By now, the entire banking industry is aware of the growing economic power of the millennial generation. In a few short years, millennials have overtaken all other generations as the largest since the baby boomers, and as the most populous in the workforce. Millennials will be the borrowers and investors of the immediate and foreseeable future, and they represent a nearly unprecedented opportunity for banks.
However, the generation also presents unique and significant challenges. Their antipathy for traditional banking is established, if not entrenched, and their affinity for all things digital makes them far more receptive to doing business with disruptors like marketplace lenders than any other generation. They’re used to a level of personalization, choice, and instant gratification that traditional banks are struggling to achieve.
The first step toward establishing long-term, mutually enriching relationships between banks and millennials is, obviously, generation-savvy acquisition marketing. However, baiting the hook with targeted marketing is only the beginning of what the industry hopes will be a long-term relationship with millennials. To set the hook, reel in the catch and make sure millennials don’t get away, it’s imperative for banks to create and smoothly implement an onboarding process specifically designed for millennials.
Adjusting onboarding priorities
Of course, an important goal of onboarding is to generate cross-sell opportunities. However, that cross-sell shouldn’t be the focus when onboarding millennial customers. Rather, the emphasis should be on cementing the budding relationship by demonstrating to millennials you:
- Understand their priorities
- Have products and services relevant to their needs
- Are adept at digital communication
- Can offer the digital tools they crave to make life easier
- Are an educational partner in helping them self-manage their money
Understanding millennial priorities
Millennials came of age watching their elders wrestle with the financial impact of the Great Recession. Much of their personal financial style is driven by a desire to avoid what they perceive as the mistakes of their parents’ and grandparents’ generation. At the same time, their financial futures are framed by economic conditions — high costs of higher education, escalating housing costs, etc. — beyond their control and created by older generations.
More than any generation before them, millennials are less focused on ownership. Instead, according to a Goldman Sachs survey, they desire access. A desire to avoid the financial responsibilities associated with owning items like houses and vehicles could be driving the trend toward sharing instead of owning.
So, while your onboarding process for Generation X or baby boom customers might be to provide information on home mortgages and auto loans, evidence shows millennials are less likely to be interested in products that facilitate ownership. Instead, they will probably be more interested in services and products that help them self-manage their money. High demand among millennials for digital banking tools such as mobile apps is evidence of this trend.
Digital drives millennial satisfaction
Examining what drives millennials to switch financial institutions can provide insight into the products and services they most desire. In a study by Digital Scientists, sponsored by Deluxe, millennials said they switched banks because they wanted:
- Online bill payment (27.3 percent),
- Mobile banking (24.2 percent),
- Online banking (19.7 percent),
- Lower or no fees (29.5 percent), and
- Better rates (25.8 percent).
Millennials embrace digital communication in their personal and professional lives, and they desire the same speed and flexibility in communication with their banks. In fact, digital channels were the preferred communications channels for all millennials in the Digital Scientist survey, with nearly 71 percent saying they favored emails with product links, and more than 68 percent preferring email newsletters for learning about products and services from their banks.
Make no mistake, millennials are the primary drivers of the digital transformation in the banking industry, although other generations also demand digital capabilities from their financial institutions. However, ensuring millennials have access to and fully understand your bank’s digital capabilities could be the most important factor in onboarding success.
Enabling self-management through education and tools
Millennials tend to be independent financial thinkers — a trait that doesn’t always serve them well. Escalating college costs mean many millennials start their professional careers deeply in debt, so paying down student loan debt is a priority for many millennials. However, multiple studies show that many millennials lack the tools and knowledge needed to achieve their long-term financial goals.
In fact, in the Bank of America Better Money Habits survey, a majority of millennials said they would feel like adults upon achieving financial independence. However, many also said they wished they had learned more about personal financial management in school, with 26 percent saying they wish they had learned how to manage monthly bills, 40 percent wishing they knew how to do taxes, and 43 percent wishing they’d learned about investing.
During the millennial onboarding process, banks have an opportunity to introduce millennials to products and services that can help them fulfill those wishes. For example, information about online banking tools can be paired with tips for monthly budget management.
Onboarding in the future
The millennial impact on the American social, political and economic scene is only just beginning to play out. In many ways, millennials will continue to redefine how companies, including banks, do business for decades to come. Financial institutions that adapt their onboarding practices to cater to millennial customers will be better positioned to take advantage of the opportunities presented by this increasingly important demographic group.