As if the financial services industry wasn’t beleaguered enough, now comes the news (via this Viacom Media survey) that 71 per cent of millennials would rather visit the dentist than listen to anything banks have to say. But is a slick banking app enough to get them out of the dentist’s chair?
When teeth-pulling takes precedence over a friendly chat about loan rates, it’s safe to say that millennials – aka Gen Y, born in the ’80s and ’90s – are more than a little disillusioned with traditional banking.
The financial crisis of 2007/8 and subsequent recession have had a negative impact on millennials’ job and housing prospects. Consequently, they’re asset-poor, mistrustful of big corporations and prepared to shop around for the best deals. Perhaps more worryingly, there’s a general feeling that banks aren’t “for them”, with 58 per cent preferring to borrow money from friends and family, and 33 per cent believing that in five years’ time, they won’t need a bank at all.
The vast majority of millennials do everything on their smartphones. - Highlight to share -
What it all adds up to for traditional banking is one big headache. If the banks can’t respond to millennials’ needs quickly and in the language they understand, startups and new-gen lenders – already innovating with new tech and creative ways of doing business – will grab an even bigger slice of market share.
Mobile banking app Mondo recently raised a million quid in 96 seconds and has over 70,000 people queueing to get a debit card (according to where our designer Ross is in the queue) – not bad for a team of 15 or so employees.
So what should the big banks be doing to engage with millennials?
Pushing the tech envelope
The vast majority of millennials do everything on their smartphones. But while most major banks are clued up enough to offer mobile-friendly banking, the feeling is that the friendliness is held back by their unwieldy computer systems.
It’s not about bells and whistles – the very opposite. Speed and simplicity are key. Recently launched mobile-only bank Monese allows customers to open an account via their mobile phone in minutes with some ID and a selfie. There’s scope, too, for greater use of mobile information and data capture. Mondo tracks all your purchases on a map, knows when you’re overseas and tells you the exchange rate.
And the mobile-first revolution opens a whole new kettle of fish when it comes to storing things like receipts – according to Mitek, 68 per cent of millennials would rather take a picture than have to manually input information on their smartphone.
Big banks have the resource to ensure their in-house apps are a match for those offered by challenger brands, so they shouldn’t lose at the game they invented. They should also take inspiration from startups like Mint and soon-to-launch Hip Money, with its “Swipe to Save” feature, which make budgeting and saving at the touch of a button easy.
Millennials’ financial goals are vastly different to those of previous generations. They’re unlikely to be interested in home loans for some years yet, likewise car loans (they’d rather rent or car-share) or pensions (don’t make them laugh). Which means the majority of products offered by banks are largely irrelevant. No wonder Gen Y feel banks don’t ‘speak’ to them.
What millennials do have is student debt, and yet financial products that address this key concern are yet to flood the market. This generation needs micro-loans not mortgages, and new ways of assessing credit-worthiness. In short, they want targeted, bespoke plans for their life stage and circumstances.
Gen Y are probably the most sceptical and independent-minded generation yet. They’re used to cutting out the middle man when purchasing everything from holidays to insurance. Any company they deal with has to be open and upfront about fees, and refrain from “hard selling”.
More than any other generation, millennials want to align themselves with brands that are seen to do good, and which make them feel good about themselves. - Highlight to share -
More than any other generation, millennials want to align themselves with brands that are seen to do good, and which make them feel good about themselves. So rather than being just a sideline for banks, corporate social responsibility should be placed front and centre of the business.
Education, education, education
While millennials are the most highly educated generation in history, they have a “knowledge deficit” when it comes to finances.
There’s scope here for banks – with their enormous expertise and resources – to innovate by offering financial education, in accessible (and non-patronising) formats: think video tutorials delivered by fellow millennials, online access to “personal coaches”, webinars and podcasts.
If millennials do need to talk face to face to an advisor, online is their preference. Banks that offer the chance to chat via phone or tablet with financial experts, as mBank in Poland and Kiwibank in New Zealand do, are likely to win out over the competition.
Customer service – and then some
When it comes to dealings with their bank, millennials report more problems, and are less likely to have those problems resolved, than any other generation, according to a recent Gallup Poll.
Thanks to Gen Y’s near-constant use of social media, a gripe left unanswered can quickly become a disgruntled Tweet, which may reach hundreds, or even thousands, of people.
On the plus side, a Gen Y customer is just as likely to tell their peer group about a positive experience. Taking a close look at customer complaint data to see which issues commonly affect millennials, then reviewing the procedures for dealing with them, should be a priority for banks. Instant, 24/7 access to customer advisors, preferably via a mobile app, is equally vital.
The good news is that…
69 per cent of millennials still trust financial institutions to protect their money. If banks can build on that trust, listen to what Gen Y want and offer a more personalised service that suits their needs and lifestyle, there’s every chance they’ll gain customers for life.