The Millennials Are Already Here, Yet Many Banks Remain Unresponsive
Visionary analysts are already preparing us for the imminent arrival of Generation Z, the technology-drenched “iGeneration” of tweens and younger teens who are about to start reaching out for banking services. In the meantime, financial institutions must figure out how to address the largest generation in the United States – Millennials.
Despite the fact that the oldest members of its generation already are reaching their mid-thirties with mortgages and children, many established financial institutions still remain oblivious to the needs of Millennials and fail to comprehend why they are so different; most worrying, they fail to grasp why millennials matter so much.
Millennials already represent the single most important demographic for financial institutions. The ability to meet their needs will determine whether your bank is successful over the next 10 to 20 years or if you’ve lost a generation of customers. And since they’re already of age, you have no time to waste.
The End of Banking Monogamy
Too often, the focus of discussion has been on who Millennials are instead of what effect they have and how we acquire and retain them. As one of the largest generations by age range, they are certainly at different stages of their lives, but there is consistent behavior setting them apart from other generations.
Millennials have an insatiable appetite for immediacy. There’s no time for slow, inflexible and opaque banking services. They expect banking and payments to move with them in real time and want immediate, transparent and flexible apps that are compelling and delivered on-the-go.
The traditional, monogamous banking relationship has been under assault for decades, but Millennials are the first generation to fully grasp the freedom to choose. Boomers and Generation Xers may have switched banks once, but they were largely one bank for life. Millennials just want products and services for a good price. They expect all their financial experiences to be online, mobile and real-time – at pace with the rest of their lives.
The good news, however, is that the bank branch has not become a historic artifact. Millennials still welcome face-to-face contact with experts, just not in the sterile, waiting-room-style of many retail banks today.
The continual growth in alternative financial services providers means new entrants are taking customers from traditional players. With well targeted products and services (P2P and mobile payments, payday loans, remittance and cross-border payments, etc.), non-bank players can offer all-digital services at competitive prices, as they are not restricted by large-scale back offices or legacy operational costs.
You Need a Game Plan
Careful consideration is needed to create and target specific products and services that attract and meet Millennials’ needs. But in today’s climate, this can be problematic. Most banks are unsure what to do and are often restricted by their established infrastructure from making radical changes to current processing norms and service delivery mechanisms. Often, banks are too busy trying to stay afloat with their current technology and meeting regulatory requirements to consider more investment. There is little or no budget for radically changing operations, but banks and retailers need to act now in order to better retain Millennials and guide them through their life stages.
Bigger banks have been able to make some significant infrastructure upgrades to support increased mobile delivery and have started offering compelling customer services options that are targeted toward Millennials with resounding success. But this is just the beginning. Initial meaningful steps could include easy ways to instantly transfer money between non-account holders via digital channels or rolling out support for mobile payment services in order to stay competitive and earn Millennials’ loyalty and business. And the mobile nature of younger people also presents boundless opportunities for cross selling in order to get more involved in their customers’ lives.
Banks could also make much better use of the rich transactional and life-stage information they possess on their customers in order to make improved offers. Better customer engagement could be achieved by simply collecting and analyzing data from product silos and customer accounts.
Millennials seem to want the best of all worlds: they want it now, in real time, backed up by face-to-face branch support when needed, but primarily more advanced, self-service offerings provided online and on-the-go. Revamping delivery mechanisms and exposing once closed off back-office systems to online delivery is certainly challenging, but, without action, a large and critical demographic could be lost for a decade or more.
Get Your Game Face On
Financial institutions urgently need to develop a suite of sticky products and services that meet the needs of Millennials. Otherwise, banks face the reality that they will lose huge numbers of customers to alternative providers with little or no chance of return. Regularly, analyst reports and surveys show that younger people actually prefer to source financial services from traditional players, but look elsewhere when their banks are incapable of delivering. Despite a love of technology, many Millennials still baulk at the idea of getting their primary financial products from Apple or Google. At the same time, these same players have set very high consumer expectations for service delivery – a bar banks seem unable or unwilling to match.
Without a doubt, it’s time for action. Understand this vital demographic and how their needs differ from what has gone before. They may be CEOs of tech startups or penniless students studying for their future, but it is now time to start delivering bespoke services that attract and retain millennials. It may already be too late to embark on a program of wholesale reform, but if you are prepared with smart and innovative ideas that focus on digital technology, multi-channel, social media, loyalty, customer advice, self-service and true real-time capability, there is a large audience willing to listen.
Will banks that do not fully cater to millennial needs really lose a generation of customers?