December 2019

We’ve long been intrigued by the concept of the 100-year life, an idea first coined by Gratton and Scott in their intriguing book with the same title.

Now, whether as they claim, a child born this decade has an odds-on chance of becoming a centenarian or as stated by the ONS earlier this month, the figure is overstated and, just over 90 is more realistic. It’s fair to conclude that people are living for longer and that this will  have a fundamental impact on how people live their lives and their relationship with work,  education and money. Not to mention cultural shifts as society gets to grips with an ageing, working population who are adopting more innovative lifestyles to sustain their longer lives. Despite this acceptance, there still remains only pockets of innovation in savings, investments and retirement solutions. With this in mind we undertook quant and qual research to better understand the drivers for saving and investment products for the next generation.

 Same, same, but different

We undertook research with two groups, those aged 20-30 and those aged 50-60 to gain insights into the critical factors that drove satisfaction, retention and advocacy. Interestingly, many of the drivers were the same, albeit the prioritisation of them was different. Unsurprisingly, a simple and intuitive mobile experience was critical for the younger audience, with ‘human’ customer service less of a priority. Rewards, whether commercial or gamified, were prioritised over interest rate. Interestingly, the values of the business being  aligned with their personal values and ‘help saving’, whether education tips and content or automated savings pots, scored highly for the younger audience but did not feature with those over 50.

Building on our research we identified 5 pillars for businesses to consider when striving to engage with this next generation of savers.

People are seeking a less formal relationship with money and financial advice.

Open Banking has enabled more human apps such as Cleo, Rise and Stash to deliver personalised advice as to how their users can make better spending decisions and see how small deposits can go a long way towards their saving goals. Most of these services are delivered through application based chatbots, which deliver nudges and savings advice in real-time, in a colloquial tone of voice free of judgement.

Our research has found that younger audiences see more value in this advice and simple experience, then in generic CRM programmes and more formal advice which is often deemed inaccessible.

The opportunity:

• Adopt a shift in language to make finance more informal, fun and engaging

• Realtime and ongoing advice, updates and highly personalised information to keep finance front and centre as opposed to something that just involves an annual statement

It’s more important than ever that current and future generations have a reasonable level of financial literacy in order to be able to both, understand financial products and the implications of their decisions. 

Echoing our research, a 2018 PIAAC study showed England & NI to have one of the lowest levels of financial literacy in the developed world and below the OECD average for both computational skills and Interpretative skills.

This lack of knowledge coupled with lack of interest, partly driven by anger at the corporate greed that led to the financial crash, the booming house prices, wage stagnation and general sense that, no generation has ever had it so bad, is significantly impacting this generation’s ability to plan for a future life stage where they don’t have to work.

The opportunity:

• Start early and ingrain positive behaviours in children, possibly linking their first current account to a savings account with a number of piggy bank pots for different goals - Step, soon to launch in the US is a good example of this.

• Dramatise the impact of making small changes over the long term i.e. an additional low value contribution to an investment or slight monthly overpayment on a credit card balance.

• Create products and services that support this generation as opposed to making them feel like they are being judged or that saving is futile. Ensure that such tools are elastic allowing for financial holidays for career changes, travel and retraining and flexes in income as opposed to the expected gradual year on year increase. 

Our research found that rewards and recognition are more important than interest rates. Coupled with the fact that many people aren’t engaging with the traditional concept of financial planning and saving, there’s a real opportunity for products and services to leverage gamification to drive ongoing interest, change behaviours and drive up financial comprehension.

One product already focusing here is Nestlings, a soon to be released, saving app using a variety of fun characters inhabiting an imaginary world who each trigger different savings actions depending on various factors within the users spending behaviour and time cycle.

TMRW in Thailand released their app earlier this year which included a money management game to help customers meet their savings goals in fun-sized, achievable steps. The game was designed to entice saving, allows the customer to level-up and build a virtual city that gets bigger as savings increase.

The opportunity:

• Reimagining the world of finance through other more accessible channels could really enhance and encourage our connection with money

• Interaction in micro ‘surprise’ moments is a powerful thing and one which could be harnessed using a more organic and rewarding model.

There was a general feeling in the research that the majority of financial products don’t truly reflect the way people plan to live their lives. The major criticism was a lack of flexibility. People expect to be able to toggle products on and off or port them from one job or address to another, seamlessly.

There are a few examples of pay as you go insurances that are more reflective of people’s needs but many other financial services have done little to innovate in this space.

The opportunity:

• Understand that the future multi-stage life is going to be very different to the traditional three stage one and build products and planning tools that truly reflect this.
• Be ready for the introduction of the Pensions Dashboard and plan how you will integrate this into your experience.
• Invest early in Open Banking enabled products and services to offer more connected and valuable services to your customers – adoption will reach a tipping point in the next decade.

Not necessarily robots but the technology that’s increasingly imbedded into the apps and devices they most use on a daily basis.

The audience see value in increasingly, automated services that support their goals i.e. rounding up payments and putting their change to a savings pot. And they are confident interacting with conversational AI for simple tasks and questions.

Likewise, Robo advice was seen as appealing and a way of democratising access to investment advice but they did have questions and were sceptical as to how well AI-powered portfolios would perform. Importantly, there is a time and place when they still wish to talk to a human but face to face is seen as less important.

Opportunities:

• Explore use cases for AI within products and services aimed at this audience
• Pilot solutions and include customers in your alpha testing process
• Consider your ethics policy and internal communications strategy before scaling AI solutions

The pace of change has never been so great, the adoption of technology is growing exponentially and the customer expectation bar keeps getting higher and higher. In addition, customers appear destined to lead very different lives to those of previous generations and the onus is very much on business to create the products and services that fit these changing requirements.

 We believe this represents a game-changing opportunity. But you have to act fast to make it count.

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