Millennials are often portrayed in the media as struggling to buy property and less well-off than their parents. But the truth is, a lot of them are rich; a 2019 report estimated that in the US alone, there were 618,000 millionaires born between 1981 and 1996.
Who do they want to manage their money? Not necessarily the incumbent banks, like Coutts and HSBC, which traditionally catered to high net worth individuals.
Instead, the younger rich are turning to a new wave of neobanks as millennial millionaires demand digital-first experiences, as well as features like robo-advisers and crypto trading.
In Episode 3 of The Sifted Podcast, sponsored by Zendesk for Startups, we dive into the minds of millennial millionaires, and the challenger banks after their money. But first, just how big is the neobank opportunity?
You might think millennial millionaires are a niche customer base — but it's a group that's getting bigger and bigger.
Not only are there already more than 600,000 millionaires in the US, but they’re predicted to get five times wealthier over the next decade as they stand to inherit $68tn in the next 25 years in the US alone.
Where do they keep their money? According to a CNBC Millionaire Survey, nearly half of millennial millionaires have at least 25% of their wealth in cryptocurrency. This means private banks, brokers and wealth management firms will need to swap out their product offering from traditional stocks, bonds and hedge funds for bitcoin.
So what’s the hold up?
Consumer trust is a major obstacle for neobanks for the uber rich. New players don’t have the name recognition that the Couttses of the world do.
In 2020, only 45% of UK consumers believed that neobanks would survive the next 12 months.
In 2019, neobanks in the UK lost between £5 and £15 per customer due to weak revenue streams and increased spend on customer acquisition
Another obstacle is that neobanks often have an unclear business model, and have traditionally focused on hype over profitability.
In 2019, neobanks in the UK lost between £5 and £15 per customer due to weak revenue streams and increased spend on customer acquisition.
But that doesn’t mean doom; UK neobank Starling Bank was able to reach profitability on a monthly basis by focusing on SME banking and business loans.
What about Gen Z?
While not a significant portion of millionaires yet, Gen Z, or the under-24s who make up today’s largest generation at 32% of the global population, are beginning to enter the workforce.
And the same millennial rules don’t apply to this younger cohort says Nafeesa Jafferjee, cofounder of Quirk, a new financial-adviser app for youngsters.
“Neobanks and banks [generally] are still a ‘one-size-fits-all’. But with the younger generation — because they were exposed to tech from the beginning — it’s like, what can they do for me and my lifestyle,” she tells Sifted.
They care about life and not just numbers… The neobanks aren’t making this fun and engaging
Jafferjee says Gen Z is also becoming financially engaged at a younger age largely due to online "Finfluencers".
“[Money] is not fun, you don’t deal with it till you’re older, but that’s completely changed now… they care about life and not just numbers. The neobanks aren’t making this fun and engaging,” she adds. Of Monzo’s 5m users, only around 2% are under 18.
Who are the neobanks catering to the uber rich? Listen to Episode 3 to find out
In this episode, Sifted editor Michael Stothard interviews senior reporter Isabel Woodford on this new generation of high net worth individuals who are demanding a digital solution for their private banking.
You’ll also hear from Chad West, a recently minted millennial millionaire who headed up communications at Revolut in its early days; Schuyler Weiss, CEO of neobank Alpian; and Henry Fudge, founder of 220, who wants to take “Soho House as a concept and put it in financial services”.
We’ll also hear from a less-than-impressed Eliza in the latest Baby Shark Tank, who grills Weiss on why exactly she should store her marshmallows with Alpian.
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Host: Michael Stothard
Producer: Georgina Ustik
Editor: Tim Smith