6 Millennial Banking Myths DebunkedSeptember 22, 2016
By Justin Smorawske
“Millennial”—it’s more than just a buzzword you hear at conferences and in trade publications. It’s a subset of the population that will grow to dominate the industry in terms of supply and demand for the coming years. (Truth—it’s already started.)
But what many bankers see as a stumbling block for their marketing strategies is actually not as dire as they anticipate. The idea that millennials are impossible to market to when it comes to traditional financial products and services is built on a foundation of perpetuated myths.
Let’s break it down.
1. “Millennials prefer national brands.”
It’s easy to assume—across all segments of the retail sector—that millennials on the whole can be a fickle demographic to nail down. They appear to be quick to abandon ship once they’ve lost interest or when brands stop constantly inventing new ways to entice. A local bank player might naturally assume, then, that eliciting some loyalty out of its consumer base might prove difficult—especially with a variety of national and web-based financial brands from which to choose.
But this “truth” just doesn’t hold water. In fact, millennials as a generation do not prefer national bank brands when it comes to managing their money. They actually prefer local providers and smaller, community banks. A recent study from the Independent Community Bankers of America (ICBA) found that 54% of millennials are more attracted to locally owned and operated banks, as opposed to national brands.
2. “Millennials aren’t savers.”
Are millennials frivolous? It’s a commonly held belief, perhaps, by members of Generation X and baby boomers: Millennials aren’t prone to saving, because they’re more consumerism-focused than previous generations. They’re also not future-planners in the way their parents were.
However, this is yet another myth about this 80 million-strong generation. Millennials, in fact, aren’t predisposed to spending thoughtlessly as stereotypes might indicate. Several studies have found that they are starting to save earlier than you might suspect. Much of this tendency can be chalked up to a fear that government-supplied retirement funding will diminish in the decades to come—or the millennial job instability of the recent recession. The Transamerica Center for Retirement Studies found that among employed millennials, 70% have begun a retirement savings by age 22 (contrasting boomers’ 35 years old and Gen-X’s 27 years old).
3. “Millennials aren’t starting businesses.”
For many banks, commercial lending can be your bread and butter. With a multitude of investors and business owners ripe for the picking in older generations, millennials don’t really factor into your commercial lending operations. After all, baby boomers sort of cornered the market in that area, and Gen-Y customers aren’t as interested in entrepreneurship.
You guessed it—it’s a big “N-O” on that myth. Millennials, in fact, are more likely to start their own businesses than their older predecessors. A recent study from Bentley University found that among this generation, 67% have “start my own business” on their list of career goals. Conversely, just 13% said the same of climbing the corporate ladder at an existing company. Your young-adult consumers will be needing startup money and office space in the near future—rise to the occasion.
4. “Millennials gravitate toward credit cards.”
Millennials are the most consumer-driven generation yet, so they’d naturally be very interested in a tool to get instant gratification from retailers (and pay the cost later). Doesn’t it seem obvious that members of Generation Y would be big-time user of credit cards and other “pay later” solutions?
It’s actually not so. Credit cards aren’t nearly as popular among your youngest banking customers as you would probably estimate. Most of these consumers are more apt to select a debit card in which you only spend what you have. Remember—this is a generation that has entered or is entering adulthood in a tentative economic setting. They’re perhaps more cautious about chalking up debt due to the international economy and their own college-accumulated debts. A study from Bankrate.com found that more than 60% of 18-to-29-year-olds don’t even have a credit card, let alone use one.
5. “Millennials have sworn off the branch.”
You’ve heard it a hundred times over—foot traffic to your branches is waning because this budding younger generation isn’t interested in face-to-face service any longer. Your online and mobile presences are booming while your branches are starting to feel emptier.
But when it comes to this cross-section of your customer demos, subsets aren’t actually as far away from your branches as you might assume. A 2016 study from Salesforce found that young millennials, those in the 18-to-25-year-old range, actually only prefer online banking by a nine-point margin. And, believe it or not, they prefer in-branch banking to mobile banking by a one-point margin. Once you enter 25-to-35-year-old range, the in-branch number begins to dip (along with the mobile banking number), while the online banking number skyrockets to 50%. All this to say, don’t count out your young Gen-Y customers stopping into your brick-and-mortar locations now and again.
6. “Millennials aren’t interested in help or advice.”
Millennials have it all figured out, and they know a little about just about everything—or so they think. Aren’t millennials pretty confident when it comes to areas that relate, tangentially or otherwise, to technology and consumer behavior? And aren’t they resistant to getting sound help or advice on these matters?
Nope. Millennials, when it comes to finances and banking, are actually highly receptive to advice from the experts, whether they’re banks and other financial institutions or their parents or older peers. When it comes to relating to a millennial audience, they’re interested in the educational aspects of finance and budgeting. A study from VeriPark found that 67% of Gen-Y members desire budgeting tools from their banks. This generation wants help from the people who know how to navigate this area best—banks.
Justin Smorawske is CMO/Partner at Epicosity, a financial services marketing agency in Sioux Falls, S.D. Epicosity has a keen insight into meeting millennial demand with its expertise in creative development, digital strategy, video production, website development and public relations. Email: Info@Epicosity.com.