Whether it’s the fear of missing out (FOMO) or just simply not wanting to be left behind, young investors and businesses do not want to be left behind as we begin to see our traditional world of finance evolve and download itself into the 21st century.
Traditionally, an individual wanting to move funds around must go through an intermediary (a bank). However, with the emergence of finance technology (“FinTech”), consumers are able to engage with one another without having to go through banks or other institutions.
FinTech, according to PWC, describes the intermingling of financial services with technology available on the market today. But, why should young investors, specifically millennials, look to new technologies such as digital finance as we approach 2019?
#1 –Understanding the Lay of the Land
In a constantly evolving digital world, financial institutions are looking for ways to improve the overall banking experience such as providing additional services for online banking, utilizing chip credit cards, and even addressing blockchain technology and cryptocurrency.
Online Banking
For the average millennial, maintaining a decent credit score is a priority. Unfortunately, with massive amounts of student debt and financial loans, it becomes difficult to overcome this hurdle.
Yet, individuals are still looking for ways to optimize their financial scenarios, even if it means convenient and efficient banking. With better and more improved mobile banking services being introduced into the market, the trending shift towards these digital avenues continues.
Millennials love the idea of a “one-stop shop” for mobile banking and fiscal management. By utilizing mobile banking services like PayPal and Venmo, users have the ability to quickly transfer and move funds from one location to another. Additionally, applications like Credit Karma that provide not only an estimated credit score, but matches the user with potential credit cards and/or loans that may be available, based on his or her score.
Credit Cards
Going back to the 2008 global economic crisis, the idea of heavy debt has scared a great deal of millennials away. Specifically, when it comes to credit cards, many millennials prefer to carry cash over the plastic, according to a Bloomberg report.
TransUnion, one of the three major credit bureaus, reported that millennials have increased the use of personal loans, at the expense of using a credit card. Yet, the societal need to have “good credit” still weighs strongly in favor of this demographic using the plastic.
“Millennials are more experienced in other forms of payment,” Todd Nelson, senior vice-president of strategic partnerships at LightStream, told NerdWallet. According to Nelson, other digital payment methods help facilitate millennials’ decision to avoid the traditional avenue of applying for a credit card.
As such, financial institutions such as JP Morgan Chase and Bank of America need to find new ways in which to encourage millennials to apply for credit cards. Currently, credit card issuers are looking for new ways to entice millennials to come on board.
Blockchain Technology
This past year, blockchain technology has had a run for its money. Major companies like HP Enterprises, IBM, and Walmart have announced its intention to utilize blockchain technology across its digital supply chain.
According to a PwC report, 84 percent of executives surveyed said their companies are “actively involved” with blockchain technology. But what is blockchain technology?
In short, it is a decentralized digital ledger that provides a transparent, but encrypted means to upload and view information across the supply chain of almost any industry. Unlike most of the centralized systems we are used to, no one party maintains control over the information, making it seamless for any two or more parties to engage in transactions with one another.
Like a Microsoft Excel spreadsheet, individuals with specialized expertise in coding are able to write in entries of information providing a clear record of how it has been uploaded across a number of . The technology utilizes cryptography, a mechanism that has been around since as early as WWII. Think of it as the solution to Wikipedia which has allowed users abroad to edit its content permissions.
Millennials can really benefit from this technology, as they are the tech-savvy demographic that has grown up with the internet and now seeing the birth of a new type of technology. According to the Foundation for Economic Education, the 2008 financial crisis traumatized the generation—millennials no longer trust these institutions, and are well-founded in their thoughts, in light of recent data breaches over the years, like Equifax and Facebook.
This technology has introduced the demographic to the cryptocurrency community.
Cryptocurrency
For the generation that demonstrates they can do almost anything with their fingertips at their devices, cryptocurrency seems to fit in fairly well.
Introducing “digital money” into their world falls in line with other forms of mobile payment like Venmo and PayPal. Cryptocurrency acts as a digital currency that users can purchase, sell, and trade without having to go to banks or other intermediaries.
This generation embraces new technology in hopes of making their lives more convenient and less “dramatic.” Similar to the stock market, this is a unique way in which millennials who may not have invested in the stock market, find new ways to invest in companies that they understand or prefer to learn more about, speaking their lingo.
