With the $600 billion they contribute to the economy each year, Millennials are transforming the financial services industry—but community financial institutions (CFIs) might not be adapting fast enough.
Among Millennials—18 to 34 year olds—with checking accounts, 51 percent use a big national bank as their primary financial institution while just 29 percent use a community bank or credit union, according to the 2015 Consumer Banking Insights Study (CBI). Additionally, 38 percent of Millennial consumers* who don’t currently have a checking account at a CFI say they want to use a CFI but don’t because those institutions lack the products (such as free checking, rewards checking and financial management tools) they need. The study was commissioned by BancVue and conducted online by Harris Poll among more than 1,000 U.S. adults.
However, Millennials are more open than other generations to switching to a CFI. Fully 41 percent of Millennials who don’t already use a CFI say they’re at least somewhat likely to switch to one in 2015—that’s 2.5 times that of 35 to 54 year olds (16 percent) and those ages 55 and up (14 percent).
With Millennials set to overtake Baby Boomers this year as the largest living generation, CFIs must deliver a banking experience that appeals to the next generation of customers. Data from the CBI suggest the following three steps could help:
- Boost your marketing. Nearly one-fifth of Millennials (18 percent) say they don’t use a local community bank or credit union because they are unaware of their options, compared to 8 percent of those ages 35 to 54 and 7 percent of those 55 and up. Those numbers make it clear that many CFIs aren’t reaching Millennials with their current promotional and educational efforts.Social media outreach and word of mouth or referral efforts can help. At least 75 percent of Millennials have a profile on at least one social networking site, and most Millennials—91 percent—report that they trust their friends for product and service recommendations.
Finally, some CFIs are pooling their marketing budgets to increase the reach of their efforts, similar to when neighboring restaurants form a “restaurant row” or an area full of dealerships creates a “motor mile.” Marketing efforts that boost the reputation of CFIs as a whole wind up benefiting individual institutions as well.
- Improve your product line-up. As mentioned earlier, many Millennials believe credit unions and community banks can’t provide the products they want and need. So what are they looking for?Almost all Millennial consumers say cash back options (91 percent) and rewards (91 percent) are at least somewhat important factors when choosing a bank. Access to a mobile or online personal financial management platform, in which they can monitor all of their finances (i.e., credit cards, loans, bank accounts) in one place, is also at least somewhat important to almost all Millennials (94 percent). Additionally, mobile banking options are much more important to Millennials (90 percent) than other generations (72 percent for those ages 35 to 54, and 58 percent for those 55 and up).
If your institution isn’t offering these products and services, now is a good time to start. Many third-party providers can help supply the needed technologies and products, often at little additional cost or hassle.
- Make it more convenient. Despite growth in online banking use, the study made it clear that Millennials highly value convenient locations and in-person service.Millennials are more likely than older adults to say it’s valuable to bank at an institution with a branch nearby (86 percent vs. 74 percent of those 55 and up). More importantly, 88 percent would prefer to do at least some banking in person, with 42 percent saying they would like to receive financial advice in person. Almost all Millennial consumers (96 percent) say personal customer service is at least somewhat important when it comes to choosing a bank.
Mystery shopping and training services can help ensure that your institution’s representatives are consistently delivering stellar customer service. These services often result in improvements that lead to increased account acquisition.
To attract the next generation of customers, it’s essential to offer an experience that appeals to that generation. These simple steps can go a long way toward building a banking experience that attracts and retains Millennial customers.
*“Consumers” are defined as U.S. adults who have a checking account at a financial institution.