Millennials and Gen Z customers are here to disrupt the banking industry - in a good way. The Baby Boomer generation has officially been outnumbered by millennials in the workplace. As the generational gap takes a shift, traditional banking techniques are outdated and no longer successfully targets a millennial and Gen Z audience. Financial institutions need to leverage their growing target demographic by shifting traditional banking methods to online banking.
A recent UCLA study predicts that millennials who have never participated in homeownership because of affordability issues are moving into the higher earning years of their lives. Given the affordability of housing from COVID-19’s global impact on real estate, they expect a robust demand for housing. As the price of housing continues to decline due to COVID-19, some millennials are beginning to eye the housing market for their first large investment. Although they are beginning to think about long-term finance goals, some may not be well-informed about their options. How can a financial institution be aware of these stressors?
It is especially important for banks to be aware of millennials' financial needs and provide personalized services. Banks need to engage their consumers by adapting to millennial preferences with their financial wellness and expectations.
Personalization and client engagement
Banks need to stay competitive. Mobile banking is the first step to expanding its digital landscape but in order to be a leading competitor, banks need to adapt new technologies that will personalize a user’s experience. Digital self-service tools and multi-channel services such as live-chats, chatbots, and social media are more commonly used by a more technology dependent era.
Large financial institutions have been making use of AI-driven interfaces to determine predictive analytics and fine tune their customer’s needs. Erica, Bank of America’s AI-driven chatbot, interacts with its mobile users to create detailed reports on your credit score, provide tips on financial wellness, and warns users of potential unwarranted activity. Bank of America currently dominates the mobile banking market by having a user base of over 25 million.
Transparency and authenticity
Sixty one percent of millennials indicated in a Salesforce study that they wouldn’t mind sharing information if it resulted in better recommendations of products and services. Unlike older eras, the new generation does not fear data collection so it is a great time to leverage data-driven analyses. Transparency for data collection with financial institutions creates trust and new opportunities for AI-driven services.
AI-driven platforms to determine consumer preferences in banking are on the rise. It is important for banks to highlight transparency when utilizing their client’s personal information because it signals trust. First-party bank data and open web data allows for AI softwares to understand consumer behavior on a new scale. Many mid-tier banks will begin to make more accurate predictions with their consumer’s needs and be able to customize their sales and management tactics.
Gamification of financial wellness
Millennials have large concerns surrounding student debt, savings, and retirement. In order to educate a new audience, the rise of micro investing apps such as Acorns, Stash, and RobinHood highly geared towards millennials and Gen Z users. Micro Investing platforms are extremely popular among the younger demographic because they want low-risk, mobile-friendly investment platforms. Many of these apps help millennials create financial goals which, in turn, boosts financial independence.
Micro investing app Robinhood takes advantage of affiliate programs with its users with a referral program: invite friends and get free stock. Robinhood fees to execute trade start completely free and their premium plans are affordable. Their low-cost and low-risk marketing tactics allow for millennials to engage in platforms with little money- investing in stocks gets their foot in the door for as little as five dollars.
Mobile-responsive website design
The majority of millennials and Gen Z customers have multiple devices: smartphones, tablets, and laptops. The hyper-connected generation expects a seamless customer experience when accessing their financial statements. Banks need to have a strong digital presence, especially amidst a time period like COVID when customers cannot speak to a financial advisor in person.
The banking behavior of millennials is commonly tied to online, mobile banking. They are self-reliant, therefore it is essential to provide online banking as demand increases for self-service. Studies by DataProt state that over three-quarters of Americans used a mobile device to check their bank balance in 2019. Millennials are more likely to pay their bills and make new purchases through mobile apps, therefore it is important to develop a seamless online platform.