Millennials have overtaken Baby Boomers to become the largest population segment in the nation. More than 75 million strong, this group — also known as Generation Y —generally consists of people in the 19-to-35 age bracket.
To build lasting relationships with Millennial customers, banks must understand this generation’s distinctive characteristics and needs. In particular, Millennials tend to use a wide range of devices and channels to interact with their banks — for banking transactions as well as customer service — including mobile apps, bank websites, texting and social media. Investing resources in developing and marketing these digital channels is critical to attracting and retaining this important demographic group.
Opportunities and risks
According to a recent Fair Isaac Corporation (FICO®) survey, most Millennials (68%) use banks with a national presence as their primary banks, with only 15% using credit unions and 9% using regional banks. Millennials are more likely than older generations to use a large national bank as their primary institution, and tend to have more products at those banks. But they’re less loyal than other customers. FICO reported that Millennials are five times more likely than those over 50 to close all of their accounts and three times more likely to open a new account with a different bank.
For community banks, this presents both an opportunity and a risk: The willingness of Millennials to switch banks makes them an attractive target for new customer acquisition campaigns. At the same time, their lack of loyalty places community banks at risk of losing their own Millennial customers.
So, why do Millennials choose to switch banks? According to FICO, the top reason is excessive service fees, followed by negative experiences with bank representatives and ATM issues (too few, inconvenient locations, excessive fees). In addition, unsatisfactory digital experiences (both online and mobile) have a much bigger negative impact on Millennials than on other demographic groups.
Making the most of technology
One key to satisfying Millennials is to offer multiple channels and devices for interacting with the bank and to ensure that communications and customer experiences are consistent and seamless across all channels. In addition to online banking and mobile apps, other examples include live chatting via a bank’s website or mobile app, two-way texting with customer service representatives, and social media (such as Twitter and Facebook). Some banks are even offering video chatting capabilities on ATMs.
FICO also makes some generalizations:
- Millennials are much more likely than other age groups to use mobile banking apps (although they still prefer to use a bank’s website).
- Frequent mobile app users are more satisfied with their banks and more likely to recommend their banks to others.
- A positive service experience is “a clear driver” for Millennials to recommend their banks to others.
- Millennials are more likely to prefer texting for bank communications, particularly for things such as credit limit warnings and notifications of suspicious charges.
The survey also found that, for Millennials, social media recommendations are much more valuable sources of marketing information than they are for other generations.
Spreading the word
To attract and retain Millennials, banks should explore options for enabling these customers to use their preferred communication methods. Texting, in particular, is an underused channel that Millennials desire. Banks also should leverage Millennials’ willingness to recommend them by developing social media platforms, “sharing” tools in mobile and Web-based apps, and “tell-a-friend” incentives.
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