After Millennials, it’s fintech time for baby boomers

AUTHOR: Srivathsan Karanai Margan

The emergence of new technologies coinciding with the millennial generation coming of age has turned out to be a golden age for industrial re-imagination. Millennials, with their increased appetite towards entrepreneurship, have founded several companies across every industry vertical. The common characteristics of these companies are to question the traditional products, processes and services, look at them from a different perspective to effect better customer experiences and to reinvent them by leveraging the emerging technologies.

Fintech and its branches insurtech and wealthtech seek to transform functions of the core finance and banking, insurance and wealth management respectively. The primary areas of fintech action are concentrated on providing a frictionless experience while transacting to pay bills, transfer money and managing savings, investments, borrowing, and insurance.

Originating from millennial creators, fintechs have predominately focused on catering to the needs of consumers belonging to their tech-savvy demographic segment, thus making them the poster boys of the fintech movement. Consequently, the needs of the other demographic segments in general and that of baby boomers in specific are yet to get the full attention of the fintech movement.

Why Baby Boomers?

Baby boomers represent a large demographic cohort that is currently in the happening zone. They are actively navigating their way towards retirement, transitioning from active to a retired-life or already deep into it. With overall investable assets multiple times higher than that of millennials, boomers represent a very attractive financial segment.

However, the challenges faced by boomers are unique. The transition from a benevolent defined benefit to do-it-yourself defined contribution retirement plans happened while boomers were in the middle of their career. Besides, while they were nearing the retirement age, the rule to compulsorily annuitize the pension-pot got changed to provide the freedom to select a decumulation plan of their choice. In sum, the global philosophy towards retirement savings and income has changed and boomers are the first you-are-on-your-own generation to test the sustainability and success of the changed philosophy. With the world slowly turning into aged societies, the evolution of robust tech-enabled financial ecosystems to provide lifetime support to the masses has become essential.

What do Boomers need?

The increasing longevity is upending the traditional three-stage life cycle model comprising study-work-retire. The retired life is now stretching across four prolonged life-stages – active, passive, assisted and supported. Boomers require fintech solutions support them across all the four stages, with overarching mandates to protect and grow the money they have already saved, support them to handle unforeseen financial shocks related to healthcare and ensure that they do not face the nightmare of outliving their nest-egg.

For fintechs, the financial requirements of boomers and the probable solution options, provide an open space with unlimited options to innovate. The solutions could range from any of the categories such as the life-stage supported (at-retirement or through-retirement), support period (one-time or continuous), or on the end-user at focus (for elders to transact, for an authorized caregiver to transact on behalf of elders, or for elders and caregivers to transact between themselves).

Fintechs for Boomers

In comparison to the number of startups that cater to the needs of the millennials, only fewer companies have emerged for addressing the needs of boomers. Within these limited numbers, fintechs trying to resolve their financial problems are lesser than those supporting their wellness and health needs. Of these fintechs, many are emerging to provide one-time support than continuous support.

Fintechs catering to the at-retirement stage extend support for one-time activities relating to consolidating nest-egg and giving advice, considering the individual’s needs, wants and wishes, to set-up a personalized hatching plan for providing life-long income. On the other hand, the through-retirement stage involves supporting a wide range of ongoing activities from periodical transactions to complex engagements. The emerging fintechs are facilitating tasks such as planning (savings, investment, and income-expense management), transacting (payment of bills), creating supplemental income (reverse mortgage, home share, unretirement platforms, life settlements), preventing exploitation (frauds, trust abuse), healthcare (financing long-term/nursing care), and estate planning (executing power-of-attorney, end-of-life choices).

Reaching-out to Boomers

Retirement is a long-term journey that spreads across several decades. As the boomer’s age, they will be facing age-related health conditions and forcing them to navigate through a complex financial and technological maze in an increasingly dematerialized financial ecosystem could be counterproductive for the growth of fintech. The belief that boomers are tech-averse and prefer to physical and cash-based transactions has relatively inhibited fintech from exploring this segment. While this could be true for the silent generation and early boomers, the tech-adoption is seen to be increasing in core and late boomers.

While designing digital tools for the boomers, fintechs will have to consider the following:

  1. Build functionally rationalized solutions with simple senior-sensitive design
  2. Provide single window solutions to orchestrate all relevant services that are thematically grouped
  3. Standardize the functions and design elements of the digital interfaces to reduce the need for seniors to have specific cognitive skills for operating each interface

Above all, boomers who are characterized by their idealism, scepticism and loyalty are unlikely to rush towards reposing their trust on startups and fintechs concerning their life savings for rest-of-life decisions. However wondrous their solutions are, fintechs are suggested to approach this demographic segment in collaboration with trusted incumbents instead of positioning themselves as challengers to the incumbents and disruptors of the market.

About the author

Srivathsan Karanai Margan works as an insurance domain consultant at BFSI– Research and Innovation, Tata Consultancy Services Ltd

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