All banks should be aware of the importance of catering to the needs of the millennial generation, and while many are, there are significant misunderstandings around how to address these new consumers.
This tech-savvy cohort is set to dictate the direction of the banking industry, making up 21 percent of the UK population and representing a significant business opportunity for interested banks. But developing a clear idea of what a certain group of customers wants, and then coming up with strategies to meet these expectations, is by no means an easy task. It requires banks to develop a strong understanding of what motivates and matters to their customers.
After a decade of rapid technological change, and new directives like the Second Payment Services Directive (PSD2), banks need to take a step back and consider exactly what it is that millennials want and expect from their financial services. Recent research by NCR shows, that adopting the latest technology should be an important concern for banks, to which 93 percent of respondents agreed or strongly agreed.
But banks also need to keep an eye out for future trends as innovation is an expectation that 91 percent of respondents have of banks.
Millennials have lived through a huge shift in attitudes towards banks – having grown up through the 2007 financial crisis. According to the Millennial Disruption Index, 71 percent of US millennials would rather go to the dentist than listen to what banks are saying.
With the increasing prevalence of digital devices in every aspect of our lives, current prevailing thought is that many members of the millennial generation are happy to take a ‘hands-off’ approach to their finances, but want their bank to be ready to provide help and advice when they need it.
The NCR survey revealed that 90 percent of the survey participants aged 18 to 25 would be happy if their bank offered loyalty programs and reward schemes in partnership with retailers. Seventy percent would appreciate recommendations from their financial institution based on a combination of their banking history and ‘customers like me’ analysis.
What matters to millennials when it comes to banking?
When it comes to delivering a certain standard of service and customer experience, it is important that banks have the strongest possible understanding of what matters to certain demographics and how to reflect these concerns.
As far as millennials are concerned, it has been claimed that members of this generation would prefer not to micro-manage their money on a day-to-day basis. Instead, millennials are looking for innovative products and services that will help them to prepare for the challenges of cash flow, budgeting and savings with targeted and appropriate support and advice.
This is where the opportunity for banks emerges; with a customer base who are driven by experiences rather than materialism (according to a survey by Eventbrite), banks stand to gain by offering the right sorts of streamlined services for millennial customers targeted at the real problems that these customers are facing – be that saving for holidays or managing their Uber expenditure.
Successfully doing this will be integral for banks looking to build successful, enduring relationships with their millennial customers, and sweep away any cobwebs of distrust that may still linger.
Are you missing the millennial opportunity?
Banks that fall into the trap of prioritising sales and revenue generation through traditional models that proved successful with Baby Boomers or Generation X, run the risk of missing out on valuable opportunities to earn long-term consumer trust and loyalty. Instead, banks need to allocate focus to goals that are harder to quantify but could prove just as significant in the long term – such as customer experience and expectations – to drive a new generation of revenue as millennials become an even-larger segment of the consumer base.
The November 2016 issue of the Digital Banking Report, sub-titled The Millennial Mind, argued that millennials represent a “tremendous upside opportunity” for banks, but this generation reports the most problems with financial services and is the least likely of all age groups to have their problems resolved. Report author Jim Marous noted:
“Millennials are the generation least likely to strongly agree that their bank knows them, looks out for them or rewards them. While partially caused by being a more demanding segment, they are also the most ignored by the industry.”
In our current era of increasing diversity and competition in the retail banking industry, it has never been more important for banks to make a special effort to engage with their customers, to find out what matters to them and to invest in delivering on those findings.
Using all of your consumer-facing touchpoints and channels of communication to build meaningful engagement with millennials could be vital to the development of long-term, mutually beneficial relationships with this key demographic.