Why Millennials Are Choosing Financial Tech Startups over Big Banks
Why Millennials Are ChoosingFinancial Tech Startups over Big Banks
Banks has been the primary method of saving and exchanging ofcurrency for centuries but since the world's economy is collapsing the dynamicsis changing quickly. For anyone that came of age during the financial crisis,it's impossible to forget the long list of banks that needed bailouts. Duringrecession, most of the millennials were studying in college with a massivestudent loan or entering into the market where there were no proper jobs.Therefore most of the people from an earlier generation lost their faith fromtraditional banking systems.
Well, a major population of millennials have a great level ofdisagreement with big banks even after recovering from the financial crisis.According to a report by the World Bank, almost 50 per cent of millennialsbelieve that due to recession, the way they perceive bank has changed. Theyhave seen how reckless, greedy and corrupted the banking system which caused amajor downfall to the economy and they faced a huge problem in finding aproblem or build wealth. And not many of us indeed want to have a conversationwith banks.
The Problem with TraditionalBanking System
The only reason why the current generation doesn't like thetraditional banking system is the bank themselves. Since the starting of this21st century traditional banks has suffered over billions in fines and rectifyfor customer exploitation. Recently there have been many bank frauds that haveshocked the Indian banking system like:
- Neerav Modi Bank scam
- Bank Scam by Vijay Mallya
- Allahabad Bank Scam
- Rotomac Pen Scam
- R P Info Systems Bank Scam
- Simbhaoli Sugar Mills Bank Scam
The banks whose money istrapped in this scam are:
- Bank of India:- Rs 754.77 crore
- Indian Overseas Bank:- Rs 771.07 crore
- Union Bank of India:- Rs 458.95 crore
- Bank of Baroda:- Rs 456.53 crore
- Allahabad Bank:- Rs. 330.68 crore
- Oriental Bank of Commerce:- Rs97.47 crore
- Bank of Maharashtra: Rs 49.82 crore
Therefore, millennials have developed awareness towards thedomination, organization, and manipulation of big banks in the financialsector. Customers are demanding the end of the dominance of huge companies andask for more transparency, honest behaviour and sensitivity. Well, most of thebanks are getting on track and responding it to the demand but it seems toolate as the generation has lost all the trust in the Indian financialinstitution.
New Financial Tech Companies as thePreferred Alternative
The advancement in technology is disrupting every sector in theworld and change the way we operate in those sectors. The same can be said forthe financial industry as numerous tech innovations is coming every year. Allthe new application and services that we can handle through our smartphones aregoing to destroy the vertically integrated banking model by making financialinstitutions and customers together and will renew trust by being transparent.
These big banks are unable to make these drastic changes and executenew technologies quickly therefore, the fintech companies are driving digitaladvancements in the banking sector. According to researches, the investments inglobal fintech start-ups are growing well above $40 billion with a compoundgrowth of over 42 per cent from the last five years. Unsurprisingly, millennialpreferences are among the primary motivators of fintech growth.
This fintech is providing the current generation what they wantedthat is, an instant and personalised service that can easily go with oureveryday use technology like smartphones and laptops. Additionally, becausethese new financial companies are effectively familiar with millennial trendsand they can make banking more comprehensible and exhilarating for newgeneration.
Financial start-ups are offering transparency in the financialsector which was very much needed and giving more control over services likedependable customer service and 24-hour immediate access to account reports. Manybanks have already made their move toward this fintech revolution and many newcompanies are maintaining full transparency which is important and it isdisrupting the traditional financial sector.