Did you hear about the girl who asked her father if she should buy a car, but she didn’t know how much it cost? All she knew was what she needed to spend each month on repayments.
What about the guy who didn’t have a job but applied for a credit card anyway – and got approved?
Or the consumer who wanted a bank account with good rates and features, but didn’t want to pay any fees for the privilege?
Generation Y may have arrived as a lucrative and influential consumer group, but financial institutions are struggling to meet the expectations of a customer mentality that has been built mainly on easily accessible credit.
Centre for Skills Development chief executive Peter Sheahan said the argument that that Gen Y “are a bunch of impatient little shits” isn’t necessarily fair.
“We have bred them to be like that because we have made it possible,” he said.
“This mindset shift doesn’t come from nowhere – it comes from a lifestyle that has been fuelled by either their parents’ wealth or their parents’ access to credit. How many family cars and family holidays were funded by reverse mortgages or drawing down on the equity in property?
“There is no question that Gen Y has very high expectations for service and they are used to getting a lot of pretty cool stuff for nothing.”
St George general manager retail bank distribution Andrew Moore agreed the Gen Y mindset has fundamentally changed from the baby boomer mentality of saving for things that you want.
“It is almost like a cultural or social shift now where if you want something you can have it now as opposed to the idea of saving up or prioritising what it was that you wanted,” he added.
“If you think about it, for the last 10 or 15 years that thought process just hasn’t been present and in the case of Gen Y that means for all of their late childhood and all their adult life, they haven’t had to think that way.”
Moore said that the new mindset was fuelling demand for new products – for example, home loans which rely on a family pledge for the deposit or no-fee transaction accounts.
“There is a certain type of customer out there where $3 per month versus $7.50 per month actually makes a big difference,” he continued.
So what can a bank do to change people’s minds and attitudes to banking?
“We are actually developing a product at the moment which is kind of like an integrated savings account and transaction account product, which will make it very easy for the account holder to move money into savings and actually visually see the progress of their savings history against the savings goal,” Moore said.
“We have realised that we can’t just rely on a group of people saying ‘I know how to save’ – it is almost as if we have to help re-educate people.”
ANZ’s Smartypig product takes the concept even further, according to online banking senior marketing manager Samantha Robinson.
Using Smartypig, customers set themselves goals and work out saving plans, with the option to share these plans with their friends and family though social networking sites like Facebook.
“It has been incredibly popular. People aged 18-35 is by far our biggest demographic – just over 50% of our customers fall into that group,” she said.
“Broadly our most common goals are travel, weddings, and first homes or home improvements. The second level is things like kids – saving for your first child or child’s education – cars and computers or electronic gadgets.”
The social element keeps savers on track to their goals, Robinson said.
“Previously you would have spoken to your friends and family and told them about saving up for your first house and people would know that was happening,” she added.
“But today we are seeing less people being willing to discuss finances, so this is a way to get support from your friends.”
And the irony of the situation is that while Gen Y may have a short-term mentality towards their finances, banks still have to take a much more long-term approach to the market.
“One of the challenges financial groups have is creating relevance for their brand in the mind of the young consumer while not alienating the older consumers who [banks] make twice as much money from,” Sheahan said.
“That’s the issue with young people as customers: they are so demanding and they are not worth anything. The fees aren’t good, the spreads aren’t good and the loans aren’t as good. In the short-term they are not a lucrative market, but long term they are.”