The 75 million Americans aged between 18 and 34 are the most educated, tech-savvy generation in the country, representing a huge prize to the financial services industry, says BBVA Compass economist Marcial Nava.

However, these millennials are laden with student debt, limiting their access to other forms of credit, and they are also delaying marriage, shunning mortgages, credit cards and other financial services.

Meanwhile, banks face a new wave of competition, with outside players in areas such as peer-to-peer lending, crowdfunding, payment platforms and virtual currencies stepping in to offer simple, transparent and personal alternatives.

The report says that to win this new type of customer in the face of growing competition, banks have to do more than simply offering basic online and mobile services. Instead, they should use their expertise and data to provide millennials with more advice on managing their finances. It also calls for more active engagement, urging firms to seek out feedback from customers and to employ more young people.

Ultimately though, Nava admits that the structure, regulation and size of banks means that they cannot lead the way when it comes to innovation. He suggests the establishment of independent teams focused on millennials, separate them from the core businesses. Another option is partnering or acquiring financial disruptors.

BBVA has been aggressively pursuing this approach itself, last year paying $117 million for Simple, a startup with relatively few customers but focussed on providing young tech-savvy Americans with a mobile-based money management proposition.

Says Nava: "A vast number of young adults demand banks to engage in the kind of relationship that helps them not only to access credit but to navigate the intricacy of their financial life cycle. If banks do not embrace these changes, non-banks will."

You can read the full report here: