Millennials are the largest generation in US history, a particularly attractive target market for financial services. This group, born between 1980-1996, consists of approximately 73–81 million people in the US, and is set to inherit roughly $30 trillion in the next 20–30 years. The majority (58%) of millennials still rent or live with family or friends so have deferred purchasing their own homes.
While millennials are a particularly digital-savvy group, they still use traditional banking channels for certain things. They select financial institutions based not just on the mobile application but also on the convenience of branch locations. Millennials are good savers and are skeptical of having debt. While they are likely to change banks, especially if the mobile applications aren’t quick and easy, they are not any less loyal than other generations were at the same age.
As millennials are beginning to mature, it is important to get them engaged now in traditional banks and offer more targeted savings options.
Millennials’ Financial Attitudes
While the group is actually quite diverse with a large Latino population, this generation grew up tied to their mobile phones for communication, information, and entertainment. They do share some common traits, particularly the need to be able to complete tasks quickly, as the digital age has created a generation with short attention spans. To attract and retain millennial customers, all applications must be fun, fast, and user friendly. Millennials have no appetite for re-entering data or complex and stale digital applications. Research has found that the quality of a bank’s mobile application has a direct impact on customer engagement and loyalty to a bank.
Additionally, millennials’ banking habits are surprisingly traditional. They use cash most often and they still write checks. While millennials use their mobile phones to get information and access their accounts, they tend to use online applications such as PayPal and Venmo for payments rather than digital wallets. Most millennials feel that mobile banking applications have helped them with budgeting and tracking their spending.
Millennials tend to be highly educated but are saddled with student loans. While debt from student loans has caused them to defer things such as buying a home or starting a family, they do save, especially for their goals. 86% of millennials allocate money monthly for savings. Common savings goals are to purchase a home or save for retirement. Millennials view money as a tool to enable them to live life as desired and have meaningful experiences.
Although millennials are more educated than other generations, they are not particularly financially savvy. Many save for their children’s education but do not know what a 529 plan is. Here, banks have an opportunity to provide financial management tools and advice. Additionally, with many millennials looking to purchase homes, offering education and assistance in the homebuying process and easy mortgage applications would work well to establish a solid foundation for a lasting relationship.This group is particularly receptive to seminars, classes, and workshops on financial management but also looks to the internet (especially YouTube and blogs) to get suggestions for financial solutions.
Another common trait of millennials is that they tend not to report problems to a bank or, if they do, they are often not satisfied with the result. Not only will this result in customers switching banks, but they will also publish negative reviews online. Despite perceptions, millennials are not any less loyal than other generations were at the same age. As they grew up during the financial crisis, they are not tolerant of deception or neglect from their bank. They are more concerned with social issues and expect their banks to act responsibly.
With the availability of information on all banking services at their fingertips, millennials will shop for better rates and leave banks over fees. They generally aren’t swayed by traditional media but do expect banks to be true to their brand promises. They also will give data more freely if they get something of value for it, such as a promotional rate. It is critical, however, that these banking recommendations and promotions be highly targeted, as millennials are accustomed to such personalized recommendations from Google, Apple, Facebook, and Amazon (GAFA).
For financial institutions to focus on this generation, banks must adapt their customer touchpoints and applications to be entertaining, educational, and proactive in avoiding fees and addressing customer issues. Banks need to be able to provide personalized recommendations, quick answers to questions, and responsive problem resolution. Additionally, as millennials accumulate savings, banks should provide timely wealth management services.
As millennials age and are able to achieve goals previously deferred such as buying a home and starting a family, their financial needs will grow. Banks that establish a positive relationship with millennials by providing user friendly digital applications, showing social responsibility, and providing financial consulting will have a leg up on fintechs and other banks if they offer services to address these changing needs. So now is the time to engage this generation to establish a solid customer-centric banking relationship.