As American Banker puts it: Everything. Nothing. Whatever. This new generation of investors generally can’t remember a time before the Internet and are often stereotyped as the generation that is addicted to their mobile phones. They’ve grown up with Facebook, Amazon and Netflix and because these companies have reams of data on customer preferences, they can create a consistently interesting and personalised experience for the customer. Millennials expect banks to provide them with the same level of personalised service.
It’s understandable that banks find the millennial mindset confusing and contradictory. The data paints a picture of a customer who is the most empowered and demanding to date, and who is willing to pick and move for better service, and yet wants the personal touch and amenities of traditional banking. Banks have some challenges ahead, as they grapple with understanding the millennial mindset:
- Millennials are "turned off" by banks because of unappealing services and products (The Cassandra Report)
- 73% would be more excited about a new offering from Google, Amazon, Apple, Paypal or Square than from their own bank (Millennial Mind)
- A survey of 10,000 people born between 1981 and 2000 reports that this demographic finds banks to be one of the most unlikeable brands (Millennial Disruption Index)
Meanwhile, fintechs have paid attention to how behemoths like Amazon and Facebook provide customer experience. They are leading the way in using customer data to offer relevant financial products to individuals and to streamline their banking experiences. They’ve also moved into social media – most major banks haven’t yet. They are partnering with Facebook and Snapchat to allow users to transfer money within their network of social connections. McKinsey estimates that banks could lose up to 60 per cent of their retail profits to fintech firms within the next decade.
But banks have one thing in their favour: a long tradition of building relationships and trust based on expertise. Millennials certainly want more automated functionality, but the stats on digital adoption provide some unexpected insight into millennial banking patterns: 46% use cheque books, 68% use online banking, 44% send money digitally and 39% use mobile remote deposit capture. While these figures reflect a preference for digital services compared to the rest of the population, they also show that millennials are not digital-only customers. They still want to interact with a person when the situation requires it. So despite fintech’s head start, it’s not all doom and gloom when it comes to banks building relationships with millennials. CCG Catalyst surveyed 450 consumers in the 18-to-35 age range and found that 90% have a relationship with a traditional financial institution.
So what do millennials want?
Someone to advise them: While there is likely a number of reasons for the disconnect between CCG's findings and other studies cited above, the disconnect doesn’t mean that millennials don't like banks — they just want them to be better. They want their institution to act as an "overall financial caretaker" for them, said Paul Schaus in American Banker, CCG's president and chief executive. "Millennials want their banks to advise them," he said. Schaus goes on to say that they want advice on how much to save and budget. Millennials are so serious about their financial health that more than a third (34%) have a written financial plan, much higher than the 21% of Gen X and 18% of Baby Boomers who have done the same. Furthermore, two-thirds of millennials would like their bank to provide digital budgeting tools.
Millennials are set to inherit an estimated $30 trillion from their parents – it pays to pay attention to them before someone else does.