The first twenty-odd years this millennium will have seen two distinct generations step in to the world of money. Although the first ten years were riddled with terror attacks and a major financial crisis, gigantic recovery efforts followed and some positives have ensued under the current US administration. However, confidence in the US finance market depends on how swiftly lenders can handle the new regulations around mortgage and financing.
The majority of Millennials (born 1980-1994) were already in jobs in the first decade. However, Gen-Z (born in or after 1995) is yet to play their independent role in the economy. Two distinct categories of people have emerged, one having faced the brunt of instability, and the other hoping to enter a mended world.
Challenges for banks
With the US job market showing signs of recovery since 2011, the lending industry should have been in better shape. However, the regulatory laws favored borrowers rather heavily. Experts predict tangible improvements in finance by the end of this decade, as hiccups with compliance fade out. Some optimistic estimates say that the job market will reach pre-recession standards by July 2016. Both generations, Gen-Z and Millennials will have enough jobs, and will be seeking loans for housing and other objectives by 2020.
Understanding their requirements and offering them low-risk mortgage plans will require business intelligence. While Millennails will have entered their mid-thirties and forties by 2020, Gen-Z participants in the economy will have only started working.
Low-risk financing for Gen-Z can be a challenge for banks because of inadequate data due to the age factor. With technology, it is now possible to use predictive analytics, which can notify banks using third-party data during customers’ repayment periods. That possibility seemed bleak a few years back. But owing to the abundance of information now, competitive strategies in finance are expected to keep emerging throughout the next 5 years and beyond.
The role of software as a service
Software as a service will prove instrumental to banks through the coming years, as they must identify their target customers efficiently. There are already well-established differences in between the two generations, Gen-Z and Millennials. As job markets and individual assets improve in the US, banks will need to develop suitable mortgaging options while complying with evolving regulations. Such intense change calls for subscription-based software development.
Increased complexity, coupled with opportunity – that’s the future. Reaching prospects in such an environment will require banks to target not just who desire loans, but those who can afford it, and still make profits. While customers will be fewer than during the Bush years, the need for customer-centric banking cannot be overstated. Stringent risk mitigation will keep the US banking sector in need of rich insightful data to satisfy different types of customers.
A reliable lending system in the US can lead to market recovery, but interest rates as low as the 2001-06 rates can be dangerous. How far banks can reduce interest rates, and for which customers, only sophisticated analytics, covering an increasing sphere of data, can tell with a high degree of reliability.
