• TABLE OF CONTENTS •
What does the future of financial services look like?
Millennials Seriously Question what Large Institutions Say
Millennials Expect Digital Services – Prefer Mobile
How to Make Millenials Love Your Bank
Millennial customers. If you manage a bank, credit union or other financial service company, you’d better be thinking about how your business can capture and serve this increasingly important segment of the economy. Not only are millennials the fastest growing customer segment in financial services, they’re also extremely well connected and some of the most educated customers that businesses have ever dealt with.
Connected means that they listen to their peers on social media sites where a casual comment about a bad experience at a bank can translate into a discussion with dozens or even hundreds of people following and commenting. In the information age, news stories or scandals can sour a bank’s image in ways never seen before. A millennial looking for a new bank will invariably end-up searching Google (or Facebook, or Reddit). When this happens, the search results may actually produce incredibly harmful information shared or referred by other millennials instead of bank websites and marketing materials.
“As consumers, millennials have been slow to accumulate wealth. They have huge debt. They're facing unprecedented underemployment. They've been relatively unaddressed as a generation by banks. All of a sudden, you see purchasing power by millennials growing to over $1.3 trillion.”
– Ross Martin, Scratch executive vice president
As a result, millenials are disrupting industries at an unprecedented rate. According to the Millenial Disruption Index, a three-year-long study by Scratch, a division of Viacom Media, banking is more prone to experiencing disruption, as an industry, than any other. Why? Because nearly 33% of Millennials say they are open to switching banks within the next 90 days.
Frankly there just isn’t any perception among this group that one bank is any different than another. If your bank is a traditional physical-branch operation, that doesn’t bode well for the future.
Traditional banks are faced with extinction if they refuse to change.
Large Institutions Say
Given the option, a majority of Millennials say they would choose to visit the dentist rather than listen to the product and service offerings from a bank. It’s not surprising, then, to learn that the four leading US banks are among the most hated brands in America.
Why is this generation so disillusioned with traditional banking institutions? Much of it likely stems from the fallout after the financial crisis in 2007. The crisis had long term, lasting effects on the millenial generation by making it harder to find jobs and pay down student loan debt. Because millenials are a highly educated group, they are largely aware that much of the pain they suffered during the financial crisis resulted from greed and fraud in the banking industry.
Millennials are so detached from the traditional financial services industry that most of them expect innovation to come from outside of the industry. Nearly three-quarters of respondents in the Viacom Millenial Disruption Study answered that they would be more interested in new financial services from Google, Apple, Amazon, PayPal, or Square than from one of the top 20 US Banks.
It is not surprising to learn that most Millennials prefer to bank remotely by using either online (browser-based) banking or mobile banking apps. It is somewhat surprising, however, to hear that Millennials are three-times more likely to open a new account with their phone than in-person. Thus, if your bank is not currently offering mobile account enrollment, then you have already put yourself at a massive competitive disadvantage. Another 61% of millenials say that mobile banking apps make it easier for them to track their spending, which means that they are making wiser purchasing decisions.
Millenials expect banks to offer more than just online enrollment and the ability to check account balances. Two-thirds of millennials want digital budgeting from their banks. But if banks want to really transition to the “new banking” model and capture the millenial customer segment, then they need to offer additional digital services, such as mobile payments, mobile banking, and wealth management.
If old, traditional banks truly want to be able to compete with upstart digital banking start-ups, then they need to completely rethink the way customers are engaged. Some examples of the type of new communication and customer service paradigms that they should be looking at include:
- Educational content like funny videos and webinars that give customers advice – such as how to build credit or the process for obtaining a home mortgage.
- Transparency, like sharing social causes and being upfront about fees.
- Choices regarding how they bank, with which banker, and on which platform.
The millennial generation, defined as those born between 1981 and 2000, overwhelmingly believe that the way they access money and pay for things will be completely different in five years. This segment of the population can actually be considered the “intentionally unbanked generation.” They choose to not have to physically walk into a branch. Many have never written a check. They are frequently terrified of – and don’t want to own - credit cards.
As a group, this demographic want easy-access and the ability to control their finances from anywhere, on whatever device they have with them. They want to be able to transfer money to friends and pay bills in just one-click. They want to be able to view their spending habits, be offered guidance, and have real-time access to their finances.
That may sound like a tall order. But catering to millennials by offering these digital services, personalization, and availability to real-time data is the key to survival.
Traditional banking organizations and others in the financial services industry such as brokerages, mortgage companies, consumer credit issuers and credit unions need to look at new upstart companies such as Venmo, Due, Tilt and Circle, and consider creating their own “internal” start-ups to take-on the newcomers and push the envelope even further.
It is not a foregone conclusion that the old guard of the financial services industry is destined to fade away. There is a message being declared so loudly and clearly that the whole industry is not meeting the needs of millenials.
It is such a big opportunity for banks.
NEXT WEEK: Resolving one of the biggest issues with remote banking – “Knowing your Customer”