When it comes to money, Millennials – also known as Generation Ys* – have mixed feelings. On the one hand, they have a positive attitude to personal financial planning. On the other, they may be more inclined to indulge in discretionary spending, leading to overspending and difficulties in budgeting effectively.
Adding to this dilemma is that Millennials prioritise immediate gratification over long-term financial goals, such as saving for retirement or building an emergency fund, and may be less inclined to seek advice or guidance from financial professionals.
Studies have found that this, along with a lack of financial literacy, impacts greatly on their ability to successfully manage their personal finances, according to Prof Marko van Deventer, recent recipient of the NWU’s Most Productive Emerging Researcher Award. His ongoing research focuses on behavioural finance in particular, and he says the financial and banking behaviour of Millennials is well worth observing.
“Given the higher earning potential and disposable incomes associated with Generation Y consumers, especially those who have graduated from university, it is important to understand their banking behaviour. Universities and financial institutions such as retail banks can use these insights to identify gaps and deficiencies more effectively in this group’s financial affairs.”
The most informed consumers in history
Prof Van Deventer, from the Faculty of Economic and Management Sciences, also looked at how digital technologies influence Millennials’ consumption-related behaviour. “Generation Y certainly has technological astuteness and they are able to quickly adapt to innovative technologies.”
He says Generation Y consumers have access to a global database of consumption-related information, including product comparison websites, online product reviews and demonstration videos, which makes them the most informed consumers in history.
“They can easily compare banking products and services and ultimately choose a retail bank that best satisfies their banking preferences and needs.”
He explains that this generation also has an increased appetite for banking services, which makes them an important current and future banking segment.
“These banking behaviour studies report important findings for retail banks that would like to target Generation Y consumers specifically in terms of bank identification, bank brand personality, loyalty, bank image, customer satisfaction and service quality. Retail banks can use the findings to devise appropriate marketing strategies for effectively targeting this market, as well as maintaining and strengthening their loyalty and trust.”
Since starting his research, Prof Van Deventer has published several research articles on mobile banking behaviour. “I believe the insights gained from these studies assist retail banks in their efforts to allay Generation Y consumers’ mobile banking trust concerns. It will also help them build greater trust in their mobile channels and gain a competitive advantage.”
Psychological factors influence financial decision-making
Prof Van Deventer’s research has a great impact on the financial industry in that it also provides insights into the psychological factors that influence financial decision-making and can enhance the effectiveness of marketing strategies.
“My research, influenced by behavioural insights, allows financial institutions to tailor their marketing strategies to resonate with customers on a psychological level. This includes understanding customers’ specific needs, preferences and decision-making processes.”
He says by understanding customer behaviour and preferences, banks can customise their marketing messages, offers and services, thereby increasing customer satisfaction and loyalty and contributing to a more client-focused and resilient financial ecosystem.
Prof Van Deventer’s new research projects will investigate Generation Y consumers’ online investment and gambling behaviour respectively.
In addition, he is looking into consumer behaviour in interactions with artificial intelligence (AI) applications such as banking chatbots.
“I believe this research is important, especially with all the new developments in AI for improving customer experience and optimising the effectiveness of these digital tools,” he concludes.
* Individuals born between 1986 and 2005
Prof Marko van Deventer is the recipient of the NWU’s Most Productive Emerging Researcher Award.
