Follow the Forgotten Money: Baby Boomers

Follow the Forgotten Money: Baby Boomers

Follow the Forgotten Money: Baby Boomers

Charles Keenan

Charles Keenan

Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997, a time when automated teller machines were appearing just about everywhere but people's living rooms thanks to the relaxation of surcharging rules.

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For entrepreneurs in fintech and beyond, there's plenty of talk about targeting the vast market of millennials. Yet innovators might be missing out, since it's the baby boomers who still hold the lion's share of purchasing power.

"A lot of companies forget where the money is," says Jonathan Boehman, a partner and chief engagement officer of Immersion Active, a Frederick, Md.-based digital marketing agency that focuses on people 50 and up.

There were 75 million boomers in the United States, compared with 83 million millennials, according to U.S. Census Bureau numbers from 2015. Despite the gap, entrepreneurs looking to bring the next big thing to the market should think about who has money – not just in the future, but now. People 50 and older, roughly comprising boomers and their elders, generate $2.4 trillion in annual income, according Bureau of Labor Statistics data compiled by Immersion Active. To put it in perspective, those 50 and older account for half of all consumer spending, according to the AARP.

Couple that with the lack of spending power of millennials, roughly defined as those born in the 1980s or 1990s. Their incomes are not only much lower, but many millennials these days are strapped with student loans. Those that graduated with debt – 69 percent of all students – had an average loan debt of $28,950 in 2014, according to The Institute for College Access & Success.

To be sure, the millennial market has vast potential, and apps geared toward millennials have their place, as they appeal to a younger generation with more openness to new forms of technology. There are payment apps such as Venmo and Dash, robo-advisor apps such as Acorns and Betterment, dating apps such as Tinder and Clover, and chat apps such as Snapchat and Yik Yak.

Enthusiasm for millennials, however, often translates to advertisers focusing disproportionately on them. In fact, only 10 percent of overall marketing spending targets those 50 and older, according to the AARP. "What you hear all the time in the industry is 'millennials, millennials and millennials,'" says Francois de Lame, a founder and chief of marketing at PolicyGenius, a digital provider that aims to make buying insurance easier. "It's misguided these days."

Boomer snapshot

The baby boomer generation comprises those born between 1946 and 1964 – the youngest among them turn 52 this year, and the oldest ones turn 70. A generation once synonymous with cultural change, Woodstock and anti-Vietnam sentiments now conjures up images of retirement, being out of touch with technology and lacking the hip factor of younger generations.

Yet to write off the boomers would be to ignore a sweet spot of sorts in American consumption. Aside from having money, baby boomers are at a critical stage in their own lives at which they may have kids starting college while simultaneously caring for their own aging parents. "All of those life events start to converge, and baby boomers have more of that than anyone else is dealing with," Boehman says.

Needs, wants and opportunities

In finance, health care, travel and education, boomers represent economic opportunity. Many of them are working longer, while others are looking to fill up time with leisure pursuits. In finance, for example, LendingClub built a business around hard-hit consumers – many of them baby boomers – after the Great Recession, notes Rodolfo Gonzalez, a partner at Foundation Capital, which was an early investor in the company. LendingClub matches up lenders and borrowers and prices loans according to default risk.

Crucial to boomers are debt refinance products – and mortgages for borrowers over 65, Gonzalez notes. "I don't think many entrepreneurs are addressing the demographic of the boomers that are either reaching retirement, or the ones that are sticking around and working more," Gonzalez says.

In health care, boomers clearly spend more than their younger counterparts. "Baby boomers still have huge economic power when compared with millennials," says Alberto Gandini, chief executive officer of Accel Diagnostics, a biotechnology startup that has developed at-home blood test products geared towards older adults. "You see more companies targeting the segment."

Don't make assumptions

In an increasingly digital world, entrepreneurs might be quick to ignore baby boomers due to the myth that they aren't as tech-savvy as their younger counterparts, ostensibly making it harder to reach them via mobile. About 65 percent of baby boomers with a mobile phone had a smartphone in 2015, according to eMarketer Inc. That number was 89 percent for millennials and 83 percent for Generation Xers.

Yet baby boomers will close the gap in the coming years. For example, 75 percent of them will have a smartphone by 2018, according to estimates by eMarkerter. And boomer smartphone usage has come a long way, notes Gandini. "Five years ago people would argue that the average 65-year-old didn’t know how to use an iPhone," Gandini says. "That's not true anymore."

So despite the hyper-focus on millennials, developers should think instead about focusing on digital consumers, no matter what their generation.

"The Internet has been around for a long time, and what we are targeting are digital consumers," PolicyGenius' de Lame says. "Age doesn't really play a part in that."

The statements and opinions of the writer do not necessarily reflect those of TSYS.

Other Articles by Charles

Charles Keenan

Charles Keenan has written about payments since joining the American Banker as a staff reporter in 1997, a time when automated teller machines were appearing just about everywhere but people’s living rooms thanks to the relaxation of surcharging rules.

His work at the American Banker included writing about credit and debit cards, merchant processing, and bank stocks. He later freelanced for the Banker and industry publications such as Banking Strategies, Bank Director, Community Banker, and U.S. Banker. He also writes about investing, insurance and health care, and is based in Los Angeles.

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