By Derrick Walton
Despite only recently earning the title of “largest generation,” according to a recent Pew Research report, millennials are already starting to shake up the financial world.
Not only do they rely on digital banking, but they also demand transparency and place a high degree of value on brand loyalty. So when news broke that top brands like Apple and Facebook were considering opening their own banks, traditional financial institutions took notice of the new competition.
With millennial customers on the rise, traditional FIs need to refocus on what this age group values most and offer the technological advances that other brands are talking about.
Providing faster payment options.
In today’s fast-paced world, speed is more than a luxury — it’s a necessity. According to a recent FICO report, 50 percent of millennials are already using payment services like Venmo and PayPal, showcasing their high demand for convenience, mobile support and simplicity.
Tapping into those values, Apple has created an instant peer-to-peer payment option via text message with its own Apple Cash tool, which very few traditional FIs offer customers.
In an effort to keep pace with brands like Apple, banks are exploring new partnerships outside the traditional financial ecosystem to help create their own instant payment options. For example, Business Journal recently noted Bank of America’s efforts to mirror Venmo or PayPal’s services by offering instant P2P payments to better target a younger customer base.
This group wants banks to create faster, more innovative technology to help make real-time payments a reality. Millennials expect control of their finances and feel they shouldn’t have to wait on banks in order to access their money.
According to a 2017 article on smartasset.com, it takes the majority of traditional FIs about two to four business days to transfer money domestically and up to a week internationally. Banks can speed up this process by partnering with fintechs, since these companies have already built the global relationships necessary to quickly transfer money around the world. Another option for traditional FIs is offering millennials credit to help them get their money faster, which could be especially appealing to those working in the gig economy.
Collect better data and offer more customizable plans.
Beyond speed, millennials are starting to demand that their banks streamline their personal information — similar to how Google stores individual user information within a single connected cloud system.
If banks start using customer information such as personal calendars, bills, accounts and location, they can offer more customizable plans based on individual needs. Greater access to customer data could help banks provide urban millennials with the opportunity to utilize city plans, such as an automated payment plan for transportation cards. Meanwhile, millennials in rural areas could enjoy new online banking opportunities they haven’t had in the past.
One brand already starting to utilize customer data is Facebook. The social network is exploring new approaches for offering loans to younger consumers who want to take control of their finances without the concern of being turned away at traditional FIs.
Increase customer loyalty.
One of the biggest advantages that companies like Apple and Facebook have over banks is their loyal user bases, with which they’ve already developed a strong relationship. In fact, a recent Investment News article states roughly 66 percent of millennials will fire their parents’ advisors after an inheritance due to lack of relationship.
Brands like Apple, Netflix and Facebook strive to create user-centric experiences that establish trust with customers, while banks are sometimes labeled as untrustworthy or misleading, according to a recent survey by the American Bankers Association. Millennials rank the four largest banks amongst their 10 least-loved brands in America.
Young people often lament their experiences with traditional FIs, especially in terms of technology. According to FICO, currently, 43 percent of millennials feel their banks don’t communicate with them through their preferred methods: email, text message, website and mobile app. While millennials still place value on human contact and expect to be able to quickly communicate with someone if they have questions, they ultimately want a bank that doesn’t leave them in the dark with outdated technology and unanswered questions.
If banks don’t have the means to connect through technology, they can still implement techniques to meet the demands of this cohort. Community banks are doing this by launching initiatives that give this group of customers a voice. Independent Banker recently reported that Centric Bank in Harrisburg, Pa., instituted a 16-person millennial advisory board to better understand what millennial customers want most. And some banks, such as Ohio’s Heartland Bank, are taking it a step further by recruiting millennial employees in order to attract a younger group of customers, according to American Banker.
Millennials value transparency, modernization and speed when it comes to their banking and take their brand relationships very seriously. With companies like Apple, Google and Facebook launching their own financial services, consumers have more modern banking options available. Traditional banks need to evolve to meet these new expectations in customer experience, or they risk obsolescence as millennials assume dominance over the consumer market.
Derrick Walton is a global bank operations specialist with an expertise in international payments and the current executive vice president of Global Financial Networks at Hyperwallet — a global payout provider, www.hyperwallet.com.