By Arno Maierbrugger/Gulf Times Correspondent /Bangkok
As time goes by, a new breed of young consumers has entered the stage, a generation with attitudes, behaviours, preferences and spending habits that differ significantly from their predecessors. It’s now the age of the Millennials, and the Muslim world is not exempt.
Millennials are the generational demographic bracket following Generation X, which was a more consumerist, independent-minded age cohort with entrepreneurial tendencies. Millennials, in turn, born between the early 1980s and early 2000s, are now harvesting the results of entrepreneurial disruption and are putting old, static business ecosystems upside down, in finance and in many other economic sectors, and this also in the Muslim world.
Generally, Millennials are marked by varying characteristics, depending on social and economic conditions in the country of their upbringing. In the Muslim world, the Arab Spring and other developments, as well as the Global Recession that set in 2007 and, later on, dropping oil prices, has had major impact on this generation. It caused partially fundamental changes in their lifestyles and political believes and transformed social coherence among young people, while it also brought rising unemployment which caused social researchers to assume that possible long-term economic and social damage has been done to parts of this generation.
However, owing to new opportunities in the digital economy, conditions for Millennials in the recent past have improved. With regards to the Gulf Co-operation Council region, a study by credit card firm Visa showed that Millennials make up the fastest-growing consumer segment in the region as they are improving their working life, namely in the UAE and Saudi Arabia. Visa estimates that Millennials in the UAE will receive an average income of $40,000 annually by 2019 which naturally makes them an important customer segment for banks.
That said, Millennials are generally savvy with digital technologies and what new media brought with it, particularly the sharing economy versus the aim to possess expensive things such as cars or houses, mainly as a result of their generation being marginalised and having faced uncertain working conditions in the early years. They also are said to have a more liberal approach to economics, which means that they are generally not brand-loyal but rather look for the best deal, regardless of the product’s image, and when managing their finances, they will also not deal with just one investment adviser or established bank like their parents did.
What does this all mean for Islamic finance?
Thomson Reuters’ consumer insights into Muslim Millennials and their relation to Islamic finance, one of the few studies on the issue as of today as part of their State of the Global Islamic Economy Report 2017, has been looking for answers.
“Millennials’ role in the development of the Islamic economy is critical given the young global demographic of Muslims,” the study says, adding that “Muslims are the youngest of all major religious groups world-wide with a median age of 23 years, seven years younger than the median age of non-Muslims.”
For the Islamic finance sector, it is important to understand the characteristics and consumer preferences of Millennials.
“Muslim Millennials tend to forge their own identity, for example with terms such as ‘Mipsterz (Muslim hipsters),’ ‘GUMmies’ (Global Urban Muslim consumers) and others, defining the young trend setting Muslims, confident of their Muslim identities,” the report says.
This means that Muslim Millennials are also truly asserting their needs in Islamic finance, as they do in halal travel, food, media, fashion and all other things that constitute the Islamic economy, and they are increasingly demanding the attention of mainstream players. As an emerging affluent consumer segment, their product choices are also set to shape product development and push forward innovative solutions within Islamic finance for years to come.
Thomson Reuters conducted a Big Data-based analysis based on social media data mining as to how Muslim Millennials interact with the sectors of Islamic economy, including Islamic finance.
The most active Muslim Millennials could be found in Indonesia, Malaysia and Pakistan, followed by the US, the Philippines and India. Malaysia led the ranking in Islamic finance, with 71% of Millennials interactions related to this segment, ahead of Indonesia and Pakistan. Overall, the most active Islamic economy sectors where Muslim Millennials interacted were Islamic finance, followed by halal fashion, halal media and recreation, halal food and halal travel.
By no later than now the Islamic finance industry should begin to listen, most of all because a “sentiment analysis” of social media interactions of Muslim Millennials brought to light that 37% of them sees the Islamic finance sector “negative” and just 26% “positive,” and this could be attributed to the failure of many Islamic banks of meeting the high technological standards Muslim Millennials expect for interacting with a bank, for example multi-functional banking apps, smartphone transfers, easy, quick and reasonably priced digital remittances, instant payments, as well as a credible and active social media presence of banks.
Since Millennials have been adopting disruptive technology in every corner of their lives, it is no surprise that many of them prefer digital, tech-based solutions when it comes to their investments as well, and this includes crowd investing, peer-to-peer lending and other shared investment solutions. But as of now, there is still a big lack of online investing solution, let alone digitised wealth management platforms for Muslim Millennials that reflect their beliefs with regards to Islamic ethics and social responsibility.
For Islamic banks, this means that digital laggards will bear the brunt of this development and highly likely lose out on this very important customer segment which is not going to set a foot in a brick-and-mortar bank branch in the future unless absolutely necessary.
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