Break the Bank Part 1: Bank of Netflix

Charting a new course for credit unions in the millennial economy.


Highlights:
  • Millennials (and Gen Z) have a well-rooted distrust of banks
  • Hollywood and pop culture reinforces this distrust (just watch John Oliver)
  • Banks are just one piece of the economic uncertainty pie

In a 2017 opinion piece for recode, SelfScore CEO Kalpesh Kapadia decried the ongoing Wells Fargo scandal and shared his vision and rationale for a millennial-focused ‘Netflix model’ for banking.

Not since the aftermath of the Great Depression, have we witnessed such a low level of confidence in banks and financial service firms as in the past ten years. This fledgling confidence has produced a generation of uneasy consumers, distrusting of financial institutions and broader corporate culture, something expressed by the majority of millennials.

And why shouldn’t they be wary? Here’s just a small sample of the economic, financial, and banking turmoil witnessed by millennials (and Generation Z) since 2000.

2000
  • Dotcom bubble bursts
2001
  • 9/11 terrorist attacks, deepening the 2001 economic recession
  • Enron scandal
  • WorldCom bankruptcy
2002
  • Arthur Andersen conviction
  • Sarbanes-Oxley Act
2003
  • Mutual fund “late trading” scandal
2005
  • Riggs Bank money laundering settlement
2008
  • Bear Stearns, Lehman Brothers collapses
  • Subprime mortgage crisis (AIG, WaMu, RBS, etc.)
  • Global economic recession
  • Bernie Madoff Ponzi scheme
  • Countrywide Financial political loan scandal
  • TARP/EESA
2009
  • Wells Fargo housing discrimination settlement
2010
  • “Foreclosuregate” (Bank of America, Citigroup, GMAC, JPMorgan Chase, Wells Fargo)
  • Wachovia drug-money laundering settlement
  • Dodd-Frank regulatory reform
2012
  • London Whale trading scandal (JPMorgan Chase)
  • Rogue state money laundering settlements (HSBC, Credit Suisse, ING, Standard Chartered)
  • Bank of America/Countrywide Financial and Wells Fargo discrimination settlement
2015
  • LIBOR scandal (Bank of America, Barclays, Citigroup, Deutsche Bank, JPMorgan, RBS, UBS)
2016
  • Deutsche Bank’s Russia money-laundering settlement
  • Wells Fargo fake accounts

You get the picture. If the news of the day wasn’t enough, Hollywood and pop culture reinforces this distrust by emblazoning the images of corporate financial malfeasance into our collective retinas. The Wizard of Lies (2017), The Big Short (2015), Margin Call (2011), Too Big To Fail (2011), and Wall Street 2 (2010) all received critical acclaim and wide distribution.

On TV (and online), no one has been more vocal or more effective at communicating financial malpractice to millennials than HBO’s John Oliver. Through his week-in-review show, “Last Week Tonight”, Oliver devotes substantial time and resources to share financial stories with his audience. Since going on-air in 2014, “Last Week Tonight” has covered the following contentious consumer financial issues: income and wealth inequality, payday loans, student debt, lotteries, the Panama Papers, daily fantasy sports, debt buying, retirement plans and financial advisors, car finance and subprime lending, and the Wells Fargo scandal.

Oliver (a Brit), perhaps unwittingly and ironically, has become the collective conscience and voice of American millennials at a pivotal time in history. Millennials, uneasy with financial institutions, unstable and unsustainable in their finances (college debt, lackluster job market, high consumption and low savings) are now at the precipice of a new economic uncertainty… a hyper-digital era where AI, machine learning, and increased automation will eliminate white collar and blue collar jobs alike.

The Economist’s Kenneth Cukier, in his 2014 TED Talk, appropriately framed the new economic reality as follows:

“Big data and algorithms are going to challenge white collar, professional knowledge work in the 21st century in the same way that factory automation and the assembly line challenged blue collar labor in the 20th century. Think about a lab technician who is looking through a microscope at a cancer biopsy and determining whether it's cancerous or not. The person went to university. The person buys property. He or she votes. He or she is a stakeholder in society. And that person's job, as well as an entire fleet of professionals like that person, is going to find that their jobs are radically changed or actually completely eliminated. Now, we like to think that technology creates jobs over a period of time after a short, temporary period of dislocation - and that is true for the frame of reference with which we all live, the Industrial Revolution - because that's precisely what happened. But we forget something in that analysis. There are some categories of jobs that simply get eliminated and never come back. The Industrial Revolution wasn't very good if you were a horse.”

Horses. That’s a pretty startling, yet all-too-appropriate if not prescient, comparison. There are millions of 20 and 30-somethings in the workforce, saddled with college debt and uncertain about their future employment viability, that resonate with this reality.

Perhaps even more startling, is that current and future business success depends almost entirely on this generational force. Millennials are America’s largest living and working generation, and will soon be the second largest in terms of spending and purchasing power (currently behind GenX and baby boomers).



Next up, we’ll take a look at the misnomers and “what matters” to millennials - their worldview, priorities, needs, and what all this means for marketing your credit union.


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