Millennials, also known as Generation Y or (less commonly) Echo Boomers, are the fastest-growing generation of consumers in the banking industry. This generation, encompassing nearly 80 million Americans born between 1977 and 1995, is entering the life stage where they are making significant financial and banking decisions that will affect the rest of their lives. This translates into a huge opportunity for banks to win their loyalty for a lifetime.
Millennials in the United States at a glance:
- Currently ages 19 to 37
- Number around 79.8 million
- Most ethnically diverse generation in U.S. history
- Getting married and having their first child later than any previous generation
- Buying their first home later than previous generations
- Greatest number of college graduates ever — twice as many degrees conferred in 2009 as in 1970
- Came of age with the Internet, mobile devices, and ubiquitous social media
Millennials, because of their size and life stage, currently represent the greatest potential lifetime value of any consumer segment in banking. Financial institutions need to worry about wooing this demographic for one simple reason: inertia. If most consumers don’t switch banks unless either (1) they move, or (2) something goes horribly wrong, then it’s critical for banks and credit unions to win over as many Millennial consumers as quickly as possible.
With that in mind, the industry trade group Independent Community Bankers of America (ICBA), has released findings from their study, “American Millennials and Banking: A Cross-Generational Study,” to help financial industry executives better understand the differences between Millennials, Gen X and Baby Boomers. The study revealed the change in demands on financial services in America.
The survey revealed that 55% of all Americans believe that banks treat them like a number. The generation that most strongly felt that financial institutions treat them like a number? Millennials (58%). 66% of Americans wish their relationship with banks were more personal. Ironically, if you asked banks what they think sets them apart from their competitors, the overwhelming majority would cite their “warm, friendly, caring and personal service.” Obviously there is a disconnect between the experience banks believe they are delivering and what Millennials are actually experiencing.
How Millennials Feel About Banking
Millennials say they like local institutions. 54% say they prefer to work with locally owned and locally operated community banks to handle their financial needs, and 46% of Millennials said that a locally owned banking institution is important to them. That may be what they say, but it doesn’t align with their actions and choices. Millennials may like to whine about how they get treated by big banks, but that doesn’t seem to prevent them from putting their money at BofA, Chase, Citi and Wells Fargo with the same relative frequency as other generations.
Millennials think mobile first. A full 74% of all Millennials surveyed said, “Mobile banking is very important to me.” This was the highest of any generation surveyed and 76% greater than the Baby Boomer response.
Millennials want a relationship. 64% of all Millennials surveyed place importance on developing a relationship with their banks or financial institutions. Millennials seem to be saying they want the best of both worlds: high tech and high touch. This creates a challenge for financial institutions; how can they cultivate personal relationships with Millennials when this demographic gravitates towards digital channels?
Millennials admit they need to know more about their finances. 70% said they wished they had more knowledge and skills when it comes to banking and other financial matters.
Millennials eschew cash. When asked, “How many days per week do you carry less than $5 in cash?” Almost a quarter (23%) of all Millennials surveyed said seven days a week.
Entrepreneurial Spirit Strong Among Millennials
Millennials, who have come of age during the Great Recession where jobs have been scarce, might become the Great Entrepreneurial Generation. Millennials are by far the generation most interested in learning about how to start and run a business. 41% of Millennials said that they are very interested in starting up their business, and 46% of all Millennials surveyed said that they would appreciate help getting a business off the ground.
The survey found that 36% of all Millennials said that they are considering starting their own business or, if they already owned a business, are considering starting another one. Of those who indicated that they are currently considering starting their own business or starting another business, 62% said that they would like to be in a position to start within the next 24 months.
When asked, “Who would you rather meet — the president of a local bank who just approved a loan to start up your business, or the President of the United States?” 57% of all Millennials chose to meet the bank president.
Millennials’ entrepreneurial drive is already having an impact on the economic landscape. In the ICBA survey, nearly a quarter of Millennials (24%) say they currently earn at least part of their income from a business they own or have a stake in — more than any other generation surveyed.
Recommendations to Attract and Retain Millennial Customers
The ICBA outlined a number of recommendations for financial institutions who are targeting Millennials.
Create an Entrepreneur Advisory Board. Most financial institutions have a board of directors, a loan committee, and occasionally an advisory board. With Millennials being the generation that most wants and intends to start their own business, creating an Entrepreneur Advisory Board would be a tangible step to demonstrate that your institution actively engages, influences, and welcomes advice from the Millennials.
Adapt to Millennials’ communication preferences. This generation is highly visual as learners and communicators. This new generation has literally been conditioned to skip blocks of text and instead look for videos, photos, and bullet points. This is underscored by the fact that the generation naturally communicates through screens, such as smartphone or tablet screens. Here are three strategies to communicate with Millennials that align with their preferences:
- Tell your bank’s story visually. Instead of presenting your story online in multiple paragraphs, turn it into graphics and pictures, or a short, fast-paced video that engages Millennials to see how your institution is different. The more personal stories you include — especially ones that feature other Millennials — the easier it is for Millennials to see that you are focused on helping people like them.
- Present information to Millennials digitally vs. brochures. Millennials like to see information visually represented on a screen. When you are meeting with them, offer a screen — such as a tablet — for them to look at while you walk them through your presentation or discussion. This is especially true when you are helping them understand and make financial decisions.
- Instead of providing a traditional business card, offer to connect via LinkedIn.
Make Millennials feel like VIPs. Millennials reacted the strongest when asked if they feel that banks treat people like a number. This presents opportunities for community institutions to distinguish themselves by showcasing how they treat each people.
- Introduce new Millennial customers to three bank employees so they are familiar with the team and not just the person who opened their first account.
- Ask Millennials how they would like to be contacted by a banker. This might include contacting them via text message rather than the more traditional email or voicemail.
- Invite Millennials as guests to exclusive events that they otherwise might not be able to attend — festivals, sporting events, fashion shows, and non-profit fundraisers.
The bottom line, according to the ICBA, is that Millennials are bringing a new perspective to banking. This generation is keenly aware that they need to better understand finances, place value in banks that help make their dreams a reality, and expect much of the experience to happen directly from their preferred mobile device, and all without carrying much cash.
You can download the complete report from the ICBA by clicking here.