At more than 83 million members, they are the largest generation in U.S. history. From a banking perspective, they are also the most baffling.
Much has been studied about America’s millennials (also known as Generation Y), loosely defined as the population segment born between about 1982 and 1996, the current age ranges approximately 25 to 34. And some of the research findings do not bode well for those seeking to build a financial future with them. Consider:
- The majority of millennials have less than $1,000 in savings.
- 65% don’t have a credit card.
- Many are buried in student loan debt. In 2018, all graduates averaged student loan debt of $28,900. Many individuals, particularly graduate degree holders, carry considerably higher debt loads
Not only do they have fewer bank assets, but they also have less bank loyalty. According to a Gallup Poll, millennials are 2.5 times more likely to switch banks than Baby Boomers, 1.5 times more likely than Generation Xers.
Despite these traits, as a community banker, it is prudent to ponder how to win this market segment’s hearts and skinny wallets if your institution is to sustain growth through the current decade 2020-30 and beyond. Because your current customer base is, quite literally, running out of time.
Community banks are notorious for having an average customer age (ACA) factor somewhere around 50 to 55. This is even more evident in Pennsylvania, which comes in at #8 among the “grayest” states and lacks the reliable feeder streams of moneyed retirees to places like Hawaii (#7) and Florida (#2).
Older customers may be good for deposits, but those relationships are slowly, but steadily, shuffling off this mortal coil. If you don’t want your bank to join them, you’ll have to tap new blood, and we all know where it flows. The question is how to attract and transform your market’s millennials into profitable customers. And the answers aren’t pretty.
But first, a wee bit of good news. Contrary to stereotype, not all millennials are locked into the neobank model. Gallup research shows that 66% of millennials visited a bank branch at least once in the previous six months. This indicates that they still value human support to manage their banking. So all is not lost on the clicks or bricks question. Many of them want both.
Now for the tough stuff. Millennials will be the most demanding and downright cheap class of customers you have ever wooed. You will not win their loyalty the way you have for previous generations of customers. They are too used to getting rewards for clicking out the best deals on their mobile devices. Beating providers down to their last cent of perceived profit is their blood sport. They’re really good at it, too. And they brag to others of their victories within milliseconds on social media — which is actually in your favor. Read on.
Among the marketing tools you’ll need to succeed, the most important is a super-strong presence across the entire digital spectrum — social media to the web to mobile — and a river of ever-changing content to engage, entice and endear them to your bank’s brand and customer experience. With proper product structuring, social media is how you can turn their brags into your bucks. Here are additional considerations.
Checking: Give Free or Die
Getting a debit card is the leading reason millennials open a checking account in the first place because debit helps them track spending. They shop checking deals very closely and use online bank rating tools like SmartAsset.com to make their decisions.
Free checking is a must to attract this wired-in consumer mindset — and the freer, the better. They want it all — no minimum balance, no monthly fees, no ATM fees, no overdraft charges, no nothing. That’s the penny-pinching reality with this population. Neobanks like Chime Banking started it and now more brick-and-mortar banks are figuring it out. There’s no perfect no-fee product, but there’s always a way, especially when “give free or die” is the only option.
Mobile: Maximum Speed, Minimum Patience
Millennials use their mobile phones about 45 times every day. 47% use it for banking, according to a survey from Jumio & Javelin Strategy & Research. That’s twice the number of Baby Boomers who bank via mobile devices. But here’s a critical difference worth heeding. Millennials won’t wait for wonky. The same survey found 38% of Millennials abandoned mobile banking (and presumedly that bank) when activities took too long. It also revealed they are logging into their mobile banking apps most often to:
- Check their transaction history
- Transfer funds between accounts
- Schedule person-to-person money transfers
Buying Homes and Planning Families (Finally!)
The image of the millennial living on the couch in Mom’s basement stuck in a low-pay job while clinging to academically ideal virtues (“Whoa, you majored in Mesopotamian Literature? Awesome!”) seems to be changing. Whether they are growing up or merely growing tired doesn’t matter. Millennials are now edging toward more traditional American consumer lifecycles based on homeownership and family-focused expenditure patterns. And that can be good news for community banks.
In 2018, millennials comprised the largest cohort of homebuyers in the U.S. at 37%, according to the National Association of Realtors 2019 Home Buyers and Sellers Generational Trends Report. If your bank has a First Time Homebuyers Program, now is a good time to shine the marketing light on it as a first-touch way to spark new relationships with this emerging and promising breed of community bank customers.
As far as growing into the responsibilities of parenting, we may be stretching our forward-looking stats a bit, but consider:
- 75% of millennials currently own a dog or cat and,
- 83% believe that pet ownership is a logical first step to parenthood.
Let’s hope that nature kicks in and A follows B, as it has for most generations since Fred and Wilma Flintstone. With families come career motivation, home expansions, college educations, wealth planning for the future and other financial growth needs, which dovetail nicely with a hometown banking partner. Community banks are, like, locally sourced. And that’s pretty awesome, too.
Michael C. Keenan is the president and CEO of Keenan-Nagle Advertising, Inc. Based in Allentown, PA, with a full-service team of 12 professionals, the Keenan-Nagle firm has specialized in community bank marketing for more than three decades. For facts, visit www.keenannagle.com/banks or call 610-797-7100.