Top Millennial Banking Trends That Banks Need to Know
A few weeks ago, CITI made public a prediction that banks are preparing to implement massive layoffs and reduce headcount by up to 30% due to the shift from in-branch banking to online. Think that’s unlikely? Considering that there has already been a 15% reduction in bank tellers since 2007, this doesn’t seem too far-fetched. So, what is at the heart of this dramatic shift in the fundamental business of banking? As you might guess, it’s Millennials. Read on to learn more about the millennial banking trends that we predict will transform the banking industry in the next 5 years and how banks can address them.
Who are Millennials?
Before discussing millennial banking preferences, it’s helpful to first identify the key millennial generation demographics:
- Millennials were born between 1981 and 2000.
- There are roughly 80 million of them in the U.S.
- They currently make up 39% of the US workforce and by 2020 that will grow to 50%.
- 23% have a Bachelor’s degree or higher (making them the most educated generation)
- Only 21% are married, while 42% of Baby Boomers were married at their age
General Distrust of Banks
Though the economic effects of the 2007 financial crisis are largely behind us, the underlying psychological scars still remain. Many millennials, who entered the workforce during the 2007 financial crisis and/or saw the negative impact the crisis had on home ownership and unemployment for friends and family, now hold a general distrust of the traditional banking industry.
In a wide-ranging study about Millennials, Innotribe found that:
- Only 19% of millennials say that most people can be trusted (vs. 31% of Gen X and 40% of Baby Boomers)
- 89% demonstrate a stronger likelihood to buy a product from a company with a social or environmental mission (91% trust those companies more)
Additionally, the Millennial Disruption Index uncovered similar findings:
- All 4 of the leading banks are among the 10 least-loved brands by millennials
- 71% would rather go to the dentist than to their bank
- 33% are open to switching banks in the next 90 days
- 73% of millennials are more interested in financial offerings from Google and Amazon than from established nationwide banks
- 52% of millennials would first turn to their parents for financial advice, compared to just 24% who would look to their bank first
Digital/Mobile is Now a Critical Channel for Banks
In addition to this distrust of traditional banks is the fact that millennials grew up in the age of the internet boom, and they spend a majority of their professional and personal lives connected to their internet either via computers or mobile devices. They have also ushered in the rise of mobile apps, crowd-source funding, digital peer-to-peer payments, and online banking.
This digital-first mindset has led to a few important facts reported by the Millennial Disruption Index:
- 68% say that in 5 years, the way we access money will be totally different
- 33% believe they won’t need a bank at all in 5 years
- 70% say that the way we pay for goods and services will completely change in 5 years
- Almost 50% are counting on tech start-ups to fundamentally change how banks work today
The Bank of New York Mellon (in association with the SAID Business School and University of Oxford) surveyed over 10,000 millennials and found that:
- 40% of millennials prefer to interact with their bank via their website or email
- Only 23% want to meet face-to-face with their bank in a branch
The Independent Community Bankers of America (ICBA) conducted the American Millennials and Banking – A Cross-Generational Study and revealed that:
- 74% of millennials say mobile banking is “very important” to them (vs. only 42% of Baby Boomers)
- 24% of millennials report carrying less than $5 cash per day
So, what does all of this mean for banks? The good news is that out all of the priorities in life, millennials report “being financially secure” as the most important goal, ahead of even finding a partner and getting married. The millennial generation is also very large, so these two facts alone prove that there is a huge financial opportunity for the banking industry if they can:
- Develop mobile/digital-first strategies that cater to millennial preferences
- Restore trust they lost during the 2007 financial crisis
- Broaden their social reach and support initiatives that millennials value
- Consistently innovate to improve their products and services before other disruptive forces in the market
Are you seeing any other important millennial banking trends? Leave us a note in the comments.