As they begin to occupy the majority of the workforce, millennials are providing chaos and complexities to traditional financial institutions. Because of this younger generation’s distrust in banks and traditional financial institutions, they are beginning to seek out alternatives in the technology and emerging market industry, some of which are referred to as “fintech.”
A big part of why banks and credit unions have trouble acquiring and then retaining millennials, is that they do not understand them, which includes their values, motivations, and loyalties. Although many think millennials are not focused on finances, that’s not always the case. Infact, 54% of millennials plan to start their own businesses within a year, and 86% of millennials are interested in social investing. Financial advisors tend to avoid millennials because they think they are uninterested, but missing out on this segment of investors is a big mistake for advisors.
Since millennials will soon make up majority of the workforce and are the most-tech savvy market segment ever, knowing how millennials are already changing modern day banking can help prepare to the additional alterations that are sure to follow.
One of the biggest shifts comes from the fact that millennials are used to technology and want personalized attention and experiences. They need and crave a digital solution to manage their money and build a strong financial base. As of right now, most traditional solutions just are not cutting it. As opposed to other industries, such as retail, that have embraced millennials’ need for customization and personalization, banks, credit unions, and other financial institutions need to play catch up.
A traditional brick-and-mortar bank is not perceived as necessary by millennials. Over 90% of bank customers under 35 years old use mobile and online banking, and 27% would use branchless, digital banks. With no need for physical checks or the familiarity of a local branch, they would rather have the convenience and technology of an online bank, with tools and communication that is tailored to their needs and an experience that is personalized based on their behavior, product choices, and other preferences.
In order to be successful, banks need to adjust their marketing, acquisition, and retainment strategy for this segment of their market. When refining these strategies, it is important to keep in mind the following:
Millennials are always looking for a better option. Unlike some other demographics, millennials are not afraid of switching costs. When asked, 80% of millennials say they would switch accounts for better rewards.
They’re not financially irresponsible, but they need guidance. Banks and credit unions have traditionally placed lower emphasis on millennials as a target audience because of the perception that they are irresponsible with finances, but millennials need the most support that banks can give them. Today, 75% of college graduates have student loan debt, and as they advance in the workplace, buy homes, and start families (as many already have) their financial needs and questions continue to grow.
Big names? Big whoop! The majority of millennials need alternate options to traditional banking institutions because of their distrust for these big-name banks after the financial crisis. Over 5 million millennials don’t have a checking account, citing “distrust in banks” as the reason why.
The need to adapt the banking system to fit with the millennial needs has opened a new market of startups with non-traditional banking capabilities. While right now these startups, like Venmo, Simple, and Chime are layered on top of FDIC insured existing banks, and these startups will likely start to branch out and provide separated alternatives to big name banks. These companies focus on appealing to millennials, with low costs, high rewards for the immediate future, creating potential threats to traditional banks.
Overall, as a bank, it is important to understand the values and needs of your target market. Millennials want integrated technology along with the trust necessary for financial interactions. By providing online services and appealing to these young investors with rewards programs, it is possible to acquire and retain millennials for life.
Carousel30 has been working in the financial services space for several years now, for clients at banks, credit unions, wealth management, and insurance. It’s safe to say that we’ve become quite familiar with the unique needs of the industry and the challenges it faces. Additionally, we are experts at achieving marketing goals and reaching a variety of target audiences, including millennials. Talk to us today about your marketing goals and we’ll let you know how we can help.