For domestic financial services companies, millennials — the roughly 80 million Americans born between the early 1980s and the late 1990s — represent the most important customer demographic.
The reasons are clear: Not only are millennials expected to become the largest living adult generation, they’re also the best-educated, and stand to inherit more wealth than those of any prior generation. The older among them are reaching the age when they’re making decisions with huge financial impact: buying homes, having children and investing for the future. And, of course, because even the oldest millennials are still under 40, the banks that capture their business today are beginning a relationship that could last for decades.
But marketing financial services to millennials is confusing, because research about them can be contradictory. For example, according to a survey of 10,000 millennials by a unit of Viacom released in 2016, 71 percent said they’d “rather go to the dentist than listen to what their banks are saying,” and 73 percent would be more excited about a new financial services offering from the likes of Google or Amazon than from their own banks.
And yet millennials also have “a higher share of wallet with their primary bank than any other generation,” according to Gallup, and that “when banks engage millennials, they gain a serious boost in wallet share: Fully engaged millennials have a 23% greater share of wallet than actively disengaged millennials.”
So, what’s going on here? What do we really know about this generation of consumers, and how can banks, especially community banks and credit unions, apply those lessons when marketing to them? A new 45-page report by Harland Clarke, “Millennials: Attract, Engage, Retain,” offers some possible answers.
For Banks, Attracting Millennials Begins with Technology
Harland Clarke, a provider of customer engagement and marketing solutions, argues that technology is the foundation for financial services companies looking to successfully market to millennials.
Having grown up during a period of massive technological advancement, millennials are “the most engaged, adept, and opinionated users of mobile apps of any demographic,” Harland Clarke writes, noting that “millennials access their financial institution via mobile browser or app 8.6 times a month, compared to 3.1 times for non-millennials” and that about 75 percent prefer communicating via text over talking on the phone.
Meanwhile, a survey of nearly 1,000 millennials by the credit score company FICO concluded that their preferred communication channels regarding financial matters are text, email, bank websites and banking apps.
Millennials’ desire to bank online and communicate through social media and other digital channels puts pressure on small banks and credit unions to improve their mobile and digital services. Yet it is clear that banks of every size must offer customers a full slate of easy to use, mobile-friendly banking services.
Millennials Demand Authentic Relationships with Banks
A robust digital experience is a prerequisite for any bank seeking to attract younger customers, but tech alone is not enough. Millennials also value authenticity from brands they do business with and have a deep-seated trust deficit with many businesses, especially financial institutions.
“Talking with millennials about what matters to them is the beginning of capturing their interest. They want a conversation,” says Harland Clarke. “Brands that can interact with them on a personal level will win their business.”
That means understanding how millennials view the role of money in their lives. While each person is different, research offers a few important insights.
First, younger consumers regard control over their lives as essential, and see money as a means of getting there rather than an end to itself. Indeed, says Harland Clarke “the meaning of life lies in control” for millennials. So while previous generations focused on homeownership, for example, millennials are more likely to prioritize well-being, financial security and achieving career goals.
Second, millennials with student debt owe an average of $32,000, and their debt is causing them to delay choices such as buying a home. For example, 85 percent say they can’t save for a down payment because of their debt and 52 percent think they can’t even qualify for a mortgage. Finally, more than 75 percent of millennials say they prefer to spend their money on experiences over ownership, anyway.
What Millennials’ Unique Outlook Means for Banks
How can smaller banks and credit unions turn these insights into a plan for attracting millennial customers? Harland Clarke’s report suggests a few action items:
- Improve digital and mobile services. Smaller banks will never have more robust digital banking options than national rivals, and they don’t have to. But having a mobile app that allows users to manage their accounts, deposit money and pay bills is essential.
- Strive for authenticity. Younger customers say it’s important to them that companies they do business with share their values. “They want brands that are associated with causes that benefit all of society, not just their shareholders,” says Harland Clarke. Community banks should emphasize their deep commitment to local causes as part of building rapport with millennials.
- Focus on relationship-building. Smaller banks and credit unions have typically done a better job than larger rivals at satisfying customers, a fact owed mainly to their superior in-branch experience. Although they visit branches less often than older generations, 90 percent of millennials still say that branch proximity is important to their selection of a bank. That suggests that small banks must capitalize on the in-person opportunities they do have to build relationships with younger customers and to better understand their financial goals.
- Be helpful. Despite their higher education levels, millennials struggle more than prior generations with financial literacy, with only about 24 percent demonstrating understanding of financial products and services such as mortgages and investments, according to a PwC study. That’s discomfiting for them — but an excellent opportunity for banks to provide educational marketing and programs aimed directly at them.