When it comes to attitudes towards banking, there’s a big difference between Millennials and earlier generations. If banks don’t recognize — and cater to the differences – they could be in trouble. Banks need to get serious about the needs and interests of Millennials since they will constitute 75 percent of the workforce by 2025. They may not have much money now, but in seven years their income will exceed that of Baby Boomers and Gen Xers combined. (1) Lose the Millennials and that’s a lot of missed revenue from mortgages, retirement accounts, credit cards, and auto loans.
A year ago I conducted two focus groups with Millennials on the north side of Chicago to better understand their thoughts about banking. Attitudes and behaviors mirrored what we are seeing in national research.
Millennials want everything mobile. As the first generation to spend a majority of their media time on computer devices – smartphone, tablet or laptop – 90 percent use online or mobile for everyday banking – the most of any demographic. (2)
Millennials don’t write checks. They prefer debit cards, paying bills online and making person-to-person money transfers digitally.
Millennials dislike monthly fees, surprise fees, and overdraft charges. More than 80 percent of Millennials say fees are the most important factor when considering a new bank. (3)
More than half of Millennials think one bank is no different than another. One third are open to switching accounts in the next 90 days and 73 percent are excited by the prospect of Google, Amazon, Apple, and PayPal opening their own bank. (4)
Millennials with college debt find it difficult to save money. No surprise here. Nearly three-quarters say having enough money for retirement is their biggest financial fear. Fifty-nine percent worry they will never pay off their college loans. (5)
Millennials are also looking for financial advice. A third say they need help and guidance in creating a budget; a fourth want advice on choosing and managing their credit card.
Although 92 percent of Millennials have banking relationships, they are not exclusive bank customers. Forty-five percent use non-banking products such as pre-paid debit cards, money transfer services, check cashing, pawn shops, and payday loans. (6)
Millennials have grown up ordering virtually everything from toiletries to shoes online. They’d like banks to offer the same ease of service and convenience expected from major online brands like Apple and Amazon. That’s a high standard for banks to live up to.
After listening to the focus group, Liberty Bank, a Chicago community bank, created Simple Debit Plus, a debit card account with no minimum balance and no monthly fee but with all the electronic features Millennials want – mobile banking, bill pay, person-to-person transfers, remote check deposits and surcharge-free ATMs at 90,000 locations nationwide. Not surprisingly, the account has been a hit with Millennials but more surprising is the fact it’s almost as popular with Baby Boomers, who use it both as a budgeting tool and a shared-ownership account with college-bound children.
Big banks have made a heavy investment to win over tech-savvy Millennials. And they’ve been successful. Sixty-eight percent of Millennials identify a large national bank as their primary financial institution. But, all is not well. Forty-three percent of customers at big banks are dissatisfied with their institution, according to the 2014 Consumer Banking Insights Study*.
Consumers saw Wall Street banks as largely responsible for the 2008 housing meltdown and subsequent financial crisis. The four biggest U.S. banks were assessed almost $100 billion in fines, penalties and various legal settlements – and that was before Bank of America’s 2014 record-setting $16.65 billion penalty. But the price paid was not just financial. Big banks saw public confidence plummet and it is only now regaining pre-2008 levels. The dissatisfaction rate runs even higher for Millennials who want transparency and authenticity in their banking relationships.
Over the next decade both national and community banks will be under increasing pressure to hold on to Millennials. Without brick and concrete facilities, online-only banks like Simple and Moven are able to offer lower fees and higher saving rates that legacy institutions can’t match. Retailers such as WalMart have entered the banking arena with checking accounts and debit cards. But perhaps the biggest threat comes from Apple Pay, Amazon, and Pay Pal who already have financial information on a large segment of the population and Millennials are poised to switch their banking to them once they have the opportunity.
(1) The Financial Brand: Nine Insights For Lasting Banking Relationships
(2) 2014 Bank Financial Education Survey
(3) ThinkFinance 2013
(4) Viacom 2013
(5) ThinkFinance 2013
(6) Think Finance 2013