This is a critical statement that defines the nature of consumer mindsets.  So the challenge is how banks can afford to offer services to this generation in a meaningful (ie internet) way, yet retain their market share of current customers.

Internet Changes Everything: A Generation Serves Notice: It’s a Moving Target

By 2010, they will outnumber both baby boomers and Gen-X’ers among those 18 to 49 – the crucial consumers for all kinds of businesses, from automakers and clothing companies to Hollywood, record labels and the news media.

This generation knows nothing about a world without internet.  Its like the 50’s and 60’s generation and cars – they were ubiquitous (in the US) and internet is the same to the millenials. They will always think first of internet for anything, whether its restaurants, music, or banking.  Its just the way things are, and that mindset ensures that banks who don’t get it, will lose their share of market.  But they won’t realise why they are losing it, and will make mistakes like building more branches to address their market share loss.

Its clear that current customers provide today’s revenue, and that to provide the right level of service to the new generation brings several issues, which are issues to different degrees in many big banks:

1. Capability:  new investment costs are incremental cost that isn’t appreciated by investors if it may not provide benefit right away.  Banks’ core systems, which come from the 70’s and 80’s are not internet
   capable, and the investment to integrate and expose to alternative
   channels is enormous
2. Incremental cost:  each new investment is an additional cost to the bank, with no, or inadequate direct revenue attributable right away.  Each customer uses more and more channels as they come avaialable, yet are not willing to pay for them
3. management attitude/ understanding:  self service channels, ie, internet, telephone, and ATM’s are generally regarded as “non-core” and in support of the branch which represents the ‘real” bank. While internet is accepted its not generally accepted that it will be anything more than in support of branches. Internet is understood as being the future, but how do we deal with it in the present.

These dimensions, capability, cost, and management contribute in different ways to different interpretations, and strategies by banks’.