial services executives found that most traditional organizations still need to transform legacy business models to become more agile against digital challengers.

Digital challengers that leverage accelerating technologies such as artificial intelligence, cloud, APIs and robotic process automation, can enjoy cost savings of 67% in operating expenses and 98% on customer acquisition, says its report.

Last modified: October 19, 2018

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