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Banking Act. 08 Sep 2018

Millennials, a challenge for the banks

33% of Americans in the so-called millennium generation believe they will no longer need banks in coming years. In view of these data, capturing customers from among this new generation is shaping up to be a major challenge.

“71% of American millennials would rather go to the dentist than listen to what banks are saying”. This phrase from The Millennial Disruption Index shows how little love is lost between banks and a generation that numbers 80 million people in the United States and a little over 51 million in Europe and which in 2025 will represent 75% of the global workforce.

The study of 10,000 millennials (that is, anyone born between 1981 and 2000) carried out in the United States highlights that 53% don’t think their bank offers anything different than other banks, and that one out of every three millennials is willing to switch banks.

“This generation can see they don't really need the financial sector –they've lived through the economic crisis and they believe that part of the blame for this crisis can be laid at the door of the banks. But this is not the only idea that distances them from banks. There is also the fact that they have been born with technology and demand a very good user experience from any company”, says Rodrigo García de la Cruz, professor at the Instituto de Estudios Bursátiles.

According to the professor, “millennials are digital natives, and they look for absolute simplicity with technology, they're used to accessing everything with the minimum number of clicks, and companies have to work hard to overcome the technological complexity involved in making a transfer or browsing websites. They must offer their products with the utmost simplicity; if Amazon allows you to buy things with a couple of clicks, the banks should also make sure the user feels completely at home”.

68% of the millennium generation in this study believe that in five years the way of accessing money is going to change, and 70% think that payment methods will be totally different. 33% think they will no longer need a bank. The professor points out that in order to approach this segment, the banks should take into account that they are “fans of certain companies. If Apple opened a bank, it would have 37 million customers on the first day. Apple doesn't have customers, it has admirers, and that doesn't happen in the financial sector”. The Millennial Disruption Index points out that 73% of the respondents would be more receptive to any financial services that might be offered by  GoogleAmazonApplePayPal or Square than by their own banks.

The advantages of the millennial customer

But not everything about this generation means bad news for the financial sector. García de la Cruz points out that banks should exploit the fact that millennials are used to surrendering their data without any resistance without a second thought, and have a much lower perception of risk than other generations, which benefits companies and banks by making it easier to learn about their preferences. This information is very important for designing strategies for capturing new customers”.

This article in the New York Times highlights that this generation, unlike the boomers (now aged between 50 and 60), downplay work –for 25% it is the cornerstone of their lives, whereas for boomers this percentage rises to  39%–, and when combining work and free time they emphasize that their time is “theirs alone”.

“This is a very well-educated generation with very clear ideas. They are not willing to work at just anything, they believe companies should generate values, and that's why they demand that banks should have social responsibility, maximum transparency and values. The millennials work for something more than just money, and that's why they're doubly demanding with the financial sector: as employees, because they're going to demand that companies manage their talent in the best possible way; and as customers, because they look for added value. We shouldn't forget that this is generation that is loyal to experiences rather than brands”, concludes García de la Cruz.

Commitment to mobile banking

Another important point for banks is the role of mobile devices in the lives of millennials –these are digital natives who have grown up in the age of the Internet, smartphones and social networks and are looking for a simple and easy relationship with the bank using these tools. The study by Gemalto entitled Generation mBanking highlights that 94% of millennials have a cellphone, 42% have a tablet and 38% have both devices.

32% claim never to have stepped inside a bank and 62% say that at least once a month they use an online banking service via their phone or tablet.  27% would prefer not having a bank to not having a cellphone.  PwC's Global Digital Banking Survey points out that mobile banking users will increase by 64% through to 2016; and those who bank through social networks and online banking will also rise by 56% and 37% respectively. Users of traditional channels such as branch offices or telephone banking will fall by 25% and 13%.

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