Young people using alternative financial services at alarming rate

by. Shazia Manus

There’s no question the Millennial demographic is a key target market for financial institutions (FIs). Its size, earnings potential and purchasing behavior are among the major factors contributing to the attractiveness of this segment. Yet, that attraction may be unrequited.

Fringe financial service providers, such as check-cashing stores, pawn shops and payday lenders, are attracting college students and recent graduates at alarming rates.

In fact, a recent Synergistics Research survey found nearly 80 percent of young people who participated in the survey had used an alternative financial service provider. Convenience and retail stores appear to be common delivery channels for these services, as the survey found 75 percent of Millennial respondents had cashed checks, purchased money orders or used an ATM inside one of these stores.

Yet compared to these providers, a primary FI, such as a credit union or community bank, has a distinct competitive edge – the ability to provide customized, one-on-one relationships. FIs looking to attract and engage young people should highlight – and of course demonstrate – this edge as often as possible. One strategy to ensure this happens is to establish member or customer journey plans, detailing the FI’s outreach strategy at key life stages.

For more immediate results, FIs can create and price their products and services in a way that encourages Gen Yers to look to their primary FI first for all their financial needs. Of course, price isn’t likely to inspire long-term loyalty; it may be just the thing to get cash-strapped students and grads in the door long enough for engagement teams to activate an effective onboarding strategy.

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