Millennials–or Generation Y–have officially surpassed Baby Boomers to become the largest group of consumers. Defined as being born between the years 1982 and 2000, Millennials currently make up 26% of the U.S. population (compared to Baby Boomers’ 24%).
Understanding that this population growth trend will continue over the next five years – Millennials will account for 1/3 of the country’s adult population by the year 2020 – financial service institutions (FSIs) are now tasked with adjusting their business models and overall marketing strategies to appeal to Gen Y.
However, marketing to Millennials is no easy task. In fact, one New York Times article postured that, “Many young adults are proving particularly baffling to marketers and researchers,” also citing that this generation does not take well to traditional marketing strategies. On the whole, Gen Y actually prefers to seek out their own brands, rather than having brands market directly to them. How then, can FSIs gain traction with this seemingly impossible-to-reach generation? The answer can be found in the services and products that FSIs provide to their customers.
When observing the way Millennials go about their banking, three major trends emerge:
TREND #1 – The preference for online banking versus in-branch banking.
It’s no surprise that tech-savvy Gen Y’ers would rather do the majority of their banking online, including opening bank accounts, transferring money both within and outside of their institutions, paying bills, getting information about products and services, and depositing checks. Those aged 18-34 do more of their banking online than any other age group, and prefer mobile banking over utilizing a computer.
FSIs should see this online banking predisposition as an opportunity to capture the Millennial audience. Mobile apps stand out as the #1 way that FSIs can improve the Gen Y online banking experience – increasing app functionality and offering additional features are recommended. Millennials are all about convenience, so it stands to reason that adding mobile app features like voice command banking, smartphone photo bill pay, and cardless cash withdrawals will attract this generation.
TREND #2 – The desire for more technology-driven banking solutions.
Going hand in hand with the Millennial online banking trend is this generation’s desire to have their FSI create a more technology-based banking experience. This desire is borne out of Gen Y’s preference for self-serving: they want to be able to do it all themselves, from self-checkout at the grocery store to applying for a loan at a smart ATM through their banking institution.
FSIs can appeal to the more adventurous Millennial banking customer by providing technology-based banking solutions such as express banking kiosks, instant message customer service, teller video-conferencing, and smart ATMs. These technologies are not meant to replace the human-to-human interaction that tellers provide, but rather to augment the overall banking experience.
TREND #3 – The expectation that FSIs will communicate via social media channels.
One of the key defining traits of Millennials is their level of engagement on social media. More and more, Gen Y is coming to expect a high amount of social activity from their FSI. Millennials use an FSI’s social media page to learn more about the institution, determine the brand’s personality, and air grievances. In fact, more than 20% of those aged 18-34 looked up or talked about an FSI on social media before they became customers.
Since Gen Y has come to expect a social media presence from their FSIs, banking institutions should embrace social media platforms as an additional way to add to the customer banking experience. Beyond just a quick response to customer grievances, however, banking institutions should also be prepared to engage with their customers on a more emotional level. FSIs can run customer contests, showcase the brand’s community involvement, and comment on current news through their social media platforms.
However FSIs choose to target Millennials, one thing is clear: banking institutions cannot afford to overlook this dynamic age group, or the large impact Gen Y will continue to have on financial service trends in the years to come.
MINTEL, The Future of Banking in the U.S., January 2015