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Shaped by the economy, globalisation and social media; millennials are a generation that rely on peer influence to make important decisions. Making up 23% of the UK population, they are extremely valuable with a potential lifetime value higher than that of any other age group. The problem is, millennials are very hard customers to retain.
33% of the millennial market believes they will not need a bank in the next five years and 71% would rather go to the dentist than listen to what their bank has to say (Viacom Survey). Unlike generations before them, millennials aren’t afraid of change, they are a fast moving and dynamic demographic who are willing to make decisions quickly with little prior research. For established financial institutions this means there is a need to act quickly to reinvent themselves, under the threat of new, disruptive non-bank alternatives.
The tech savvy, forward thinking attitude of millennials isn’t currently suited to in-branch banking. The recent economic crash and current climate has had a significant impact on their behaviour, demand for mortgages and other large-scale loans is low. A decreasing need for brick and mortar banks and increasing non-bank competition is putting the traditional bank under pressure. Research from Mortgage Master reported that millennials value passion much more than a pay cheque, and prefer to spend their money on experiences rather than material investments. Despite this, 93% of millennials said they wanted to own a home in the future, indicating current behaviour is likely to change over the long-term.
As this generation grows older, become families and seek to make long-term investments, the branch is likely to become an important part of their banking experience. This is predictable behaviour for any growing consumer; it’s just that millennials are doing things differently, for example, 94% state they will begin their home search online. Millennials are digital natives; they use tech to organise, communicate and research and for banks to communicate effectively with this digital bracket they need to behave in a digital manner.
Face-to-face encounters with in-branch staff aren’t part of the ideal millennial consumer experience, unless completely necessary and this approach to banking saw 479 branches close in the UK in 2014 and higher figures are forecast by the end of this year, with 399 branches already closed by June (according to the The Campaign for Community Banking Services). Does this point towards the death of this channel? Not necessarily. A survey conducted by Statista found that 33% of 18-24 year olds had a negative opinion on an all-digital bank compared with only 18% of 25-34s and this figure jumps to 36% for those aged 35 or older; indicating that the branch is still very much in demand.
A recent survey from Biocash looking at consumer preferences in the US and UK found that, of 600 consumers surveyed, 36% preferred online banking and 29% chose mobile channels. However, data from a 2014 ComRes study suggests that 69% of consumers in the UK believe that it is important to have a bank branch close to where they live. Perhaps it is time to concentrate less on eliminating the branch completely and instead optimising this channel by taking the online experience and applying it in-branch. Changes like reducing the number of tellers and increasing the number of kiosks to minimise queues and increasing the facilities that enable in-branch customers to perform digital banking actions. Minimal staff are required to guide the customer through the technology, ensuring their experience is quick and easy, but it is these few staff that give the branch added value and competitive advantage over non-bank competitors.
Even the mobile loving millennial will admit that applications can be temperamental, unreliable and frequently annoying; and whilst one day in the future there might actually be an app to set up your mortgage, it seems a very distant future. It may not be the most popular channel amongst the younger age bracket, but it is important not to alienate the older generations altogether. Across some of the biggest banks in the UK, the branch still remains the most popular channel; in 2014, TSB found that 36% of their customers preferred to visit a branch compared with just 22% who bank online. Millennials are not the only segment banks should be aiming to please, although they are a potential ‘long-term’ investment, other segments still build up the majority of the banks customer base and branch optimisation initiatives aimed at this age group should be relatable to older customers.
The in-branch experience the millennial consumer is looking for is real-time, they want up-to-date information on their deposit and credit accounts, expect to be in control of the account information they see and when they see it and most of all they expect their banking experience to be transferrable across all channels. This seamless experience requires an optimised customer journey that enables consumers to prearrange face-to-face meetings with their bank using their mobile application on the go. Time in-branch per visit should be minimal, with all processes and operations as fluent as possible. By doing this the consumer won’t view the experience as a chore but as a more integrated part of their banking process. Whilst optimisation shouldn’t be a tool to drive millennials in-branch, there is no harm offering them a personalised experience when they are there. Staff members with tablets can easily be on hand to assist, and even cross and upsell products.
Financial institutions need to use their assets to their own advantage amongst a market of disruptive new technology. When millennials do eventually look for the face-to-face advice needed for bigger transactions or long term financial decisions the non-bank rivals will have little to offer. The future is uncertain, in this digital age who is to say that in 20 years’ time todays millennial won’t be tomorrows in-branch banker? The answer is simple, don’t let the branch die, revolutionise it, become more adaptable and respond in real-time, that way consumers won’t feel the need to look for alternatives, let alone change financial institution completely.
This content is provided by an external author without editing by Finextra. It expresses the views and opinions of the author.
Erica Andersen Marketing at smartR AI
04 November
Ellison Anne Williams CEO at Enveil
30 October
Klaas Stijnen Co-Founder & Co-CEO at Montoux
Vinothkumar Kolluru Senior Data Scientist at Fractal Analytics
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