According to PWC research, half of the world’s workforce will be millennials (people born between 1980 and 1995) by 2020. It is also estimated that over the course of the ‘Great Wealth Transfer’ occurring over the coming 30 years, this generation will inherit wealth to the value of $30 trillion.

A lot of editorial ink has been spent on the analysis of millennials, especially on the ways in which their spending habits differ from those of previous generations (smashed avocado, anyone?). It has been reported that the particular context in which this cohort grew up – described by one columnist as ‘a series of moments when the big institutions failed to provide basic security, competence and accountability’ – has ‘fundamentally changed the game for Millennials’. They don’t buy houses in the way their predecessors did. They want access to cars, but not necessarily to own them, and would rather have a smartphone anyway. They are characterised by a ‘quirky eco-conscious individualism’. They want workplaces that offer flexible hours and feel like a community, and would rather keep their lives than work towards partnerships or corner offices.

Similarly, in recent months, we have seen a marked generational change in some of the lenders we work with. While some are determined to carry on as if the GFC never happened, others are looking at building brand new books with innovation and new technology at their core, even in more traditional fields like asset and equipment finance.

All of this has made us wonder. If millennial spending habits are so different from those of previous generations, why should their lending habits stay the same? What happens when the millennials are running those ‘big institutions’? Specifically, what will millennial asset finance look like?

More or less travel

As experiences and travel are valued more and more widely, with the constant fare price battle between the world’s airlines, and with rising demand for capacity in Asia, it seems inevitable that the need for new aircraft will continue to grow, as will the opportunities for financing all this new equipment and infrastructure and investing in the companies making it happen.

But the art will be in balancing this increasing demand with the ‘eco-conscious individualism’ observed above. Will this mean more travel but shorter haul to minimise the environmental impact of wanderlust? Or will long haul be dominated by next generation wide-bodies that need only two of the traditional four engines, like the Dreamliner? The combination of millennial characteristics and new initiatives like the Green Loan Principles is likely to generate substantial momentum in asset finance, as the chance to both finance green projects – such as, for example, increasingly efficient aviation engines or working on alternative fuel sources – and to be seen financing green projects will no doubt be attractive to millennial lenders.

More or less stuff

Certain features of millennial spending habits – such as falling car sales, or the rise of Netflix and other streaming services to replace DVDs and bulky audio/visual equipment – could have negative effects on certain shipping sectors, as the demand for the products they carry and the fuel that powers them potentially decreases across the board. But this is also the gig economy and Amazon Prime generation, and when they do make purchases, they like their shopping to arrive much more quickly than it does when carried by sea.

With the first zero-emission shipping zones also now on the horizon in Norway, it seems likely that the industry will come under increasing pressure to adjust its capacity and equipment for a new market. This will offer opportunities for energetic millennial owners, operators and lenders alike, as fresh faces and refreshed market standards push equipment technology forward and next generation assets become the norm – such as, for example, new electric ferries designed for new zero-emission transport, or vessels with onboard 3D printing equipment for creating both spare parts and cargo as they go (and vessels with improved reefer units for the better shipment of avocadoes, naturally).

More transparent…?

Finally, as noted above, millennials came of age at a moment when ‘the big institutions failed to provide basic security, competence and accountability’. With eye-wateringly large fines handed down to banks globally over the last few years for variations on the theme of misconduct and with a number of inquiries and commissions ongoing, millennials in lending have the motive and opportunity to change these institutions – but what might the means look like?

The UK’s new gender pay gap reporting requirements, while not perfect, have been instrumental in flushing out the issues associated with the various gender-related disparities in our workplaces, and the media attention generated by the public reporting has brought this to the collective front of mind. Perhaps there is also a place for a similar programme in lending, and particularly in asset finance. For example, banks and large funds could be required to make public (on an anonymised and annual basis) the proportions of their asset loan books that comply with the Green Loan Principles or have a social impact investment component, to improve this by a certain percentage each year or to reach a required target within a set timeframe, to increase their accountability for a generation used to summoning any information they like with the devices in their hands.

Millennials therefore have the potential to completely change the lending landscape in asset finance, as they begin to step up into leadership positions in the big institutions and to control the world’s wealth, and do so within a framework of generational characteristics that arguably sets them apart from their predecessors.