“Digital natives,” also referred to as the Millennials, Generation-Ts, or Late Gen Ys, can be identified as the segment of the population born after 1985. They are growing in numbers and are very comfortable with 21st century technology. They are beginning to enter the workforce today and most certainly will not access financial services using conventional and traditional banking technology.
 
The unique characteristic of this population segment is that the digital native has been exposed to technology starting at a very young age. Some beginning in pre-school programs! We thought we were just keeping them occupied playing video games, but in reality, we were creating a digital culture that does not fear technology as much as it expects technology. Theirs is a virtual world where the limits of time, distance and location no longer apply.
 
Why talk when you can text?
Text messaging has become the preferred form of communication between digital natives. They have rewritten the language of communication using letter and number codes (there’s the well-known “lol” for “laugh out loud,” but also “ruok” for “are you OK?” and “2d4” for “to die for”). A good resource for understanding the SMS (short message service) text codes can be found at http://www.smsglossary.com/a-to-z.html. For those that prefer to type in full words and sentences, most cell phones contain a feature known as T-9 or Word. These features complete the word as you type or fill in the blank while you type in a message.

The Global Wireless Review, published by Fitch Ratings on May 16th 2008, reported that there were over 232 million cell phone subscribers in the United States. More importantly, data revenues increased 16.5% over the prior year and represented 75% of the total industry revenue growth. Of this growth, SMS messaging was the key driver. For the year 2007 over 2006, Verizon saw a 100% increase in data revenue over the prior year, AT&T saw a 44% increase and T-Mobile saw a 45% increase. It is clear that mobile phone technology and the relationship with data and text messaging in data revenues already plays a major role in the lifestyle of the digital native and should not be ignored.
 
The fascinating aspect of messaging communication is the different forms that are available. Digital natives use instant messaging, chat rooms, e-mail, a cell phone (with texting) to communicate while they are sitting at their desks doing homework—all at the same time! This one characteristic drives their parents crazy because it is perceived as a distraction that they feel interferes with their concentration, but the digital native calls it multi-tasking. ARGH! Marc Prensky, author of “Don’t Bother Me Mom, I’m Learning” (2006), makes it clear… these kids can multi-task and learn!
 
It is a huge paradigm shift in the understanding of the social and learning interactions associated with technology. The difference between the digital native and the other generations, known as “digital immigrants,” those born prior to 1985, is that the digital native has grown (or is growing) up immersed in technology from a variety of perspectives and has developed a natural lifestyle relationship fully integrated with all forms of technology, while digital immigrants did not grow up with it.
 
Key to this understanding is that Digital natives will almost never leave their home or apartment without their cell phone, and if you could put their driver’s license or ID on the cell phone along with a contactless payment chip, they would never take their wallet or purse with them. They expect internet access using wi-fi to be available everywhere and at no charge (this is one trend that is getting real traction) and texting is more important than talking. They buy using plastic, not so much the credit card, but the debit card. Don’t even think about giving them a check. Why would they drive to the bank to deposit a $25 check when gas is approaching $5 a gallon?

A 2008 study commissioned by the British Library and the Journal of Librarianship and Information Science
 
concluded that the Google generation, as they characterized it, is more inclined to use a search engine for research than go to a library.
 
The question to ask is: “Are financial institutions next?”
 
Honk if you got the payment
As a customer, the digital native expects the businesses that they interact with to offer products and services in a 21st century context. They relate to technology in a completely different way and they expect technology to serve them. Why should they go to a website, branch, or ATM to find out if their payroll has been deposited? That is too inconvenient?

Going to a branch, or even a website for information is a “pull” model. The customer has to pull the information from the bank (or source). Digital natives expect their information to come to them in a manner that does not interrupt what they are doing. They want a push model. An example of the push model would be the sending of a message in the form of a ring tone to their cell phone. The ring tone would be the sound of coins tied to a direct deposit. The benefit is that they do not even have to read the text message alert to know that they have been paid. House payment? Instead of coins, how about a door bell! Car payment? Honking horn or screeching tires! Insurance payment? Well, you figure it out. The key is integrating the solution with the lifestyle of the digital native, who doesn’t frequent the branch or even visit your website. Take the bank to them!
 
Has the back office lagged?
There is an interesting paradox here. Retrospectively, it was not long ago that moving to a different city meant changing all of your banking relationships. Conversely, in today’s banking environment, you can move anywhere in the world and not change your banking relationship a bit and you don’t even need travelers checks. Just use the ATM and your debit card at Victoria Station in London and withdraw pounds sterling. The convenience factor has created the opportunity to maintain a banking relationship with a customer literally from cradle to grave. While convenient for the customer and also good for the bank, are the products really changing to reflect 21st Century solutions?
 
