Should banks care about millennials?
As a marketing professional, I do feel slightly bored with the buzzword ‘millennial’, and find myself asking what purpose the categorisation really serves – since millennials are all the people born between 1980 and 1996.
Has this mammoth group (35% of the workforce in the US; 13.8 million people in the UK) got many characteristics in common? Several reports suggest they do, and offer advice on how banks (and FinTechs) may approach them differently.
I don’t know about you, but I’m feeling 22
Sandwiched between ‘Generation X’ (born, roughly, late 70s to early 80s) and ‘Generation Z’ (born mid-90s to early 2000s), millennials or ‘Generation Y’ are characterised as being self-expressive, civic-minded, liberal and upbeat.
As one of my favourite marketing gurus Mark Ritson notes, the attributes we ascribe to ‘millennials’ could quite easily describe a phenomenon called ‘being young’ – and he warns marketers against lazy segmentation and mass marketing. Most millennials did grow up around technology, and are therefore often labelled as ‘digital natives’. But not all of them did. And there are plenty of digitally savvy consumers in other demographics. So why do we keep reading about how to market to ‘millennials’ digitally? And is there anything banks can actually learn?
I knew you were trouble when you walked in
Apparently, millennials may be the segment least likely to rely on traditional ‘physical’ branch banking. However, as our recent infographic showed, those pesky youngsters DO enter a branch when it comes to complex financial products. An SMF study found that 72% of those under 30 would go into a branch when making a big decision, versus just 61% of those over 50.
In a Fiserv study, quoted in Financial Brand, it was found that a high proportion of millennials had visited a branch in the past month – but a similarly high proportion had received a loan in the previous 12 months, which could explain the correlation.
Every generation can benefit from branches, but there are improvements to be made. As Oliver Smith, Senior Reporter at The Memo, told us: ‘Bank branches have to adapt or die. Much in the same way that mobile phone retailers are overhauling their stores to focus on advice, repairs and servicing smartphones, rather than pure sales, so-to bank branches must capitalise on their USP as being the best place to seek financial advice from a human expert.’
Of course, digital banking has replaced in-branch interactions for many consumers. Over half of millennials have an Apple smartphone, and the sheer volume of mobile banking app downloads in 2015 shows the growing popularity, and maturity, of this channel. 45% of 18-29 year olds said they would use their mobile banking app on public transport, compared to just a quarter (24%) of over 50s. (SMF)
Most young people feel comfortable doing tasks on their phone, wherever they are. But does that mean they prefer it? A Jumio Global Survey found that 85.5% of millennials were actually dissatisfied with the mobile banking provision of traditional financial services providers – a problem that challengers and FinTechs are likely to take advantage of.
Jim Marous of the Financial Brand comments: ‘Consumers can no longer be classified by traditional demographic variables (age, income, account holdings, etc.). In a digital economy, 1:1 personalization is expected, where consumers are proactively engaged with advice and offers based on real-time insight. More important than “what a consumer looks like”, marketers need to understand “what channels consumers prefer”.’
Now we got bad blood
Apparently, millennials are far more likely to have a preference for ‘FinTechs’ over banks.
A recent Salesforce report found that with 83% of millennials, 79% of Generation X and 62% of baby boomers in the US have used payment services provided by financial technology companies. The majority of millennials (55%) prefer to use FinTech firms, over banks, for payment activities such as peer-to-peer transfers, bill payments and loans. The statistics for Generation X and Baby Boomers were just 38% and 21%. The main reasons for this preference were ‘convenience’ and ‘ease of use’ by all three segments of respondents.
The report also noted that millennials tend to have fewer accounts than those in previous generations (a symptom of being young and mortgageless, perhaps?) and are more likely than Gen Xers and baby boomers to have switched to a digital bank (13% have done so, so it’s still not huge numbers). While millennial branch switchers, as other generations, were largely basing their decision on physical branch location, a significant proportion (29%) switched for an ‘easy-to-use mobile app’. (Just 8% of baby boomers gave that reason).
And yet. Gallup research found that (despite low satisfaction levels) millennials have a higher share of wallet with their primary bank than any other generation. Loyalty appears to hinge on how often they are communicated with, a nice bit of personalisation, and some decent rewards.
I’ve got a blank space
In certain cities (my own experience being in London), the fact that younger people are struggling to get on the property ladder is discussed almost daily.
Lenders have reintroduced mortgages with tiny or ‘barely there’ deposits, targeted at millennials, and a few providers are making strides in the digital application process for these complicated products. But, as noted above, if millennials are more likely to go in branch for ‘complex’ decisions, is that really a necessary effort? Is it for the benefit of the digitally savvy in other demographics?
Indeed, Bobsguide recently noted that the house purchases of millennials will be supported by baby boomers (bank of mum and dad), so the notion that the next era of mortgage marketing should focus on the young is perhaps unfounded. Luckily, a seamless digital experience is something people of all ages can find benefit from.
Shake it off, shake it off
Finally: Do millennials follow a different pattern when it comes to payments? A YouGov survey quoted in eMarketer found that half of millennial and Gen X internet users preferred contactless cards as a payment method for general shopping. Approximately three in 10 respondents ages 55 and older said the same.
In the US, only 16% of people have used a mobile wallet. Financial Brand reports that: ‘Millennials are the most common mobile wallet users, with 36% of younger Millennials (those ages 18 to 24) reporting that they use mobile wallets.’
Considering the fact that millennials take their phone to work, bed, the toilet, and even funerals, it seems surprising that uptake of mobile wallets isn’t higher. Are we finally ready to accept that the smartphone isn’t the only thing we want to carry around with us? And that millennials are equally concerned about data breaches and the security implications of keeping all your proverbial eggs in one basket?
We are never ever ever getting back together
Many have written about the issues of lumping together everyone aged 17 to 37. When people say ‘millennial’ in the context of marketing, they often just mean digitally savvy. But EY research found that ‘across all age groups and countries, respondents are typically more digitally confident than they are financially savvy… and, against common belief, digital savviness is only slightly correlated to age.’ A recent Nielsen report even found that Generation X used social media more frequently than any other generation. That explains all those Farmville requests from my aunt.
As Smith notes, ‘Ultimately, the qualities Millennials may be looking for in a great bank – digital-first services, personalisation and ease-of-use – may be coveted by a certain age group, but their appeal is universal.’
Tristan Thomas from Monzo isn’t convinced about the word ‘millennial’ as it applies to their marketing strategy. ‘I think every time someone uses the word millennial, they show that they have no idea who they’re targeting! Everybody is different and the most successful products, like those from Facebook, Google and Apple, invariably appeal to a huge portion of the population.’
‘At the core of it, people of all ages want financial services they can trust and rely on and that really help them get on with their everyday lives. Targeting “millennials” with offerings that are transparently fake and contrived will do nothing to help them do that.’
Ritson also makes a point that banks are surely acutely aware of: The older generation still has more money. Why are we targeting the young and poor when the old and rich are more profitable, and less risky, for the bank? With the burden of student debt being the only real defining characteristic of those aged between 20 and 30, in both the UK and US, is it worth going after them at all!?
As we have argued before: segmenting by age alone is a blunt instrument. Targeting the digitally-savvy, on digital channels, will rest on using behavioural, not demographic, information. Cross-selling to existing customers should be based on what they do, not how old they are. And the data that becomes available following PSD2 should give banks the intel they need to promote the right thing at the right time to the right person – and there are challengers ready to do this if the incumbents don’t.
As much as we love mobile banking here at Mapa, we know desktop banking is still massively popular – that’s why we still monitor developments in both. Contact us today to find out what your financial competitors are doing online to make the customer experience better.