Millennials have very specific ways that they like to bank, and want options in banking services and communication channels. They’re also much more likely to switch banks when their needs aren’t met.
A report on Millennials and retail banking from FICO delivers key insights and discusses how financial institutions to effectively engage with this key demographic — switching behaviors, what types of financial institutions they prefer, and which channels banks can use to engage this audience more effectively.
1. Millennials Itching to Switch
Millennials are less loyal to their primary banks than other consumers. FICO’s survey showed that Millennials are five times more likely than those over age 50 to close all accounts with their primary bank. They are also three times more likely to open a new account with another bank.
Because of their increased openness to switch banks, FICO says financial institutions should target this segment more than others with their new customer acquisition campaigns. At the same time, banks and credit unions should take preventative steps to hedge against losing their own Millennials.
2. Millennials Gravitate to the Big Boys
68% of Millennials use a national bank — Chase, Citi, BofA or Wells Fargo — as their primary financial institution. More Millennials use megabanks than any other generational group (55% for Gen X, and 43% for Boomers). Only 15% use a credit union, while 9% are with a regional bank.
Millennials also have more products with their primary bank. They have 3.49 products compared with 3.3 products for Boomers. They also have the highest penetration of relationships involving five or more products at their primary bank (21%) — nearly five percentage points higher than Gen X or Boomers.
3. Why Millennials Switch: High Fees and (Surprise!) ATMs
For as tech savvy as Millennials may be, they sure love their ATMs. Roughly one in four said ATM-related issues was the main reason they switched banks — too few, inconveniently located, or fees too high. But it’s fees that really get Millennials blood boiling. One-third of Millennials who switched cited excessive service fees (real or perceived) as the single biggest reason for changing banks. Negative experiences in the digital channel — both online and mobile — had a much bigger negative impact on Millennials than on other age groups.
To build loyalty with this segment, FICO recommends financial institutions use strong analytics to make savvy fee waiver decisions that take into account both short term profits, the complete set of products the customer has with the bank, and long term attrition risk.
4. Marketing to Millennials: Digital Channels Are the Key
While e-mail and direct mail are still the highest areas of preference for Millennials to get marketing information, social media, television ads and word-of-mouth recommendations are often 2x or 3x higher as preferences than other generational groups.
As banks consider new customer acquisition or retention campaigns, they should ramp up investments in integrated marketing campaigns built around the channels Millennials prefer: social, direct mail, e-mail and TV.
5. Millennials Are Digital Omnivores
Some experts in the banking world say that Millennials only like the mobile channel. Not true. Millennials use a broad set of channels and devices to interact with their bank. While Millennials are significantly more likely to transact with their bank through mobile apps than other age groups — 26% prefer mobile apps compared to 12% for Gen X and 3% for Boomers, they still prefer to use a bank’s website over mobile apps. They also use the desktop computer at similar rates to a smartphone. That’s why FICO says banks and credit unions need to keep communications and customer experiences consistent and well-orchestrated between channels.
6. Mobile Banking Millennials are More Loyal
Customers who are frequent users of their bank’s mobile app (at least once a week) are more satisfied with their bank and will recommend that bank to others — 78% say they are very likely to recommend vs. only 4% who are unlikely to recommend. Millennials who don’t use their institution’s mobile apps are twice as likely to be dissatisfied and not recommend that bank (67% very likely to recommend, 8% unlikely to recommend). 82% of mobile banking app users are satisfied with their bank, compared with only 71% among those who do not use a mobile banking app.
7. Do Millennials Know You Have a Mobile App?
You may have rolled out the best mobile app in the banking industry, but you can’t assume that Millennials know about it. Almost a quarter of surveyed Millennials said the lack of a mobile banking app was their main barrier to engaging with a financial institution. 13% said they didn’t even know if their bank offered a mobile app or not — that’s one in every eight Millennials.
8. More Texting Please
Millennials want more communication with their banks through texting. Compared with older age groups, Millennials are notably more likely to use and prefer texting for banking purposes for such things as notification of suspicious charges and credit limit warnings. 9% of customers ages 35-49 and only 5% of customers 50 or older expressed that same preference.
Developing more text communication with Millennials is a loyalty-building opportunity, FICO says. They recommend financial institutions develop and expand texting services for items like alerts, mobile payments and financial management.
9. When Millennials Like Their Bank, They Refer Others
56% of surveyed Millennials have recommended their bank in the past. So what’s the key to getting referrals from Millennials? Service satisfaction is paramount, but lower fees, convenience, friendly and helpful assistance, and product options also play a role in Millennials’ overall satisfaction.
FICO recommends financial institutions develop campaigns and digital functionality that leverage the Millennial propensity to evangelize — tell-a-friend incentives, sharing capabilities and social media-based driven campaigns.