Newsflash: Millennials don’t like banks. And everyone in the banking industry needs to take at look at Viacom’s recent Millennial Disruption Index. The company surveyed over 10,000 U.S. Millennials about 73 companies spanning 15 industries, to determine which industries are ripe for disruptive change. Here’s what Millennials said:
- In five years, roughly 70% of Millennials expect to be accessing their money and making payments in a totally different way.
- 73% would be more excited about a new financial product from tech companies like Google, Amazon and Apple than from their own nationwide bank.
- A staggering 71% would rather go to the dentist than listen to what banks are saying.
In light of these attitudes, it’s no surprise that fully a third of Millennials – the largest generational cohort in American history – believe they won’t need a bank at all in the future. Already, Millennials are three times more likely than Baby Boomers and almost twice as likely as members of Generation X to forgo both a savings and a checking account. And those numbers are likely to grow, as alternative financial products proliferate from tech companies both large and small. For many banks, it’s no exaggeration to say that their survival depends on reasserting their relevance to young people. But it will take far more than youth-oriented marketing and public relations efforts to win over the same generation that spearheaded the Occupy Wall Street movement. Here are four ways banks can get back on Millennials’ good side:
- #SociallyConsciousBanking #EthicalBanking #BankingOnValues
By the numbers, big banks regularly make the list of America’s most philanthropic companies. But the industry’s high profits and low public image suggest that it wouldn’t hurt to open the coffers even further – especially considering that 83% of Millennials expect businesses to do more to help the world. Yet philanthropy won’t help if banks continue to be associated with a “toxic and destructive” corporate culture that – whether by manipulating markets or maximizing fees – often puts profit before people. Fortunately, there are ways to both make money and make a difference. Socially responsible investing and impact investing, for instance, have emerged as viable – and popular – options in recent years, especially among Millennials. Banks that incorporate a socially conscious element into their portfolios may find themselves better placed to invest some of the $30 trillion in assets that Baby Boomers are projected to pass on to their heirs in the coming decades – which is one reason major players have shown increasing interest in this key demographic.
- #StudentLoans #StudentDebt #BankingInnovations
Banks can make immediate gains by addressing Millennials’ biggest financial challenge: runaway debt. With student debt reaching a record high of over $1.2 trillion and impacting some 40 million Americans, lenders have a valuable opportunity to do some good, build some good will – and attract new customers – by lightening the burden on young college graduates. Companies like Discover and Wells Fargo are reportedly seeking to cut deals with borrowers on income-driven repayment. And other banks are offering loan consolidation and refinancing options – including the peer-to-peer lending platform Social Finance Inc. (SoFi), which advertises an average of $11,783 in savings per member. SoFi is also branching out into mortgages and personal loans geared toward Millennials, appealing to their desire to pay off credit card debt, and even offering to pause their payments and help them find work if they lose their job. This approach seems to be working: the company is reportedly planning an initial public offering that would value it at $3.5 billion, nearly triple its valuation in a recent funding round.
- #CommunityMatters #ShopLocal #BuyLocal
Millennials are known for their interest in buying locally produced foods and supporting local businesses. So it should come as no surprise that they also prefer to work with local banks. A recent survey found that 54% of Millennials would prefer to work with locally owned and operated banks, and 64% said it was important for them to develop a personal relationship with their financial institution. This is good news for community banks and credit unions, which enjoy higher overall levels of trust (among Americans of all ages) than their national and regional counterparts. But it also opens an opportunity for larger banks, which could pursue younger customers by emphasizing the personal touch at their branches and boosting their support of small local businesses – a priority for the highly entrepreneurial younger generation. If they don’t, big banks shouldn’t be surprised if their smaller competitors use their local ties to level the playing field.
- #MobileBanking #DigitalBanking #MobileMoney
The need for strong online and mobile banking tools is abundantly clear to anyone trying to win over Millennials. It’s no surprise that 87% of Millennials in this survey say their smartphone never leaves their side, day or night. And 72% in this report say they use mobile banking apps, with 94% reporting active use of online banking. To reach a generation with little patience for time-consuming offline tasks, banks need to make as many transactions as possible accessible with a few taps on a mobile device – and if they don’t do it, others will. For instance, companies like Prosper and Kabbage are streamlining the borrowing process for individuals and small businesses, respectively, sometimes making funds available in a matter of minutes. And apps like Evolve and Mint are making it easier to manage finances and pay bills on a mobile device.
It’s also important for banks to realize that Millennials are not alone in their general dislike and mistrust of the banking industry. By implementing the changes required to attract younger people (investing in socially responsible causes, finding creative ways to help people get out of debt, supporting local communities, and using technology to make transactions more convenient), banks will become more appealing to people of all ages. And this would be a significant first step in transforming the public perception of the industry as a whole.