Millennials, (those born after 1981), are now entering the work force, moving up the ladder, and making financial decisions about their future such as buying a home or car, starting families, and starting businesses. As they do, they are making decisions about the financial service providers they want to work with and how they will save, spend, borrow and grow.
Traditional banking as we know it is at risk
“I don’t see the difference between my bank and all the others”
–Quote from “The Millennial Disruption Index”
The Millennial Disruption Index, a report released in March 2014 by Scratch, a division of Viacom Media Networks, identifies Banking as the industry at the highest risk of disruption.
Some facts from this report to note:
- 71% would rather go to the dentist than listen to what banks are saying
- 70% believe in 5 years, the way we pay for things will be totally different
- 73% would be more excited about a new offering in financial services from Google, Amazon, Apple, PayPal, or Square then from their own nationwide bank
- All 4 of the leading Banks are among the ten least loved brands by Millennials
Millennials are open to change
Another report from May 2014 “The Disruptive Mindset of Millennials Around the Globe,” by Dutch research firm Motivaction International, sampled more than 48,000 adults between 18 and 65 years of age across 20 countries. One of their core conclusions was that “Millennials are unconventional thinkers and they are open to change, much more so than older generations.”
The report also found that “…millennials are more open than previous generations to online transactions like so-called peer-to-peer lending and more likely to consider using large, non-financial companies like Google for basic financial services.”
P2P lending and alternative financing is here
You are now seeing the beginning of the future. Alternative financing groups, such as SoFi (Social Financing,) specialize in providing social financing for student loans, and are moving into mortgage loans. Affirm, started by Max Levchin a co-founder of PayPal, offers on-the-spot financing for shoppers making purchases online with an upfront charge and without additional interest and late fees.
Much has already been written about P2P lending platforms like soon-to-IPO Lending Club and Prosper. These P2P platforms have seen tremendous growth. Prosper, the second largest platform in the US, has made over $1.2 billion USD in P2P loans so far in 2014 compared with nearly $357 million USD, putting it on track to nearly quadruple it’s year over year growth.
P2P Small Business Lending
Funding Circle specializes in offering peer-to-peer small-business loans, with P2P lending leader Lending Club building up its small business loan business as well. Many expect this space to be increasingly competitive as other firms like Dealstruck, Ondeck, Kabbage, and others come online with their own unique twists.
Millennials and their financial future
P2P lending and other forms of alternative financing have left the launch pad and are just starting to break through the atmosphere. Given the mindset of Millennials, as these reports have documented, traditional banks and financial firms are at risk as new ideas and technology in finance emerge.
Prime Meridian Capital Management is an investment management firm specializing in P2P lending strategies. Its flagship Prime Meridian Income Fund is designed to provide investors low cost access to short-duration, high yield consumer loan portfolios by taking advantage of the efficiencies in the burgeoning P2P lending market. The Prime Meridian Small Business Lending Fund was developed specifically for investing in P2P collateralized small business loans backed by creditworthy personal guarantees.
Sources:
“Millennials highly competitive, yearn to be noticed – study”
REUTERS
http://www.reuters.com/article/2014/05/30/usa-millenials-study-idUSL1N0OG08920140530
“PayPal Founder Seeking JPMorgan-Style Longevity With New Startup”
BLOOMBERG
http://www.bloomberg.com/news/2014-06-17/paypal-founder-seeking-jpmorgan-style-longevity-with-new-startup.html
“Is peer-to-peer lending the future of mortgages?”
MORTGAGE PROFESSIONAL AMERICA
http://www.mpamag.com/mortgage-originator/is-peertopeer-lending-the-future-of-mortgages-19772.aspx
“Peer-To-Peer Lenders and Small Business Loans”
CLARK HOWARD
http://www.clarkhoward.com/news/clark-howard/personal-finance-credit/crowdfunding-offers-new-twist-p2p-lending/nCtcp/