Millennials: Is There a Generation Gap in Banking?
In previous blogs, we discussed banking and Baby Boomers and Gen X - what each generation wants and doesn’t want in their financial institution relationships. Not surprisingly, both generations are tech users with unique financial needs. Now, let’s discuss Millennials! Love them or not, Millennials are the future!
For the sake of this blog, Millennials are defined as those born between 1981-1998 and account for 25% of the population. As of the latest census, Millennials are the largest segment of the US population. As such, they directly influence how many industries react to and with society. Much of the recent development in technology can be credited to the Millennial generation’s demands.
Some other characteristics of this group include:
- Demanding and self-centered: (hey, I didn’t say it, I am quoting from MX Resources) As the first digitally native generation, they expect things instantaneously
- Staying home longer: They are marrying later in life and leave college with significant student loan debt
- Mobile first: They have very active lifestyles with an “always on” mentality
Millennials have been a difficult generation for us “older types” to understand. In fact, the group has been so challenging for the financial industry that American Banker titled an article with ‘What Do Millennials Want from Banks? Everything. Nothing. Whatever.’
The “word on the street” is that Millennials hate banks and want everything digital. Millennials have thrown away the traditional financial relationship and are looking for a new way to bank. But is that really true?
Before financial institutions can meet the needs of Millennials, we should understand the generation’s wants and actual behavior. In the same American Banker article referenced above, Millennials indicated:
- 92% would choose a bank for its digital services
- 68% use online banking manage their financial life
- 90% have a relationship with a traditional financial institution
- 30% have at least one financial product provide by an institution that isn’t their bank
While Millennials like a digital experience, they don’t want it to the exclusion of other options. Millennials don’t necessarily dislike banks; they just want them to be better. This generation wants the best of all worlds, a great digital experience coupled with the ability to have a face-to-face relationship with a financial partner, as needed. So don’t tear down your brick and mortar just yet!
I see Millennials’ expectations driving the need for change. And let’s be honest, change is needed in banking. As an industry, banking is rarely on the cutting edge of technology. And technology drives the Millennial generation. In the March 15, 2017, article in Financial Brand, What Motivates Millennials to Switch Banks, sixty-five percent of Millennials surveyed said they would be open to switching to a community bank if it offered mobile services. Seventy seven percent said they would only consider using a financial institution that offered online banking as well as in-branch operations. Technology leads the Millennial’s decision to choose a financial institution, and that technology needs to be mobile responsive, client friendly and easy to use.
Obviously, understanding the need for technology is crucial. Once that is achieved, what are the Millennials financial needs? Where can banking help?
Millennials want to better manage their money. Sixty seven percent of Millennials are interested in their bank providing tools and services that will help them create and monitor a budget. Many Millennials leave college with large amounts of student debt, so budgeting and debt management assistance is key. Tying this with mobile budgeting and payment tools, as well as virtual AND in person money coaching would be a substantial differentiator in the market. In addition, guidance is needed with investments for savings and future retirement plans.
Millennials are also starting new businesses. Here, too, they are looking for digital tools for the business side of their financial lives. Deposit opening, business loan applications, financial statement submission all need to be mobile responsive with 24/7 access. Millennials expect the technology available on the retail side of the financial institution will exist on the business side. For many financial institutions, business lags far behind retail in its technology and digital experience.
It is important to offer technology for all the generations, not just Millennials. Nevertheless, Millennials are pushing financial institutions to move faster than ever before. Is your financial institution ready to serve the Millennial generation? Where are you with mobile responsive applications and on-line banking? Is this built-out on the retail side but ignored on the business side? Have you developed budgeting applications that are focused on needs of this generation?
Are you ready for the future?
Posted on Friday, July 6, 2018 at 3:00 PM
by Stephanie Butler