In Part I of this post, I said that as Boomers get closer to retirement, Gen X & Gen Y (Millennials) are becoming the driving force behind the economy.
“This year millennials will overtake the majority representation of the workforce and by 2030 this hyper-connected, tech savvy generation will make up 75% of the workforce.” -U.S. Bureau of Labor Statistics
Who are Millennials?
Millennials — that elusive age group everyone is talking about. Also known as Generation Y, Millennials are the generation born between the 1980’s and 2000’s.
I like to think of them as those consumers who are currently aged 18-34, the first generation to be digitally native and the ‘me’ generation.
(More detail on this post will be covered in our free 2015 Trends Webinar on 2/12 at 1pm EST with Wells Fargo and others.)
A few fun facts about Millennials:
- 91% expect to stay in their job 3 years or less (Forbes)
- Millennials are getting married later than their parents, staying at home longer and paying off ridiculously high student debts
- They are highly demanding (magic pill style thinking, where everything comes easily and very quickly — think Amazon and Netflix)
- 53% would rather lose their sense of smell than their technology (newscred)
Welcome to the new world where, as newscred cites, the average person has an attention span of 7 seconds.
How do Millennials interact with money in a digital world?
Imagine if you were to watch Netflix, and it kept buffering or crashing on you. How long would it take you to get frustrated or leave? Pretty quickly, right?
Millennials are using their phones for ordering food, social media, music, dating and much more. Do you think they’ll use mobile for managing their money?
Of course! But the experience has to be excellent.
The top 3 things Millennials use apps for now are social media, music and SAVING MONEY. Not banking. SAVING MONEY.
As Forbes reports via CB Insights, "more than $1 billion has been sunk into tech-driven personal finance companies — a whopping $261 million in the second quarter of 2014 alone."
Mint.com had 1.8 million users when it was bought by Intuit in 2009, and now it has over 15 million. Mint has its issues, but it is clear from these numbers, that there’s a clear demand for it.
Everything centers on the battle to be top of mind for your account holders!
What are banks doing wrong now?
If you were to do a focus group with 100 Millennials, less than 10 would be able to tell you what legacy systems are, and almost none would be able to tell you what regulations you face. They don’t care. They just want a great experience.
Regulation, compliance & security is huge, sure. Very important. One poor move here and your entire company could be ruined. But when leading venture capitalists like Marc Andreessen are saying of finance that "we could reinvent the entire thing,” that’s got to make you sit up and rethink your traditional business model.
Look at the trend below on the consolidation of the banking industry. Do you think this trend is going to slow down or speed up as Millennials become more demanding and new competitors enter the equation?
What can financial institutions do?
Here are two things banks have control over and can change now:
- Internal attitude
I’m not going to go too much into agile development or lean start-up approaches here, but here’s a great message from McKinsey on digital leadership:
"Be unreasonably aspirational. Make someone accountable at the board level; create a stretch vision; measure digital value, not digital interactions."
In terms of legacy systems, most FIs rely heavily on one vendor or their own proprietary technology. That makes it tough, as you are limited to move as fast as that technology can move. For banks to compete, they really need to be thinking about a full-fledged SOA or how can use API’s/Middleware to be more agile and innovative to overcome the legacy systems that new competitors are not held back by.
You can hear more on internal attitude and managing legacy systems in our 2015 trends webinar.
How can banks profit from Millennials?
I hear this a lot from community banks and credit unions. They say, “I have an aging user base and want to attract more Millennials. The issue is that Millennials don’t hold nearly the deposits boomers do and don’t make the same income.”
This may be true in general, but:
- Millennials are the future or your institution
- Many Millennials are MoneyHawks (a coined by Javelin Strategy that I alluded to in my last post.)
Facts about Moneyhawks (from Javelin Strategy & Research):
- 31 million Moneyhawks in the U.S. (13% of population)
- They control 41% of the deposits and 33% of investable assets
- 20% of Moneyhawks are at high risk of leaving their primary bank or credit union
Taken together, this puts an estimated 103 million financial accounts and $1.1 trillion in deposits into play, plus another $5.8 trillion in investable assets. That represents 72% of deposits held by potential switchers, and 71% of investable assets. Financial institutions can't afford to ignore numbers like these!
How to win their business
Moneyhawks are generally digital natives. If your financial institution can deliver this experience and you can get it in front of them (think of the ‘try before you buy’ mentality), you will win their business.
Offer the following advantages:
- Monitor all accounts in one place
- Anywhere, anytime
- Move money when and how they want
- Make it easy, make it work
- View and do (action it)
You can hear more about this on our free 2015 trends webinar on 2/12 at 1pm with Wells Fargo and more here.
We’ve covered a lot of ground here and glad you’ve stayed until the end!
Would love to hear your thoughts/experiences on this and if you agree/disagree with me!