You might say that millennials hate Wall Street.
And yet when it comes to where millennials actually put their money, big banks dominate.
It turns out that millennials are actually the most likely demographic to choose a big bank for financial services — more likely than Gen X or Boomers. In addition, millennials are the group least likely to join a credit union.
Those statistics, which come from two separate studies (one at Digital Fieldwork and one from Ron Shevlin at Aite Group), might initially seem perplexing. How could millennials list the four biggest banks among their most-hated brands and still be most likely to choose those banks for their financial needs?
At first glance it might seem like all millennials are hypocrites. It might seem like that’s all there is to it. Cased closed. But there’s something much bigger at play here. Millennials might legitimately dislike the practices of the big banks and simultaneously like the convenience big banks offer. The thing is, their draw toward convenience might simply trump their disdain for the big banks.
We see evidence for this over and over.
Take Bank of America, for instance. In 2011, Bank of America focused primarily on providing convenience and was the first financial institution to launch mobile banking on the iPhone. The results were impressive. More than six million people downloaded the app, and a quarter of a million joined Bank of America specifically to use mobile banking.
The app generated an enormous return on investment for Bank of America. To illustrate, from June 2011 to June 2012 more people switched to Bank of America than any other financial institution in the US.
All this growth came despite the fact that Bank of America was deemed as the main villain during Bank Transfer Day in November 2011 (a grassroots movement to switch from big banks to credit unions). What’s more, in 2011 they scored the lowest of any financial institution on a customer satisfaction survey — 11 percentage points below the industry average.
In retrospect, Bank of America’s gains might not be surprising. After all, Bank of America simply gave users what they wanted: convenience.
And, to put it bluntly, convenience is king. Just look at these results from Stackpole Report:
It turns out that millennials generally want to support locally owned businesses, but they want convenience more. It follows, then, that millennials would understandably be more likely to choose big banks because the big banks invest more heavily in the financial technologies that make banking more convenient.
What does this mean for smaller players in the financial industry? It means that it’s more important than ever to figure out ways to compete in the world of fintech. Smaller players likely don’t have the same resources to develop financial technology in-house, but they can find inexpensive partnerships that can give them an edge on the big banks.
If community banks and credit unions don’t move quickly to answer the needs of millennials, then new financial players —like Moven, Walmart, or Google — are set to do so. Not only are these new competitors free of the damaged branding that big banks have, but they're becoming just as convenient as traditional financial institutions. After all, nothing is more convenient than having a full banking experience available on your phone at all times. And that’s what these new players aim to provide.
In sum, the shift in the financial industry cannot be understated. To illustrate, Accenture recently published a number of key statistics:
- 39% of millennials would consider using a branchless experience, compared to 16% of those over 55
- 72% would be likely to bank with non-financial services companies with which they do business, compared to 27% for those over 55
- 67% are interested in their bank providing tools and services which help them create and monitor a budget, compared to 31% for those over 55
If smaller players in the financial industry are not fully prepared for the demands for convenience, including the demand for better budgeting software, they should be worried about what the next 10 years will bring — especially since by 2025 millennials will represent as much as 75 percent of the workforce. On the other hand, if you’re making legitimate efforts to make banking more convenient, you have every reason in the world to be excited about the future. Because convenience is king.
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