How millennials are shaping the future of the financial sector

Manage finances independently without an intermediary

In their relatively young years, millennials have already experienced an astonishing number of global crises: the Asian financial crisis in 1998, the crash of the dot-com bubble in the early 2000s, the global financial crisis in 2008 and, more recently, the corona crisis. Statistically speaking, millennials have less trust in institutions than their previous generations. The Deloitte “Millennial Survey 2019” study states a high loss of trust in politics and business in general. Problem solving skills are given to private individuals rather than official representatives. This attitude goes hand in hand with great skepticism about the lack of solutions to major social issues such as the climate crisis or retirement provision, which is of particular concern to millennials.

Despite concerns about the future, according to the study, millennials in Germany are mostly satisfied with their lives and are very convinced of their digital skills. Millennials are self-confident and agile, aren't afraid to speak their mind and prefer to take their fate into their own hands. So did their finances. The globally connected generation prefers fast, efficient services and avoids intermediaries. Why rely on slow, often fee-based banking services to execute simple transactions when FinTechs provide highly efficient solutions?

Financial platforms thanks to distributed ledger technology

Distributed ledger technology, or DLT for short, no longer requires traditional intermediaries such as banks. Transactions in the network are added as a data block to a chain of previous blocks in a tamper-proof manner and stored decentrally. Payments with cryptocurrencies, signing smart contracts or other digital transactions are possible within milliseconds thanks to blockchain technology. Instead of an intermediary, participants only need a platform from a technical point of view.

Millennials are driving developments in the financial sector, either directly through their involvement in young, disruptive FinTech startups or through their demand for modern, customizable and self-responsible financial solutions. The trend here is clearly towards cryptocurrency and digital assets. According to a representative survey by Blockchain Capital, 18% of US millennials already own Bitcoin; around half of all millennials in the US plan to buy Bitcoin in the future. Cryptocurrencies or electronic securities that are operated using a blockchain not only offer millennials a digital investment option to suit their individual taste.

Trading cryptocurrencies, paying with digital currencies, or transmitting investment tokens is fast and efficient. The flexibility and high level of security of digital transactions also favor new business models that make previously hard-to-access assets available to a wide audience.

The financial sector of the future in the hyperconnected business world

Distributed Ledger Technology is paving the way to a hyper-connected economic world. The concept of a hyperconnected business world creates a cross-company digital ecosystem that focuses on the changing and very different needs of customers. Individual companies participate in the network with connected, blockchain-based services. Customers move through the ecosystem and use connections in the way they currently think makes sense. The result is a personalized, efficient and potentially limitless user experience that reverses the classic balance of power between company and customer.

The future of the financial sector relies on modular applications for individual cases instead of universal solutions. The characteristics of blockchain technology support this transformation of financial services by fundamentally changing business transactions and data storage. The HFS Research “Top 10 Enterprise Blockchain Services 2020" identifies a blockchain “six-pack” that has disruptive potential for companies:

• Distributed data across peer-to-peer (P2P) networks reduce selective outages
• Trust through the principle of consensus makes the middleman superfluous
• Immutable transactions ensure trust
• Hashing-based data ensures integrity and security
• Automated smart contracts promote contactless interactions in process chains
• Public and private blockchain solutions give enterprise users flexibility

Liberalization of digital assets

Financial services are becoming more global and faster. Real-time transactions directly from smartphone to wallet and peer-to-peer are a future trend that can no longer be stopped. Decentralized finances offer users the opportunity to decide for themselves where and in what form digital assets should be invested, temporarily parked or secured. Asset developments and returns are achieved by Investments in tokenized assets realized or through trading in cryptocurrencies; the options are manifold.