#2 –Becoming Comfortable with Being Uncomfortable
Consumers need to learn to become comfortable with being uncomfortable.
According to a report by CNBC, millennials between the ages of 25 and 34 have an average of $42,000 in credit card debt, each, as initially gathered by Northwestern Mutual’s 2018 Planning & Progress Study.
As individuals grow older and mature in life, their responsibilities and expenses grow. The pressures of maintaining healthy credit with a well-paying job do impact how millennials approach their fiscal responsibilities, which is why as mentioned earlier, student loans and other personal loans seem more attractive.
Whether we are talking about the stock market or the cryptocurrency market, speculation continues to drive the manners and habits in which people decide to invest or cash out. Market volatility can teach us a lot about the investing habits of not just local communities, but also of communities on a global scale.
#3 –Work, Travel, Save, Repeat
One major highlight from the blockchain technology and cryptocurrency spaces is the unlimited geographic scope innovation can bring.
This past year, we have seen more startup businesses gravitate overseas to help expand its operations. Many of which are tropical and/or luxurious locations such as Mauritius, Switzerland, and Malta.
What’s unique about this space is the almost necessary requirement of travel. Think about study abroad programs for the digital age. In order to further the level of knowledge and education about the technologies behind these ventures, traveling to these places is essential to seeing the application of the technology.
Mauritius
Small in size, but tropical all around, the island of Mauritius plays host to what it believes is a state-of-the-art infrastructure, hoping to promote a rapidly growing environment for newly innovated blockchain companies. Similar to Singapore’s stance on the technology, it remains neutral as to newly-created startups. Yet, Mauritius does not consider initial coin offerings, or ICO’s to be securities, as defined under the SEC’s Howey Test. Under Mauritius law, unless an ICO whitepaper defines the token in question in such a manner that meets the elements of Howey, that ICO will continue to remain unregulated.
Last year, the country issued its open call for innovators to take advantage of the Regulatory Sandbox License (RSL), which allows companies to begin its operations, despite the absence of any formal licensing framework.
Switzerland
From the sandbox to the “Crypto Valley”, Switzerland, holds itself out as the “Silicon Valley” for the cryptocurrency realm. Last year, Switzerland implemented options for companies who accumulate around $1 million in third-party funds to help test their financial technology ideas, without having to worry about regulation.
The country is openly welcoming companies and innovation to help establish a regulatory-friendly environment for those advocating for a healthy regulation of the technology, said Attorney Valentin Botteron, in a previous interview with CoinTelegraph. Valentin, who has a PH.D. in Anti-trust laws, was very open to Switzerland’s approach to the fintech space.
Malta
Another example is Malta. Nicknamed “Blockchain Island”, Malta became one of the first countries in the world to legalize the blockchain technology, demonstrating its desire to be a pioneer and forefront for this technology. The laws passed by the Maltese Parliament provides for a regulatory framework for distributed ledger technology. Although we have seen a lot of talk in this area, there hasn’t been much action going on with several question marks remaining over when companies in this space can begin to operate.
Earlier this autumn, the Delta Summit was held on its island, which comprises of over 3,000 attendees and a large number of thought leaders from all over the world. With the increased global interest in the Maltese government creating a future for blockchain technology, many companies are starting to migrate operations over there.
“Establishing our European headquarters here in Malta will help to further strengthen our presence in the region,” said Calvin Cheng, CEO and Co-founder of ABCC, one of the sponsors of the Delta Summit. According to ABCC, by providing an ecosystem where token holders are also stakeholders, there is a large incentive for good trading behavior. “If a currency does not have the right fundamentals, its price cannot be sustained,” said Cheng. He also explained that businesses choosing to establish operations on the island, helps encourage the creation of more employment and investment opportunities for the country and that ABCC is looking at Switzerland, Liechtenstein and Gibraltar, and emphasizing the importance of regulations in the six to twelve months – regulations impose a huge impact on the survival of exchanges.
At the end of the day, millennials in addition to the average consumer, are in for quite a ride in the financial community, as we lie in wait to see how the birth of these new technologies are received.