The internet has expanded the reach of the community bank and electronic payments have, in large part, eliminated the check as the prevailing payment method. But these popular solutions are merely electronic versions of a paper process; that is, solutions, such as online statements and voice response units (tele-banks) along with internet banks, that have automated frequent and repetitive tasks in the form of balance inquiries, account transfers, copies of statements or checks.
 
A good example of this is retail remote deposit—the automating of a retail customer’s deposit using a scanner. It is not a new technology or solution. More importantly, the digital native is not inclined to write a check. Retail remote deposit has a very limited appeal that will decline as check volume declines.

Their expectations of products and services are based on real-time interaction with information. They perceive technology and its use as necessary as oxygen for breathing. Furthermore, current banking product development is lagging far behind. For example, consider banking organizations that only provide batch internet banking services, offline ATMs, and offline plastic card products. Direct deposit of payroll may be memo posted on the core application, but the balances are not reflected on the bank’s website until after the evening update. Where is the real innovation?

In other words, before you develop a solution, you need to know just as much about your customer and/or employee and how they interact with the technology as you do about the technology. Retrospectively speaking, most new technology solutions in banking are born from the past more than they are a product of a future vision.
 
“Where are the games?”
It is not enough to be focused on just the customer and their technology demands. The digital native is your employee, too, or will be soon. They are accustomed to speed, graphics, flat panels, a wireless mouse, wireless keyboards, DVDs and games. They expect the computer to tell them what they need to know. They are not inclined to sit in a training room and endure hours of PowerPoint presentations on the teller system before they are admitted into the society of banking employees.

When a new employee joins a financial institution right out of high school or college they are amazed to see how far behind most banking organizations are in keeping up with technology. In some cases, they are more advanced in their use of technology at home than they are at the bank. Their reaction is, “Hey where are the training games? What do you mean I have to read a book and take a written exam?”  Don’t wince. “If you are in business,” Prensky writes, “the training possibilities of modding [gaming] should leap out at you!”
 
In essence, when it comes to 21st Century technology, Digital natives are waiting on the digital immigrant to adopt the technology that they are already using. It is important to note that if the customer or employee feels that they are taking a step backwards by virtue of the products and technology that your organization does not have, you will not have them for long. Waiting upwards of two weeks for a new or replacement debit card is not acceptable. Just as sending a letter from the president of the bank welcoming your new ten-year-old customers does not inspire them or get them excited about your bank. In reality, the opposite occurs and becomes a profound ho-hum experience.
 
Asking a new employee to complete a paper employee application versus an online application sends the wrong message. Also, having a locked suggestion box in the employee lounge instead of a blog on the company intranet places your company in a position that broadcasts how behind you really are. A suggestion box is a slot that receives ideas into the abyss. A blog provides the opportunity for a dialog that all employees can participate in and observe.

How to stay relevant
The 21st century financial institution needs to develop creative and relevant products and services that match up with the environment of the digital native. This means that the decision makers in your organization need to step away from the traditional views and develop an entirely new outlook. There is no doubt that this will be a difficult endeavor, to say the least. More importantly, it is hard to update your understanding of technology when most senior bankers rely on someone else in the organization to develop product ideas and make them work.
 
Furthermore, the worst thing you, as a banker, can do when trying to update your technology understanding is to go to yet another bank technology conference. It is highly unlikely that you will receive any new and innovative ideas from this event that pertain specifically to the digital native. So here are some suggestions:

1. Plan to attend the Consumer Electronics Show in Las Vegas (usually in January) to see all the latest games, handhelds, and wireless features.
 
2. Survey the digital native employees within your organization using an online survey. Ask them: What technology do you use? Do you write checks? What technology should the bank have?
 
3. Survey your digital native customers, asking them the same questions.
 
It is what is important to the digital native that matters, not what is important to you. Learning from their interaction with technology will provide tremendous insight into the future. Their vision will give you a clearer picture of where you need to go. In order to achieve relevancy with the digital native, banking technologists need to start building product bridges between the technology used in the classrooms of our public schools and institutions of higher learning that connect to the lifestyle of the digital native. This is mission critical to survival. Failure to do so could result in disintermediation of the banking model by innovative and relevant non-bank competitors. BJ

About the author. Dan Fisher is president and CEO of The Copper River Group. A consulting firm headquartered in Fargo, N.D., that focuses on technology and payment systems research and consulting for community financial institutions. For nearly 30 years, Fisher has worked in the financial industry using technology to improve the bottom line. He has served as: a director of the Federal Reserve Board of Minneapolis and the chairman of the American Bankers Association Payment Systems Committee among other positions. This e-mail address is being protected from spam bots, you need JavaScript enabled to view it
 

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