How Millennials are Changing the Financial Sector and the Economy in General

Young smiling millennial business man outside holding tabletThe millennial generation is getting older and wealthier, although at a much slower pace than most of the previous generation. Nonetheless, now that millennials are moving further up the food chain, they are beginning to change the country in a number of ways.

Millennial Demographics & Traits

There are two key differences among many others between the generation born between the early 1980s and the 1990s and the generation that birthed millennials. First, millennials are poorer, have less job prospects and prefer simpler lives that involve less spending and more living. Second, this generation is more digital, mobile and interested in connecting with people all across the world. These two broad characteristics are seen generally throughout the younger generation and are in stark contrast the previous generation known as the baby boomers.

Key Differences Between Millennials and Baby Boomers

One of the best examples of the differences between millennials and baby boomers is the vast changes occurring in the financial sector. Investment banks and private equity funds alike are hemorrhaging cash into tech startups for a reason. The financial technology sector is fast growing and disrupting traditional financial institutions. This trend appears to be accelerating mainly due to the emergence of millennial consumers who are demanding more socially conscious, digital, efficient, and convenient services.

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Credit Card are Changing

Credit card companies are beginning to change their services dramatically. For example, the announcement of the Chase Sapphire Reserve credit card caught the attention of many millennials. The card drew so much attention not only because it offered travel rewards points and an appealing sign-up bonus, but also because it offered $300 in annual travel credit. Chase is clearly appealing to the younger generation by connecting its new credit card with the jet-setter lifestyle, which aligns perfectly with the ideals of millennials.

A Shared Economy

But what does this mean for the rest of the economy? A new term known as the sharing or shared economy has emerged to describe the proliferation of services such as Airbnb and Uber. These companies and many others operate in a way that allows individuals to temporarily share property to others for a profit. This market didn’t exist in great proportion before millennials and their vagabond-esque ways came into the picture.

Traditional is Out

Credit card companies, seeking to take advantage of this rising travel-focused generation, have introduced many different rewards programs tailored towards the busy millennial on the go. Credit cards offering rewards points on purchases towards purchases through companies like Uber have grown exponentially over the past few years. At the same time, rewards points for hotels have lost ground significantly as millennials shun traditional hotels. The same trend can be seen in the retail industry. Traditional brick-and-mortar shops, especially malls, are on the outs, and in some cases even facing bankruptcy. Instead, tech savvy millennials are shopping at online retailers such as Amazon, which currently dominates the online retail market. This has led to a rise in the popularity on retail credit cards, mostly ones that cater to online purchases.

Final Thoughts

Clearly the millennial generation is going to drastically change the shape of the financial sector in a very permanent way. Credit card companies and the banking industry are shifting focus dramatically. Rewards programs are going through major transitions and entire sectors of the economy are being hollowed-out physically and rebuilt digitally. For those who keep up with financial trends, expect more of the same over the next decade as millennials begin moving into upper management and top-level investment positions.

Posted on April 21, 2017 by in Personal Finance

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