According to Bankrate, 24% of adults say they have no money saved for an emergency like a layoff or medical bill. Even though this is its lowest level since the survey began in 2011, a whopping 25% of Millennials say they have no emergency savings whatsoever.
“A lot of Millennials have seen their parent suffer financially through the recession,” explains Andrea Woroch, a consumer saving expert explains. “They are trying to be savvier with their money.”
Millennials make conscious efforts with lifestyle choices from living with roommates and taking moonlighting gigs to delaying major purchases and shunning credit cards. Saddled with student loan debt, it’s the number one reason they are not buying homes, according to the Federal Reserve Bank.
Clearly, Millennials have “savings” on their mind. It’s no wonder that there is a plethora of fintech solutions lined up to help. Millennials have more choice than ever before — from standalone apps like Acorn and Digit to challenger banks like Varo Money.
There is no reason for traditional retail banks to be left out of helping Millennials improve their financial well-being. In fact, there has never been a better time to evolve from helping them move their money to helping them manage their money.
You Are Sitting on a Gold Mine
At the heart of someone’s financial well-being is their financial data — how much do they spend, what do they spend it on, how much debt do they have, what do they have saved for a rainy day and invested for the future, etc. Turning this raw data into actionable and relevant recommendations is the difference between helping someone simply move their money around vs. actually helping them manage their money.
Seamlessly processing people’s data to predict their financial needs requires you to take this often disparate and uncategorized data and augment it. With enriched data, you can derive insights and see the patterns in the data that allow you to create customized, personalized and contextual recommendations. It’s an opportunity to proactively inform the customer, not only increasing engagement but also improving brand loyalty.
Your recommendations can be triggered by account activity such as a large deposit that hits their checking account and leads to a recommendation that some portion be moved to saving, or a customer-defined goal such as eating out less this month so they can reach their savings goal.
You have a unique advantage to use the data to proactively inform your Millennials about their spending patterns and saving goals.
You Have Many Products and Many Channels
Unlike fintech startups, you’re more than a savings app — you’re a full-service and trusted provider with checking, loans, credit cards, mortgages and more. Over time, a fintech savings app might grow to add more products, but in the meantime you must leverage your advantage; don’t let those fintech savings apps chip away at your customer base.
You have a relationship with your customers wherever they are — in your mobile app, on your website, in your social media channels and messaging platforms, on the phone with customer care, and, of course, in the branch. You can truly meet your Millennials “in the moment”. Financial well-being and saving is not something they sit down and do — it should be woven into their everyday decisions.
Put a stake in the ground and be more than the app they use to check their balance before they buy their airline ticket. Help them save for that airline ticket and the trip they are planning. Highlight benefits of the credit card they can use in this trip and offer them travel insurance. Let them know when bills are due and how those expenses are going to impact their goals. Weave your way into their everyday life.
Technology On The Inside And Out
According to Accenture, more than 70% of consumers would be willing to receive computer-generated banking advice. And Gartner estimates that by 2020, customers will manage 85% of their banking relationship without ever interacting with a human.
That’s why many banks are embracing artificial intelligence to create bots and virtual assistants. AI ingests data and all the nitty gritty details about how customers use a bank’s products and services. These banking bots are designed to detect and triage customer issues — answering questions and resolving problems.
Now flip that around. Imagine if those bots and assistants did more than customer support, and actually used their natural language understanding and reasoning to not just find a routing number but also find a better way to help people actually save money. The same AI platforms banking providers are using for support can be used to deliver forward-thinking banking experiences like this.
Of course, in a regulated industry, offering financial advice is different than teasing out insights and detecting patterns. The latter is more about using AI to present data-driven insights and ideas so customer can make informed decisions on their own — showing how the little things add up or tying together short term and long term financial goals.
User Experience Matters to Millennials
Millennials will be the largest adult demographic group in the world by the end of the decade. Couple that with the fact that 57% say they would change their bank relationship for a better technology experience. This makes presentation and delivery of financial advice critical to effectively engaging tech-savvy Millennial consumers. You have to go well beyond putting a budget and goals dashboard in your mobile app. The quality of your user experience and the customer journeys you create will matter deeply. You need to add real value and not noise.
Financial Well-Being Means Financial Literacy
Financial well-being goes hand in hand with financial literacy. According to research, US to gaps in financial literacy are responsible for a portion of the massive wealth inequality in the US. What consumers don’t know about topics like mortgages, credit cards, and payday loans hurts them.
Two-thirds of Americans cannot pass a basic literacy test, and when Millennials were tested on financial concepts, only 24% demonstrated basic financial knowledge. This gap is an opportunity for banks to be good teachers.
Use the financial well-being experiences you create as an opportunity to also increase their financial literacy — put it in plain English and explain things without the banking jargon, and ask if they want to know more or why. Millennials can turn to you with questions they may worry are silly without experiencing the nervousness or embarrassment incurred by asking their friends or family members those questions.