Young surfers putting a bomb under online finance

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Web-savvy 16- to 22-year-olds will soon be sending shockwaves through the online financial industry. According to Forrester Research*, young consumers will quickly shift their focus from entertainment to finance and grow into prime financial customers.

With technologies such as Napster, young consumers are catalyzing a revolution in the entertainment industry. Today, the battleground is music because that’s what kids care about. But as they mature, young consumers will rapidly shift their focus to online financial services including loans, insurance, and investments.

“Having grown up in a digital world, young consumers are not simply ahead of adults, they’re different from adults,” said Ekaterina Walsh, an analyst at Forrester. “The Net generation is just beginning to show financial potential, but it will quickly grow into a prime market. And this group’s reliance on the Net will impact its financial choices.”

It may appear that young consumers simply live on the edge of the technology adoption spectrum, but there’s more to it. Instead of just adopting technology faster, young consumers actually have internalized it – because they have grown up with the Net, they use it instinctively.

Ninety percent of 16- to 22-year-olds do something else while surfing on the Net – like listening to music, watching TV, or chatting on the phone. Wired young shoppers also engage in more sophisticated online activities, such as demand-driven pricing and file sharing.

More importantly, many applications are not only widely used by young consumers, but they are often created by young people. Napster was created by a 19-year-old college freshman who realized technology could make his life easier.

As young consumers zip past a series of life changes in their late teens and twenties, their lives become loaded with financial responsibilities. At 22, virtually all consumers have bank accounts and 83% have credit cards. Key milestones in young consumers’ lives often involve a financial aspect, such as school or car loans.

And although they are just starting to dabble in investing, they have little fear – they are 23% less likely to say that they don’t like taking investment risks. These Net-powered investors are almost four times more likely than adults to trade with an Internet-only firm.

As soon as young consumers start adding financial complexity to their lives, the Net plays an integral part in how they will research and transact. The propensity to research financial products online is stronger in young consumers than adults.

The gap with adults opens widest with credit cards, which young consumers are three times more likely to research online. And while fears about security and privacy dampen adults’ desires to apply online, young consumers click away – they are four times more likely to apply for financial products online.

Digital transactions have already taken off among wired young consumers. One-third of bank account holders make account transfers, a quarter pay bills online, and of those with brokerage accounts, 55% trade stocks and 12% trade mutual funds.

“Although it’s impossible to predict how these kids will revolutionize financial services,” added Walsh, “it’s not too early to examine how their technology attitude shapes the universe of brands they will consider when managing their financial lives. These consumers already consider technology and Internet companies as financial providers and trust Yahoo! and Amazon as much as Fidelity and E*Trade to hold their money.”

* The Next Financial Consumer. Forrester drew on data from three surveys, with a combined total of 117,000 consumer responses in North American households.
Forrester

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