Who's on First? The Contradiction of Millennial Research

"Who's on First?" comedy routine made famous by Abbott and Costello speaks to the

confusion of communication. How can same thing have two polar opposite positions? Research about the Millennial generation seems to be research in contradiction. 

For example,  according to the millennial disruption index study, Chase, Citi, BofA and Wells Fargo are among the ten least loved brands by Millennials. According to FICO's Forging Lasting Banking Relationships with Millennials, 68% of Millennials use Chase, Citi, BofA or Wells Fargo as their primary bank. Only 15% use a

credit union and only 9% have a regional bank as a primary bank. More Millennials bank at national banks than any other generational group (55% for Gen X and 43% for Boomers). Millennials also have more products with their primary bank. They have 3.49 products compared with 3.3 products for Boomers. How can these two studies be reconciled?  

FICO's report also goes on to say, "Millennials now comprise the largest population segment ever in U.S. history, and that segment is growing as a percentage of the overall population. Opportunities are abound for banks and credit unions that understand this generation and can address their unique requirements." 

It is clear that credit unions and banks have to understand and resolve this conflict of information or their futures may be bleak. Philosophically, a credit union's mission is more inline with Millennials beliefs than major banks, yet the four major banks dominate their banking experience? Why?

Millennials, while bringing values that may be different than their parents, are also extremely pragmatic, learning from the challenges their parents face. In an interview by The Financial Brand, “Millennials are very pragmatic and have high expectations around technology,” said Laurie Paleczny, co-founder of Digital Fieldwork, noting that the research examined thousands of online data points, including publicly available profiles on Facebook, Twitter and other social networks. “If convenience and functionality aren't there, they’ll do business with banks even if they do not always respect their values.”   

Digital Fieldwork's research suggests that "credit unions have a golden opportunity to acquire a new generation of members, but first they must adopt smarter ways of engaging them online. Their research into U.S. credit unions’ digital landscape reveals a distinct gap between the current digital strategies of credit unions and the interests of Millennials." Credit unions’ struggles to attract Millennials, a demographic of approximately 74 million people, is well documented. Many credit union observers are concerned that the average age of credit union members is 47, and that a large majority of younger generations are not familiar with credit unions.

Javelin Strategy & Research writes, "Millennials are made up of two distinct

segments, both with widely differing circumstances, behaviors, and needs. The first group, Gen Y.1, numbers 31 million consumers ages 18 to 24. Gen Y.1 is financially young and uncommitted to any one service provider - a great target for prepaid cards or basic checking accounts. Their counterparts, the 42 million consumers of Gen Y.2, are 25 to 34 years old. These consumers are highly engaged in financial services, and are tech-savvy consumers with an appetite for financial products. To earn the business of next-generation financial customers, providers must understand and meet the needs of these two groups."

There is good new for credit unions and community/regional banks. Despite the

high Millennial market share the four major US banks have they are very vulnerable. According to FICO's Forging Lasting Banking Relationships with Millennials study, Millennials are less loyal to their primary banks than other consumers. The survey showed that Millennials are five times more likely than those over age 50 to close all accounts with their primary bank. They are three times more likely to open a new account with another bank.

So what does all this information mean 
about how to attract and retain Millennials to credit unions and community/regional banks? Millennials are using the services of the major US banks primarily because of pragmatism and their perception that only the major banks have the digital channel they seek to conduct their financial business. They have little knowledge about credit unions. They are not loyal to the big banks and will quickly switch when they find a better option. Millennials consist of two distinct groups that have very different needs. Credit unions and banks must appeal to both segments.

Javelin Strategy & Research recommends:

1. Don’t wait until Millennials are profitable. Start a relationship with Gen Y.1 now through products such as student loans, checking accounts, and prepaid cards. Gen Y.1 consumers are underbanked at high rates, which demonstrates a clear need for bank products.
2. Provide Gen Y.2 consumers products suited to their career-driven life stage. Unlike Gen Y.1 consumers, Gen Y.2 has a developing need for products such as brokerage and retirement accounts and home loans. Credit unions and banks that act as a trusted provider and teacher throughout Gen Y.2’s financial maturation can earn their loyalty in the long term.
3. Design digital banking for speed and simplicity to serve Gen Y.1. Position high-frequency activities like account balance and recent transactions front and center and allow users to monitor their accounts without logging in. To satisfy Gen Y.2, build out support for multiple financial products and services within digital banking: retirement accounts, loans, stocks, and multiple account types.
4. Look for opportunities to create financial co-management tools. Because 40% of Gen Y.1 members have others managing their finances, look for opportunities to create financial co-management tools to support their needs. These could include tools to facilitate easier money movement or for oversight to help caregivers ensure their funds are being used responsibly. Additionally, design actionable alerts enhance these tools.
5. Opportunities lie around budgeting, savings, and education. For Gen Y.2 members are transitioning from co-dependence to financial autonomy, so lightweight tools to create and manage budgets are critical. For education, a guided experience can help them become better buyers of financial services products and maintain financial well-being.

