By Enacomm CEO Michael Boukadakis
First published by CBInsight
Community banks and credit unions have a distinct advantage with wooing Millennials. These young adults crave in-person relationships when it comes to financial management. At the same time, this generation grew up with digital tools in their pockets, which created expectations for technology-enhanced experiences. Banks must become more sophisticated with their offerings and roll out technologies like virtual assistant banking, visual IVR, and biometric account login to court these digitally-savvy consumers.
Millennials are at the pinnacle of financial services usage. And as the Pew Research Center recently pointed out, they now make up America’s largest generation by population. Soon they’ll enter their earning prime, increasing their purchasing power. In fact, Goldman Sachs Global Investment Research expects that, “as Millennials enter their peak home-buying years (25-years-old to 45-years-old), their…desire to settle down in the future could lead to a surge in home sales”…and, I might add, mortgage loans. Now is the time for community banks and credit unions to convince this generation to trust their wallet to a smaller, more personal financial institution.
Research shows that Millennials are prime for switching to a local community bank or credit union from their big box bank to take advantage of better customer service and less expensive loans. More than half told SurveyMonkey in summer 2017 that they had visited a bank branch at least once in the past month. Four in five wanted to be able to go to a brick-and-mortar location based near their towns. This desire for personalized service means Millennials gravitate toward working with a banker who knows their first name.
All the while, this generation is highly digitally engaged, using multiple platforms for several hours every day. They want the technology that the major retail banks offer but smaller institutions sometimes can’t afford.
Community banks and credit unions typically don’t have the IT staff or budget for R&D and compliance like big box banks…and it shows. For example, only 42% of credit union members are using their institution’s mobile app, compared to 64% of customers at large national banks, according to a FICO survey. And important to note about their preferences: two in three Millennials use a mobile device as their banking method, according to a report from MFour Mobile Research’s Millennial Insights Project. What’s more, FIS reports Millennials are three times more likely than Baby Boomers to access their accounts through their mobile phones. Already, Millennials are forcing banks and credit unions to rethink how they do business for decades to come.
By seeking out the right technology partners, smaller financial institutions can merge the online and offline banking experience. A hybrid, omni-channel approach that delivers value and enables customer engagement across an increasing number of channels and platforms will make it possible for community banks and credit unions to grab greater market share. Currently, 20% of Millennials in the 18-24 age group use credit unions as their primary financial institution. Millennials’ demands for a friendlier financial institution and a technology-enriched consumer experience create an opportunity for community banks. Smaller institutions should take the steps necessary to close the gap immediately in order to survive and thrive.
As the 80 million Millennials – roughly, adults now between the ages of 20 and 36 – progress in age and earning power, so too must the strategies developed and implemented by financial institutions advance. Community banks and credit unions can’t afford to overlook 31 percent of the U.S. adult population and 34 percent of the workforce, banking on their older members. They need a technology-based, speed-first strategy complemented by smiling faces. A pivot will pay off: FICO’s consumer research on why people switch banks uncovered that Millennials are two to three times more likely to close all of their accounts with their primary financial institution than people in other age groups – new business for the taking. Win Millennials with valuable offerings, then retain them with a level of personalized service that only community financial institutions can offer.
Millennials want to work with community banks and credit unions but expect an advanced, technology-enabled experience. While many smaller financial institutions today lack the technology to meet their expectations, there’s opportunity in the wings. Innovators are reimagining the consumer experience and have developed turn-key applications that equip smaller community financial institutions with the modern tools they need to meet and exceed the expectations of patrons today. In a universe ruled by computers, technology is a critical component of a winning strategy.