Different generations shop, save and invest in very different ways. Millennials are no exception and financial institutions have taken notice, investing large sums in an attempt to understand and accommodate their needs. But who exactly constitutes this generation? Millennials are defined as individuals ranging from 18 to 34 years of age and represent the customer segment not only leading the digital revolution, but will most likely set the tone of the industry moving forward. The infographic below provides some further information as to their overall demographic characteristics:
Currently, millennials make up just a quarter of the U.S. population; however, they account for 43% of all mobile and online banking users. It’s forecasted that by 2020 they will have more income than generation Xers and baby boomers combined. Millennials consume and manage their finances in very different ways than previous generations and major banking institutions have not let this trend go unnoticed. One of the pioneer programs, Wells Fargo Startup Accelerator, aims to provide hands-on support to startups that create solutions for financial services and enterprises. Multiple digital marketing campaigns and product offering focusing on low fees surface on the ad space on websites after their efforts to google anything related to financial services. All these would have been a smart investment to capture millennials attention except one underlying problem – the millennials distrust of big banks and brands.
According to the Millennial Disruption Index, banking will be the no. 1 industry disrupted by Millennials, and Wells Fargo, JP Morgan Chase, and Citigroup are among their least favorite brands. Not only do these firms share their distrust for big brands, a third of surveyed millennials believe that banks will be irrelevant to them in 5 years. In other words, many would be happy to “bank” with Google, Apple or Amazon if such services become available (a few services such as Google Wallet, prepaid cards, and funds transfer via Gmail have been offered).
These facts represent a hidden opportunity for community banks and credit unions if they are able to adapt quickly. Being smaller can be an advantage. Personal service with a community focus has always been the guiding principle to breed customer loyalty and ensure longevity of these organizations. Millennials are no different in this respect. If anything, they enjoy even more personalization and being in-touch with their communities but take it even on step further by expecting that personal experience online and through technology.
Community banks and credit unions stand a better chance to adapt more quickly than those mega banks. For example, they may join or partner with nonbanks to create product offerings through new channels and technology. To adapt, one must also embrace a new vision of financial services. As suggested in this article published by American Banker, it includes increased mergers and acquisitions, joint ventures and branch transactions as the size and composition of institutions adjust to new strategies. If changes are made quickly and effectively, the community banks may find millennials coming into the branch asking for financial planning or saving advice. They may even become your branch advocates.