Industry Insights

How Is Your Financial Institution Marketing to Millennials?

December 2015
Author:  Derek Stahlman

Derek Stahlman



Financial Services

10001 Reunion Place, Suite 400
San Antonio, TX 78216-4137

San Antonio

Financial institutions of all sizes bear the reputational scars from the actions of a handful of “too-big-to-fail” institutions following the last economic crisis. Narrowing margins stemming from the prolonged zero-interest-rate environment, increased competition from nontraditional entrants, e.g., PayPal, Square and crowdfunding, and growing regulatory oversight are contributing to a Darwinian consolidation within the industry.

Even more troubling may be the banking industry’s declining view among consumers. In a recent Accenture survey, 79 percent of respondents considered their relationship with financial service providers to be “transactional” in nature. More alarming is the growth of this view among consumers, as only 71 percent of respondents described their banking relationships in this manner in Accenture’s previous survey.

While growing consumer antipathy toward financial institutions cuts across all age groups surveyed, one group appears especially problematic for financial institutions. Millennials, defined here as those ages 18 to 34, are most likely to switch their primary financial services provider. In the same survey, 18 percent of millennial respondents switched institutions in the past year, significantly more than those aged 35 to 54 (10 percent) and 55 or older
(3 percent). 

Millennials are a market growing both in size and in influence. Tech-savvy and quick to adopt new technology, millennials prefer online banking applications rather than visits to more costly brick-and-mortar branches, which makes them profitable potential customers.

So why can’t financial institutions retain these customers?

No Money, Mo’ Problems

The third installment of the “Better Money Habits Millennial Report” by Bank of America and USA Today examines millennials’ money habits and attitudes toward personal financial management. The report highlighted one survey indicating 41 percent of respondents are “chronically stressed” about money, with that stress manifesting itself in other areas of the respondents’ lives.

A restructured job market and increasing student loan costs arguably contribute to millennials’ financial stress. Underlying issues aside, the report suggests millennials’ minimal confidence in their personal finance skills may exacerbate their financial stress. The report described one survey in which 34 percent of respondents believed they had expertise in social media as compared to 17 percent of respondents who had personal finance expertise.

Financial Education – Opportunity & Solution?

Millennials’ preference for less costly online banking applications makes them ideal financial institution customers. While millennial customers remain an elusive customer base, effectively reaching and retaining customers in this demographic may not require financial institutions to overhaul their marketing efforts.

Providing educational resources to customers offers financial institutions a direct link to current and potential customers outside ordinary business and provides mutual benefits. On one hand, these resources help institutions brand themselves as “relationship advisors,” countering the growing consumer sentiment of banking as a “transactional” relationship. On the other hand, customers benefit from increased knowledge of personal finance. Finally, institutions benefit from a more knowledgeable customer base. In light of the Bank of America/USA Today report, financial education resources may be especially important to millennials, a significant proportion of whom are dealing with considerable financial management-related stresses.

Financial institutions have long provided customers with financial education resources. On October 15, 2015, the American Bankers Association Community Engagement Foundation sponsored the Get Smart About Credit program, in which 4,000 volunteers from 250 banks delivered roughly 6,000 presentations to 132,000 students. With financial education programs and resources readily available to customers, why are financial institutions unable to reach and retain millennial consumers?

Delivery Channels:  They Are A-Changin’

Generational studies frequently tout millennials as early adopters of new technologies, so institutions pursuing consumers in that demographic should develop delivery channels that follow suit. Simply dedicating pages of institution websites to dry narratives about personal financial management won’t attract or retain millennial customers. Instead, institutions should re-evaluate channels used to deliver financial education resources and make sure they align with the methods their target customers use to consume information. 

Cellular and data compression technologies have transformed the ways people communicate and consume information. Financial institutions can harness these technologies to develop educational resources and transmit them in a way that lets them effectively reach millennial consumers. There are numerous potential methods for institutions to modernize their delivery channels and better attract millennial customers, such as creating short videos describing revolving lines of credit (to be housed in the credit card application screen of an institution’s online banking app) or ripping the audio stream for later publication as a podcast. Providing these resources through modern delivery channels reflects both the institution’s commitment to superior customer service and its investment in the financial well-being of its customers. Distributing these resources through new delivery channels may help institutions lay the foundation for lasting relationships with millennials.

Though the millennial market is still coming of age, institutions shouldn’t delay efforts to proactively reach this market. Institutions that ignore this demographic may miss opportunities to be a lender of choice when millennials’ credit card loans evolve into mortgages, college savings plans and other more profitable retail banking products. Establishing delivery channels suited to this demographic will position institutions to build a base of loyal, profitable customers for years to come.

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