Millennials and Gen-Z are reshaping trading, favoring mobile-first platforms. Neobanks, building on their digital banking success, are now disrupting retail trading with seamless app-based experiences.
As the Millennial generation enters its prime earning years, with Gen-Z following hot on its heels, a number of interesting differences in trading practices between younger generations and the ones that preceded them are emerging. These differences include interest in other asset classes, trading styles, risk tolerance, and, above all, venues.
Neobanks, which have been very successful in attracting younger generations to their app-based banking services, are expanding into the world of trading. In reimagining the traditional online brokerage in line with these generational differences, they’re seeking to disrupt the world of retail trading just as they have already disrupted online banking.
With deep expertise in trading technology, Devexperts has observed how this shift is reshaping the industry. Below, we’ll look at some of these trends and tie them into the increased importance of app-based trading.
The Millennial takeover
Back in 2019, the Millennial generation surpassed Baby Boomers as the largest generation in the United States (72.1 million to 71.6 million). Additionally, elder Millennials are now earning more than their Gen-X and Boomer counterparts were at their age, and are expected to benefit from around $70 trillion being transferred from Baby Boomers to the generations that succeed them over the next quarter of a century.
This is why these cohorts are so important to financial services firms and why neobanks are making such a concerted effort to capture this market. Getting the Millennial and Gen-Z recipe right has rapidly become of existential significance for any trading business wishing to stand the test of time.
Post crypto boom
The climate in which different generations come of age is of great interest to demographers as it shapes their expectations, values, and mores. Millennials experienced two financial crises (the Great Financial Crisis and Covid) before entering middle age proper, and these have radically altered their relationship to markets.
According to a recent study conducted by investment advice website The Motley Fool, Millennial respondents are nearly twice as likely as Gen-Z and Gen X to own crypto, and almost five times as likely as Baby Boomers. These findings are in line with other surveys conducted by Investopedia and Charles Schwab, which also demonstrate that crypto is far more popular among Millennials than any other generation.
In many ways, crypto belongs to the Millennial generation. It emerged at the height of the Great Financial Crisis, when mistrust for the banking sector and traditional finance was extremely high. At the time, young Millennials were fresh out of college, having to contend with a job market that was reeling under the pressures of a global crisis.
Crypto became a way for Millennials to invest in a new technology that they were not only ideologically attached to, but which also promised outsized returns when compared to other asset classes. Neobanks made this connection early on, and were quick to offer crypto trading and other value-added services such as the ability to earn cashback in crypto, helping to consolidate the Millennial trend towards, and interest in, trading more generally.
Using crypto as a gateway to trading, this generation has since expanded their trading preferences to include a variety of other asset classes. The initial move following the crypto bear market of 2018 was to the trading of equities, which provided valuable experience in centralized listed markets. This was followed by a broader expansion into other instruments such as futures and options during the Covid lockdowns.
Relationship to risk
Another characteristic schism between the generations is their relationship to risk. The Gen-Xers and Boomers who saw their portfolios decimated during the Great Financial Crisis, favored passive investing strategies in its wake, while Millennials were much more comfortable actively trading individual securities across the asset spectrum. This trend towards active trading among younger generations continues.
According to the survey cited above, roughly 70% of Gen-Z and Millennial respondents report that they enter a new position at least once a month. This is compared to 50% of Gen-X respondents and only 24% of Baby Boomers. Millennials and Gen-Z are buying and selling securities much more frequently than their older counterparts, which makes them far more attractive clients to online trading firms.
This trend carries on into the specific style of trading favored by younger generations. According to research by Survey Monkey, 24% of Gen-Z and 26% of Millennials report that they day trade stocks, compared to 15% of Gen-X and 7% of Boomers. Also, around 40% of Millennial and Gen-Z respondents admit to checking their portfolios on a daily basis, compared to around 20% of Gen-X and Boomer respondents.
This much more active approach to trading, paired with a host of personalized client communication strategies (many involving AI) that neobanks have become adept at managing through their apps, is a match made in heaven. It promises a type of engagement and stickiness that brokers of old could only dream of.
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