Millennials use a broad set of channels and devices to interact with their credit union or bank. Credit unions and banks need to keep communications and customer experiences consistent between channels and well-orchestrated. A well planned and executed digital and omnichannel banking strategy is a key to gaining and retaining Millennials banking business.

Pray For the Baby Boomers

Let's face it, baby boomer leaders have it rough. Many companies are led by baby boomers in their 50s and 60s with a growing employee base consisting of those damn generation Xers and Yers. You know .......... the Millennials. "We just don't understand those people!" 

Did you ever read the book, Men Are from Mars, Women Are from Venus? When is John Gray going to write an update, "Baby Boomers are from Earth, Millennials are from Another Galaxy?" All kidding aside, the world has changed immensely over the past 25 years and many community and regional bank's and credit union's executives have struggled to keep-up and catch Millennials attention. 

The 18 to 35 age bracket, collectively known as Millennials, now make-up the largest age segment of our population, passing the baby boomers. If you don’t have a plan to meet their banking needs then your credit union’s or bank's future looks bleak, because there are plenty of traditional and emerging non-traditional financial service providers that will. 

What are Millennials looking for from their financial services provider? Millennials want their banks and credit unions to provide the same kind of customer experience that they receive through more agile consumer technology companies they rely on in other parts of their life. They are looking to manage their personal financial lives in the same way they manage their digital and social lives. Right now, with some exceptions, non-traditional financial service providers are building superior offers.

Just in case you have been sleeping here are some more facts about Millennials according to the Millennial Disruption Index study:

1. 71% would rather go to the dentist than listen to what banks are saying
2. 1 in 3 are open to switching banks in the next 90 days  
3. All 4 of the leading Banks are among the ten least loved brands by Millennials
4. 68% say that in 5 years, the way we access our money will be totally different
5. 70% say that in 5 years, the way we pay for things will be totally different
6. 33% believe they won’t need a bank at all
7. Nearly half are counting on tech start-ups to overhaul the way banks work
8. Millennials believe innovation will come from outside the industry
9. 73% would be more excited about a new offering in financial services from GOOGLE, AMAZON, APPLE, PAYPAL or SQUARE than from their own nationwide bank

Credit unions and banks should focus on service as an engagement route with their younger members. An omnichannel strategy designed to deliver a low-effort seamless member/customer experience across all interaction channels. Best-in-class mobile and web solutions, as well as simplified, transparent products all support this direction. 

Another buzz word in omnichannel banking is "seamless experience". What the heck is a seamless experience? Despite the required breaking down of banking silos, hand-offs between channels or people within the credit union or bank will continue to occur. When they do, members and customers don’t want things falling through the cracks or to have repeating their problem multiple times.

As +Ron Shevlin from the Aite Group  says, "consumers want things to work. Period. But if you must elaborate, they want things to work the way they expect those things to work, when they use them, and where they use them. And consumers don’t want to have to think about any of it. They just want it to happen. If you really think about it, what they really want is for banks to be invisible." Combine simplicity and low effort with Mr. Shevlin's comments and you have the definition of a seamless experience. 

I hear credit union and banking executives ask "what is the ROI of your digital technology

solution?". Digital technology solution providers say, "shift your routine transaction volume to the lower cost digital channels." Credit union and banking executives ask, "does that mean I have to maintain both branches and digital channels? My costs go up." Both parties miss the point. Branches and digital solutions are the ante just to have the opportunity to play-in or stay-in the game. Consumers expect and demand more. They want 24/7

365 day access to all the services, products and counselling their financial institution

provides. They want choice according to their timeline and mode of communication. It is not about shifting consumers to lower cost channels, it is about service and meeting the expectations of the information age consumer.

Omnichannel represents a long-term journey and commitment. I describe Omnichannel as an “end goal”, not a product, service, or marketing campaign. Omnichannel is the breaking down of silos that exist with most traditional financial services providers. Omnichannel as goal, and its successfully implementation will only occur if it receives the same commitment, resources and seat at the executive table as the CFO, COO, marketing and other key areas of the credit union.  Omnichannel is not just “e” services or digital services. It is the entire member experience. It is how credit unions and banks interact and reach out to their members/customers, both digitally and within the brick and mortar of their buildings.