Forget Yelp and social media influencers: When it comes to choosing a financial institution, new research indicates that younger Millennials turn to their family and friends above anyone else.
That presents a strong opportunity for community banks in particular, and for credit unions as well. 75% of consumers 18-26 choose their primary banking institution based on a referral, according to the FIS Performance Against Customer Expectations (PACE) study, which defines these people as younger Millennials. (The study polled 1,749 U.S. consumers about their feelings toward banking institutions.)
Many of the referrals came from family members, with parents and grandparents carrying outsized clout. These findings correlate with a recent Deloitte survey that found many young adults choose their primary financial institution based exclusively on the recommendation of others.
Community banks are in a unique position to take advantage of these preferences to target and reach younger banking customers. With 51% percent of their clients comprised of Baby Boomers, community banks’ best advocates are already banking with them. Similarly, over a third — 36% — of credit union members are Boomers.
Here’s how these financial institutions can leverage this group as a vital asset to attract a new generation.
Talk Up Digital Banking To Win Millennials Over
Mobile banking may be viewed as a nice add on for Baby Boomers, but for Millennials, it’s a given.
“Mobile banking may be viewed as a nice add on for Baby Boomers, but for Millennials, it’s a given.”
The PACE survey found that 78% of young Millennials bank through a mobile app, while 32% want to engage with their financial institution through social media. Of the group, 65% hadn’t visited a branch in the past month and 38% use non-banking providers.
It’s up to financial institutions to spread the word in marketing materials and promotions, like referral programs or discounts, and during discussions with present members and customers about their digital offerings. A Baby Boomer may see a flyer in a branch or see a relevant website page and talk up that feature to their children. Dinner conversations could become discussions about the digital features the institution is rolling out.
That’s a much more powerful way to market than running a banner ad or posting on Facebook. “If you build it they will come” doesn’t apply in the cutthroat world of banking.
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Low Fees Are a Way to Shine
Fees may not rank high on the list of attributes a young Millennial cares about when shopping for financial services —only 2% of survey respondents cited it — but they are deal conscious. They grew up looking for a discount on everything from the food they eat to the clothes they wear.
Young Millennials don’t want to pay full price nor do they want to get hit with exorbitant fees. That’s why they favor free securities trading platforms and low-cost credit cards.
This is an area where community banks and credit unions can shine. Perhaps it’s a lower interest rate on a car loan or a better payout on a savings account than larger banks are offering. Any way a community bank or credit union can promote the differences will help bring the next generation in.
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Data Security Chops Matter Too
Data breaches have become commonplace, with well-known companies falling victim to attacks over the years. That isn’t lost on the younger generations that have come of age online. While they may be willing to share too much on social media — at least according to Boomers — they don’t want anyone touching their data without their permission.
That attitude seeps into many of their decisions, including the institutions they bank with. Of the younger Millennials polled in the PACE survey, 23% said security was a top concern when choosing a third-party financial provider over a bank. So it’s up to community banks and credit unions to promote their levels of security and dispel any notions that smaller institutions can’t protect data like larger institutions.
Community institutions must be clear and forthcoming about the data they collect and why they collect it, especially if it drives a better customer experience. That’s a basic. They should also assess their risk and protection for every type of account as fraudsters grow increasingly persistent. Adequately defending consumers and their data from new security assaults will require the development and adoption of next-generation fraud mitigation strategies.
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Turn Younger Millennial Entrée Into Lifelong Relationships
Baby Boomers may be at the wealth preservation point in their life but younger Millennials (18-26) are just entering the accumulation stage. Many are gearing up to graduate high school or just exited college and are beginning their first jobs. They aren’t focused on buying a home or saving for retirement today, but they will be. Of the PACE survey respondents, 45% said they are paying for school tuition, while 34% are covering the costs of an engagement ring or wedding.
Those community banks and credit unions that are able to bring them in at the beginning of their financial journeys they have the opportunity to create customers for life.
They can do that by offering solutions geared around the life stages that younger Millennials are in. It could mean a high-yield savings account or educational seminars on college debt. Such efforts build goodwill with the existing consumer base, and provide a sound financial footing for the younger generation which will soon purchase homes, start families, and save for retirement.
Of course, community institutions need to remember that existing members and customers can’t be ignored in favor of the pursuit of their children, especially since generations have different relationships with their financial institutions. Older consumers need to know the bank still cares about their wants and needs, whether it be in person or via digital channels, addressing their first car loan or the mortgage on a vacation home to enjoy in retirement.
Finding a balance between marketing new services and keeping people in current relationships happy is key. In order to achieve this, community banks and credit unions need to stick to their roots, maintaining deep relationships with their consumers regardless of age.