Banking's Digital Future: Becoming More Relevant to Millennials

Banking is in the throes of unmatched change and potential disruption.  The shift to digital and mobile technologies combined with changing consumer demographics—especially the increased importance of Millennials—present vast opportunities for innovators.  This blog describes critical elements that banks need to consider to become more relevant to Millennials.

First, let’s look at the research data…

In the U.S. in 2015, Millennials (who are defined as 18 to 34 years of age in 2015) now outnumber Baby Boomers according to Pew Internet Research.  The population make-up in many other countries is mirroring this generational and cultural shift.  And as Quisk has written before, Millennials have very different views toward banking relative to other demographic segments. 

Net/net:  banks are ominously at risk of disruption.  Some of the more powerful views of Millennials, which are detailed in The Millennial Disruption Index, are summarized here:

• 71% would rather “go to a dentist than listen to what their banks are saying”
• 1 in 3 are open to switching banks in the next 90 days
• All four of the leading banks are among the 10 LEAST loved brands for Millennials

Accenture consumer research from North America in 2015 provides the following highlights:

• Consumers expect their banks to be:
  • Intuitive:  54% want their banks to locate discounts
  • Intelligent:  53% want proactive bill payment services
  • Individual:  52% want proactive product recommendations
  • 79% of consumers think their banking relationship is transactional (up 10% from 2014)
  • 86% of consumers trust their banks to securely manage their data

In particular, banks need to recognize that Millennials switch from their primary bank at a pace nearly double the average of other consumer segments.

• 18% of Millennials switched their primary bank within the past 12 months—compared to 10% of customers aged 35 to 54 and 3% of customers aged 55 and older.

So what can a bank do to become more relevant?

First, banks must acknowledge that their futures are in their own hands.  As William Shakespeare said, “It is not in the stars to hold our destiny, but in ourselves.”  In other words, banks need to take action.  The Accenture study showed that Millennials point to high fees and poor loyalty programs as top reasons why they are dissatisfied with their banks.  On the other hand, Millennials say that they are most likely to stay with their current bank if online banking services are good.

Banks must not try to retain Millennials in the same manner they did with their parents or other demographic segments.  Based on specific insights, banks must create programs and communications tailored specifically for Millennials.  In addition, re-thinking bank loyalty programs and evolving transaction-oriented perks into more individualized benefits should be positively received by this strategic segment.

Investing in new digital services which deliver personalized, proactive interactions would be a positive step for Millennials.  That said, according to Accenture:  “More than developing digital products and services, this is about using digital as a springboard to meaningful experiences that bring new value to Millennials’ financial and non-financial lives.”

In summary, this effort for banks to become more relevant to Millennials will NOT be easy; however, there is really no other choice.  Let us know what you think.