How Banks are Evolving to Meet Millennials' Needs

Estimated read time: 6 minutes

The way to find out how companies are adapting for the future is simple. Just follow the money. A study by the technology firm Turn found that marketers spent 500% more on Millennials than other age groups.

Millennials are set to eclipse Baby Boomers as the largest living adult generation, and by 2020, this generations' spending will reach $1.4 trillion dollars per year.

But winning the hearts and minds of Millennials takes more than a few carefully crafted advertisements. This generation, people ages 18 to 35, grew up with the internet and smartphones. In order to meet their needs, companies must join the tech-oriented space Millennials are accustomed to living in.

The industry spending the most to attract Millennials' attention, as shown in the Turn study, is financial services. In addition to marketing, here's how banks are evolving to meet Millennials' needs.

Mobile Apps for a Mobile World

Perhaps, five words that best describe the world for Millennials are there's an app for that. Smartphones are an integral part in everything Millennials do, from work (Slack) to play (Netflix) to travel (Uber). Corporate mobile apps now come standard and are considered necessary to meet consumer expectations.

Banks have responded actively by developing robust mobile apps that offer a bevy of products and services that once required the help of a teller. It's possible to deposit a check in seconds just by taking a photograph. You can split a bar tab by wiring money to a friend instantly. For young professionals who live fast-paced and time-pressed lifestyles, most banking mobile apps have auto features that will alert you when your account is low and even transfer money over automatically from another account. Some also provide budgeting tools and educational resources to help users better manage their money.

More Digital Products

This generation has come of age during a full technological shift from analog to digital. In a digital world, needs and problems are addressed instantaneously with a few clicks or swipes of the finger. Banks, therefore, have had to adapt their products to operate in this digital space. With the advent of electronic signature technology, for example, opening a checking, savings or credit card account can be done online in minutes. Wait for loan approval through the mail? Nope. Banks that can't provide rapid customer service and a digital means for obtaining their product offerings are unlikely to win with this generation.

Banks are also starting to use digital products to create a better digital experience. As we mentioned above, some banks feature online budgeting tools to help customers track their spending and save for specific financial goals. In addition, banks are giving customers greater control over their accounts digitally by allowing them to set up automatic transfers or pay bills right from their computer or smartphone.

User Experience Shapes Customer Experience

With all this digital aptitude comes the ability to solve most problems on your own. This increase in self-sufficiency is greatly shaping customer service. Research shows 73% of Millennials want the ability to solve product or service issues on their own. Further, 69% say they ‘feel good' about the company and themselves when they can do so. A live human answering the phone is no longer the nonpareil of customer service. Instead, it is online chats, blogs, videos, forums, social media posts, etc., that are designed for any device.

And when things don't go well, Millennials have many channels at their disposal to not only let the company know, but the entire world. Customers can connect with banks on Facebook, Twitter, Instagram, WhatsApp, Yelp and more, and when they do connect via these social channels, the expectation is to be served and interacted with on them, too, in a timely fashion. Whether when asking a question, making a comment or sharing funny meme.

Offer More in Terms of Savings

Many Millennials started off their careers amidst the 2008 financial crisis. After seeing their job prospects dry up along with their parents' retirement savings, they have learned to become frugal and risk-averse with their money. Homeownership is lower than their parents and grandparents. Three in five Millennials are not investing in stocks, according to the Federal Reserve Bank of St. Louis.

Still, the American Bankers Association has found that 86% of Millennials are putting money toward savings. Therefore, there exists a demand for banks to provide savings accounts, smarter credit cards for saving or other financial products that are better aligned with their financial behaviors and preferences. In addition, banks can introduce creative solutions that encourage Millennials to take on risk to grow their money. One such example are banks that allow customers to round up their purchases and deposit the difference into an investment account. It can also mean implementing personalized financial tools that help them plan and track their progress toward their financial goals.

Emphasis on Authentic Loyalty

Unlike other generations, Millennials are accustomed to having a wealth of choices. They can find hundreds of providers for any service or product online and choose among them based on real user-submitted reviews. The fact is that banks can all generally offer the same services and promotions. That helps explain why the rate at which Millennials change banks is 2.5 times more often than Baby Boomers and 1.5 times more often than Gen Xers, according to a Gallup poll.

Banks, instead, earn customer loyalty among Millennials through authenticity. They don't want to be sold to but rather supported by someone who shares their values and understands their specific needs. Consider that a Facebook IQ study shows 60% of Millennials want their bank to be their partner and friend. That bodes well for banks that have an active social media presence as well as mobile apps with high functionality.

Be Disruptive

Research suggests that the average Millennial consumes up to 18 hours of media a day. This encompasses a variety of media channels, some of which are consumed at the same time. It's safe to say Millennials consume media in a totally new way than ever before. For banks, it is an opportunity to be disruptive in how they reach new customers by creating helpful content across platforms, including blogs, YouTube channels and social media. Think of a video that shows viewers how to create a budget or a Facebook Live stream of a webcast on paying off student loans.

Whereas the products and services may be the same, banks can differentiate themselves to Millennials by creating wholly unique brands through the creation of their own media. And, it doesn't have to be digital as long as it is authentic and aligns with their lifestyle. For example, Capital One set up Capital One Cafes in select cities that served coffee and pastries and featured staff on hand who could provide financial advice.

Corporate Focus on Social Responsibility

Confronted with challenges such as climate change and inequality, Millennials proudly value social responsibility when it comes to giving a company their business. Consider that 70% of them will spend more on brands that support causes they care about, according to research by Cone Communications. Quality service and products don't mean much when they can get the same elsewhere from a company that truly shares their values.

Banks and all other corporations have realized that the proof is in the pudding. One way banks earn profits is by investing their customers' money. And, some banks have committed to never allowing that money to go toward organizations that are known to harm people or the environment. For banks who maintain brick-and-mortar branches, there is greater focus on their locations earning green building certifications. A prime example is the Global Alliance for Banking on Values, which is comprised of banks from around the world who are measured by their economic, social and environmental impacts.

Be Open to Change and Have Agility to React

Technology changes in a flash, so it follows that the people who most rely on it most, Millennials, do too. That means banks who want to attract Millennials have had to learn to accept change and move quickly to their changing needs. Banks that are successful at doing so are those that are investing heavily in their digital frameworks and the way in which they present themselves. That includes things as far-reaching as incorporating artificial intelligence for customer support to simply using less banking jargon in their market materials.

Most importantly, banks who create multiple touchpoints in which to interact with customers are most likely to thrive. Something seemingly innocuous as a prompt reply to a Facebook message is what will drive a positive customer experience. And, that is what Millennials want most.

Because money is so electronically driven these days, banks compared to other industries are far along in servicing the needs of Millennials. Still, they continue to evolve in many ways, both in order to differentiate themselves and to adapt to changing tastes. Even the traditional major banks are not immune to competition from banking startups. The banks that don't stop evolving are sure to be the ones to earn Millennials' loyalty.