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Why Millennials Are Choosing Financial Tech Startups over Big Banks

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Why Millennials Are Choosing Financial Tech Startups over Big Banks

Banks has been the primary method of saving and exchanging of currency for centuries but since the world’s economy is collapsing the dynamics is 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. During recession, most of the millennials were studying in college with a massive student loan or entering into the market where there were no proper jobs. Therefore most of the people from an earlier generation lost their faith from traditional banking systems.

Well, a major population of millennials have a great level of disagreement with big banks even after recovering from the financial crisis. According to a report by the World Bank, almost 50 per cent of millennials believe that due to recession, the way they perceive bank has changed. They have seen how reckless, greedy and corrupted the banking system which caused a major downfall to the economy and they faced a huge problem in finding a problem or build wealth. And not many of us indeed want to have a conversation with banks.

The Problem with Traditional Banking System

The only reason why the current generation doesn’t like the traditional banking system is the bank themselves. Since the starting of this 21st century traditional banks has suffered over billions in fines and rectify for customer exploitation. Recently there have been many bank frauds that have shocked 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 is trapped in this scam are:

  1. Bank of India:-                      Rs 754.77 crore
  2. Indian Overseas Bank:-          Rs 771.07 crore
  3. Union Bank of India:-            Rs 458.95 crore
  4. Bank of Baroda:-                  Rs 456.53 crore
  5. Allahabad Bank:-                 Rs. 330.68 crore
  6. Oriental Bank of Commerce:- Rs 97.47 crore
  7. Bank of Maharashtra:            Rs 49.82 crore

Therefore, millennials have developed awareness towards the domination, organization, and manipulation of big banks in the financial sector. Customers are demanding the end of the dominance of huge companies and ask for more transparency, honest behaviour and sensitivity. Well, most of the banks are getting on track and responding it to the demand but it seems too late as the generation has lost all the trust in the Indian financial institution.

New Financial Tech Companies as the Preferred Alternative

The advancement in technology is disrupting every sector in the world and change the way we operate in those sectors. The same can be said for the financial industry as numerous tech innovations is coming every year. All the new application and services that we can handle through our smartphones are going to destroy the vertically integrated banking model by making financial institutions and customers together and will renew trust by being transparent.

These big banks are unable to make these drastic changes and execute new technologies quickly therefore, the fintech companies are driving digital advancements in the banking sector. According to researches, the investments in global fintech start-ups are growing well above $40 billion with a compound growth of over 42 per cent from the last five years. Unsurprisingly, millennial preferences are among the primary motivators of fintech growth.

This fintech is providing the current generation what they wanted that is, an instant and personalised service that can easily go with our everyday use technology like smartphones and laptops. Additionally, because these new financial companies are effectively familiar with millennial trends and they can make banking more comprehensible and exhilarating for new generation.

Bottom Line

Financial start-ups are offering transparency in the financial sector which was very much needed and giving more control over services like dependable customer service and 24-hour immediate access to account reports. Many banks have already made their move toward this fintech revolution and many new companies are maintaining full transparency which is important and it is disrupting the traditional financial sector.

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