Getting into Business Banking Neobanks are best known for consumer banking offerings, however, there is a significant march of digital-first banks moving …
Generation Rent “The Truth”
When I started to put this piece together, I asked myself a simple question…“What has changed and why it seems a whole generation are totally unconcerned about buying property and investing in their own future?”, with a generation that is more interested in a “social hook-up culture” buying a home to raise a family seems furthest from their mind.
As of 2019 figures suggest that up to a 3rd of people aged between 23/38 may never be able to own their own home and half of these will rent property into their 40’s. That is a stark and worrying first sentence for me to write. Indeed, my own nieces and nephews who are in this bracket seem unconcerned about wanting to own property, to them, it seems more of a burden than an exciting opportunity and a strong financial investment in their own future, the stark truth seems that for a large proportion at least, the mindset has changed and the roadblocks to get on the property ladder are much bigger!
What Can Generation Rent Afford?
Between 2018 and 2020 a lot of coverage from mortgage providers was pushed out at “generation rent” trying to dissuade them from renting and moving into the buyers’ market, I might add this didn’t work and whilst some will argue mindsets are changing, my opinion hasn’t, “generation rent” are just not interested…The reality is that a large proportion in the UK do not have the means to save for the deposit required. With the average household income in the UK at £30,800 and the average house price in the UK at £249,633 based on a 25% deposit for first-time buyers they require a £62.408.25 cash deposit which for most is out of reach without the “Bank of Mum and Dad”. Based on saving £500 per month it would take them on average 10 years and 5 months to save the required deposit just to get on the property ladder. For a large proportion, this is unrealistic. Hence the term “generation rent”.
Are Neobanks making a mistake?
Are Neobanks just running on the same wheel as traditional financial institutions, all be it with a hip and funky new message, but still looking to offer the same services to a core demographic that in 5 to 10 years will not be interested in those offerings anyway, that at least in my opinion is what the data is starting to show…
With all this in mind and the fact that 1 in 4 millennials are now digital-only bank account holders, it begs the question why are Neobank’s marching into mortgages and lending when their core client base, a large proportion at least will never look to or even want to get a mortgage or be able to afford one. Are Neobanks making a mistake? It’s true that they have turned consumer banking on its head but based on where they are trying to go and given the investment required and license regulations to even get into those markets, one could argue that the true value which Neobanks own is in the data they have on their customers not in what the customers are worth to them on a subscription basis.
It’s safe to say that Neobanks are winning the “Hearts and Minds” campaign with their users having the deep-seated roots of wanting to challenge and move away from traditional banks.
Digital Banks, Neobanks and “digital disruptors” have already started cutting into the revenues of the traditional and financial markets and institutions.
Read Nick Foggin’s complete deep-dive into Neobanking here