There are 80 million Millennials living within the U.S. alone. Consumers born between 1980 and 2005 are having a significant influence on a number of industries, but perhaps none larger than that of banking. From picking digital banking over the conventional “customer-teller” method to eschewing banks altogether, it’s clear that Millennials have put banks on notice.
Apps like Mint and Cash make banking and payments more accessible for the tech-savvy cohort. With the increasing amount of money Millennials manage, banks, now more than ever, must find a way to interact with and provide exactly what this generation is looking for or risk losing them for good.
A Damaging Perception
A recent Scratch (Viacom Media) research got to the heart of the problem with only a couple of straightforward stats. The biggest banks in this country are some of the Millennials least-loved brands. Not only do Millennials not see the big banks favorably, they likewise don’t think there’s much difference between each of them. The study showed more than half believe all banks are basically the same, and almost three quarters would rather go to the dentist than listen to what banks have to provide.
Those who do visit banks are migrating to smaller community banks with lower service rates and fees. In fact, 16% of individuals between the ages of 18 and 34 have left the big banks in the previous year, while community banks and credit unions have seen an uptick of new members in that age group over the exact same amount of time.
The Tech Takeover
The truth is that more than 70% of those Millennials polled are not even interested in a conversation with banks suggests that a huge change is coming soon. The main catalyst of this change is technology and the way it enables MIllennials to handle their finances and interact with banks and other companies.
Millennials are choosing to bank through mobile apps, but even that could be falling by the wayside shortly if banks are not able to connect with them on a more personal level. The Scratch report showed that 73% are excited about financial services progress through technology giants like Google, Apple, or Amazon than from banks, and 33% consider that soon they won’t require a bank in any way.
Alternative payment companies, such as PayPal and Venmo, are getting a stronger hold in the space, and mobile payments through services such as Apple Pay and Google Wallet, among others, are picking up steam. Even Bitcoin, a digital currency not commanded by banks, has seen a growth in popularity.
A current FICO poll found that 52% of Millennials between 18 and 34 are already opting for or contemplating switching to alternate payment companies in the subsequent 12 weeks (compared to just 27% of those 50 and older). Likewise, 32% of the 18 – 34 group are already using or quite seriously considering mobile payment providers (compared to only 8% of the 50 and older). And while the popularity is growing, these newer forms of payments or banking come with their own challenges.
“These alternatives are not necessarily safer, the threat is merely shifted to another kind of vulnerability,” Verifi Senior Vice President of Business Development Rick Lynch said. “Solutions such as bitcoin may be safer in regards to anonymity and protecting a customer’s information from being used in fraudulent purchases, but it comes with the trade-off in that the worth of bitcoins is much more volatile and the bitcoins can be stolen just like every other data.”
Do Banks Still Have a Shot?
The trend is clear. Millennials are opting for non-traditional ways of handling their finances and making payments, but it does not necessarily mean banks are down for the count. Below are just four ways banks can get back into Millennials’ good graces:
1) Smarter messaging.
One reason Millennials do not want to listen to what the banks are saying is they do not feel like the banks’ messaging is catered to them or relevant for their needs. The FICO study noted that 40% of the surveyed stated banks don’t send personalized messages and 46% said banks are not sending information that is relevant to future purchase plans.
A more strategic approach could resonate with Millennials. For instance, many Millennials are more concerned about paying off their student debt compared to jumping into buying a home after college. Targeted messaging aimed at assisting young people’s needs and addressing their existing requirements can go a long way.
2) Preferred communication channels.
Millennials are extremely specific in terms of how they want to be reached. With smartphone saturation among the cohort, it is reasonable for banks to listen to favored communication preferences and use them. Mobile devices basically mean banks can be constantly connected to their customers. The trick to mobile banking would be to approach them with the way that they want to be reached, be it via email, text messaging, or app alarms. Calling them on the phone when they clearly checked the text message box may cause Millennials to become annoyed with a bank very quickly, also it does not take much to compel them to seek other banking options.
3) Focus on Convenience.
A major reason Millennials are trying to find alternative payment services is due to the ease of the technology. It is plausible to believe that some Millennials have not set foot within an actual brick-and-mortar bank, particularly those on the younger side of their 18-34 spectrum. If banks will compete, they must produce their apps as fast and easy to use as the alternate payment firms’ technology and permit users to do anything through the app they can perform on their computers or in the teller window. Banks that optimize mobile banking are already moving in the right direction.
“Issuing banks are focusing more on the behavior of consumers—rather than static passwords—for authentication, which is very positive,” Lynch said. “They’re making things more consumer friendly and giving folks a less invasive way to shop online.”
4) Get competitive with fees and rates.
Younger folks are leaving banks as a result of high rates of interest and service fees. From free assessing to lower overdraft fees to free ATM transactions, Millennials are seeking the banks or alternative financial businesses which charge less to become a part.
It’s a crucial time for banks if they want to retain current Millennial customers and attract new ones. Today’s tech-savvy consumer wants options, convenience, and easy communication. Millennials want to feel more than a number, and banks which take the steps to provide them with what they want will have the ability to stand above the competition in a fast-changing era of how we handle our finances.