Nearly a third of America's 'generation y' have used mobile banking over the last three months and many are prepared to switch providers to get it, according to Javelin Strategy & Research.
With Gen Y (12-32 year olds) set to earn more than any other generation within 10 years, banks need to tap technology to attract them, offering services such as mobile, personal finance management and person-to-person payments, says Javelin.
About 28% of Gen Y consumers have used mobile banking in the past 90 days, compared with 18% of all people. Not only do they use it, young people switch banks for it, use it frequently, and value it.
Javelin's research also shows that Gen Y consumers have a lower satisfaction rate than that of the general population, which produces a higher switching rate and increases customer retention costs.
Since Gen Y shows a strong preference for electronic and mobile interaction, providers have a chance to guide them toward these less expensive channels.
Mary Monahan, research director, Javelin, says that with regulatory moves to cap card fees disproportionately affecting Gen Y, banks need to look at how they can make money from other services.
"Since interchange and overdraft revenue from debit card transactions has subsidised such services as free checking and free direct deposit accounts for the past decade, FIs will need to determine- from a profitability standpoint - what to do about these free services," says Monahan.