#4 Global Credit Crisis and Gen C – How will Gen C react?

Jake Pearce ⋅ Generation C, Marketing ⋅ Banks, Credit Crunch, Financial Crisis, Gen C, Generation C, peer to peer banking, prosper, zopa ⋅ 6 Comments

I have become so incensed by the confusion between Gen C and Gen Z that I have commissioned Bridge Ellis to find some really cool data to show the difference based on an international search of the deep web (beyond Google etc).  

In the meantime, with all the banking fiascos going on globally – it’s worth asking how Gen C will react to the global credit crisis; will they still trust financial institutions – in particular, banks? Will they have a blip of confidence or a long term collective generational grudge?

So we’ll look at:

• Generational collective memories;
• Trust in the digital medium;
• Traditional bank’s views on peer-to-peer banking;
• Will banks be caught out by the digital revolution like the music industry was;and 
• Peer-to-peer banking.

Generational collective memories

Howe and Strauss’ book called Millennialls Rising is a look at what makes Millennialls different from Boomers or Gen X. Unlike Gen C*, Millennialls are a demographic not a psychographic generation. Howe and Strauss argue that big ‘events’ unite generations with a kind of collective memory. So for Boomers – the whole culture of ‘sex,drugs and rock ‘n roll’ was unifying as was the assassination(s) of the Kennedys. For Gen X kids the Aids epidemic, the Challenger Space Shuttle disaster (in ’87) was a ‘unifying’ event.

So what’s interesting for Gen C, is that events literally get logged in the collective memory of the internet. Google is a collective diary that we’ve never had that before. And Gen C have a higher trust of the digital media and digital providers than other generations.

Trust in the digital medium

For example, Skype is the fastest growing new product in history. YouTube has been used by more people than CNN has ‘broadcast to.’ Now I know we could explore the ‘quality’ of interaction angle – rather my point is that at the core of the digital revolution – there is a hard core of trust due to the high level of interaction. It’s no accident that according to AC Nielsen’s 2007 Worldwide Trust in advertising survey, WOM (Word of Mouth) Networks (friends or online peer to peer) is at 78% as being ‘trusted’ which is way ahead of any other medium researched.

Banks argue that trust is critical and online is ‘only a channel’

Banks argue (I have been speaking to some) that they are unphased by the whole ‘on-line’ thing.  They say it’s a medium (on-line) and they are dealing to it. Furthermore – based on an interview I conducted – a leading Australasian bank argues that trust is a critical thing in banking. He argues that banking needs higher levels of trust that most other categories. And they went further – arguing that at least for this bank (which has experience no financial meltdown in the last wee while) people will trust financial institutions that have a ‘clean’ bill of health’ even more than those that have been touched by economic nightmares.

In other words the banks that emerge relatively unscathed will be genuinely massive on the TRUST stakes. On the face of it, this is actually quite a convincing argument.

Will banks be caught out like the music industry was?

However we need to look at the flipside. As Simon Young and myself argued in our article on the future of the music industry  that an industry like music which is very used to a fast pace of change got caught out by the impact of the digital world.

So the question is simply this, if born Gen C grows up having gone through one of the biggest banking crises in history will they hold the same general trust of financial institutions? It’s been shown that if you compare the Boomers trust in doctors with Gen X it drops of dramatically. In simple terms – the majority of us in the West don’t trust institutions as much as we used to. What happens to the finance industry if a whole Generation grow up and turn to institutions such as zopa: ‘Borrow money from people not banks.’

Peer-to-peer banking

Check out Zopa and Prosper

The basic concept is  thatmembers of the public sign up and say ‘I’ve got money to lend’ and the site connects them with people ‘who want to borrow money’. This is peer-to-peer banking. Zopa started in the UK and has now spread to the US, Italy and Japan in the last 3 years. Of course that doesn’t mean it’s profitable (it might be supported in the way Amazon was…) but it does seem to be very popular. Enough so that the founders have expanded from 1 to 4 countries in such a short timeframe.  As for Prosper – it is America’s largest peer-to-peer bank, was started in 2006, has 830,000 members and has funded US$ 178 million in loans.  Not bad huh?

So what do you think will happen?

The banks argument is – trust in banks is different from normal trust in brands becaus it’s about the serious stuff called money.

The alternative is exactly because banks say ‘trust us we know what we are doing,’ that Gen C reacts and say ‘we know a better way’ and they turn increasingly to peer to peer banking and the digital medium they trust implicitly.
So what do you think?

I’m going to talk with some more  banks and invite them to put out their views (anonymously) or not here. 

The more data we can get the better – we want educated opinion AND we want facts

*Gen C has been dubbed ‘Digital Natives’. Gen C are a psychographic generation – essentially they are people who actively embrace digital networks (from social entertainment mediums (eg YouTube ) to social networking (eg Facebook) to fast networking (twitter.com) to storage mediums (flickr.com) to sharing data via mobile or other digital mediums. There are those who are ‘born Gen C’ (ie born into the medium) and those who are ‘adopted Gen C’ – ie those who maybe Boomers (1943-60), Silent Generation (1925-42) or X (1961-81) who love the advantages it provides.