It's been a tough road for financial stocks. Bank of America (NYSE: BAC) posted pathetic fourth-quarter earnings. Washington Mutual (NYSE: WM) has fallen a staggering 63% from its 52-week high amid myriad issues. Even Goldman Sachs (NYSE: GS) has seen its stock price drop 30% following admissions that it will take additional writedowns in the next quarter.

The Fed offered even more bad news on Thursday, acknowledging the current difficulties in the housing market and the economy as a whole, and saying that it will most likely lower 2008 economic projections. Can anyone or anything help the sad state of financial stocks?

IMO, GEN Y can
Those Generation Y kids (a.k.a. the 76 million Americans aged 13 to 29) are shaking everything up. Their widespread support for Barack Obama has been all over the news. They seem to be the technology trendsetters, with their Facebook profiles and constant text messaging (BTW -- what does IMO mean, anyway?). So what do they have to do with financials, other than racking up lots of credit card debt?

Pennies at a time
One financial innovation that this tech-savvy generation has picked up is online banking. Just as Ron Popeil used to say, "Set it and forget it," bank users can input information for their favorite bill collectors and have bills paid automatically each month. As usual, it looks like Generation Y is leading the charge as it seeks "quick and convenient online banking experiences."

Online banking isn't just quick and convenient for consumers -- banks love it, too. Electronic commerce provider CheckFree estimates that the difference between processing a paper check and an electronic one is at least $0.08. Banks do tend to use CheckFree systems or internal electronic processing systems, but for the sake of analysis, we'll assume that $0.08 per check is a fair number. Before you dismiss that as chump change, think about the number of paper checks each bank processes annually.

A recent Federal Reserve Study stated that while the number of paper checks processed continues to decline, 37 billion paper checks are processed annually. For every 1 billion paper checks that a big bank can replace with electronic checks, banks can potentially save $80 million in processing costs. Obviously, this won't make up for those huge mortgage-loan losses, but over time, the move to electronic checking could certainly help to bolster bank cost controls.

More mortgages? Saving for the future?
Yes, mortgage lenders such as Countrywide (NYSE: CFC) are drastically tightening their lending criteria. However, Generation Y is getting older, and as they march into their late 20s and early 30s, they'll want to buy houses. They may not seek the big suburban homes their parents bought, but they'll be looking for cash to fund their purchases, and mortgage lenders are in desperate need of reliable new customers. Who knows? Maybe they'll even learn something from today's current lending crisis, and save 20% for a down payment.

Generation Y hasn't been known as the savings generation. Recent studies have shown that only 31% of those eligible to invest in 401(k) plans actually do so. If and when Generation Y does start to save and invest, just think of all the fees that the financial industry can generate by managing Gen Y's brokerage accounts. And even if they don't save money, the financial stocks can win through the continuous debt that Generation Y will generate through college loans and credit card debts (as long as those youthful debtors pay it all off, of course).

Generation Y certainly can't change the financial industry overnight -- not even Superman could fix the years of lax practices that have led to the current debacle. But with their large numbers, Generation Y certainly can be key to a turnaround in the financial world.

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Fool contributor Colleen Paulson does not own any of the stocks listed in this article and is just a few years too old to be part of Generation Y. The Fool's disclosure policy is timeless.