The fastest growing customer base is changing the way banks do business
Soon, Millennials will dominate the business world, as they will represent 44% of the workforce by 2022. This mobile and tech-savvy segment requires drastic transformation when it comes to banking with digital solutions assisting them in managing their money.
A bank in their pocket – anytime & anywhere
The digital world is now a reality with 72% of the interactions between the clients and the bank happening online according to a FIS consumer banking report.
In fact, the ABA (American Bankers Association) found that Millennials are 3 times more likely to open a bank account with their phone (e.g. mobile app) than in person. In addition, 67% want digital budgeting tools from their bank.
Even if they prefer using a mobile application to satisfy their needs, 38% of Millennials are abandoning the institutional bank app when it’s too slow according to a study by Jumio and Javelin Strategy & Research.
They are used to exchanging emails and receiving an instant reply. The old age of receiving a reply by mail waiting for a few days for your financial planner is over!
The Millennials habits on mobile application are 24/7:
- Plan payments between friends and family members
- Manage wire transfer between different accounts
- Check transaction’s history
- Budget tools to plan more efficiently their future
The use of video, geo-location, social engagement and other supporting technologies to facilitate a proactive, personalized interaction with bank experts are the key features to develop according to a study from CGI.
New face for physical proximity – multipurpose & convivial
The physical presence needs to be rethought for proximity to kill the ancient codes. Capital One understood this major shift and proposed a different banking experience targeting Millennials with their desire for flexibility and non-formal.
In its flagship branch in Union Square (Manhattan), the first floor of their three-story operations includes a Peet’s Coffee Shop adjacent to a seating area to facilitate impromptu meetings, temporary wait or recharging phone or laptop.
The coffee shop displays a warmer tone with natural textures and wood announcing quieter workspace contrasting with the community tables in front of the 3 ATM.
For creating this modern feel with LED screen, bright colors, linear fixtures and vivid patterns, the design agency CallisonRTKL won the “Gold Awards” at the 2017 Shop! Awards.
New product needs vs. older generation – rough start, earning less & risky culture
The Millennials don’t have the same financial ease as their baby boomer or Gen X/Y parents, already settled in their existence. In the US, 75% of college graduates have student loan debt according to ABA with an average $29k balance debt.
Millennials are working to build their finances with two top priorities:
- Put money into savings each month (86%)
- Paying down debt (43%)
Consequently, Millennials tend to delay major life events with only 26% married before the age of 32 years old while 70% wanted to get married and 93% to buy their home. However, they are set to inherit $30 trillion over the new 30 to 40 years.
There is a taste for risk to increase their level of wealth. CGI found out that 55% of Millennials wish to be oriented towards financial products. Banks have cleverly exploited the popularity of online trading and facilitated the online access to it.
In 2018, J.P. Morgan’s has unveiled a new investing mobile app with an eye-catching and disruptive price: free. With this new offer called “You Invest”, any bank client who downloads it or uses its website can get at least 100 free trades in the first year. Wall street, which was reserved to the elite in until now, is becoming affordable.
New era for retail bank, change or die – neobanks, rewarding & AI
The neobanks are becoming popular – when Millennials becomes unhappy or dissatisfied with their traditional retail bank, they’re not afraid to look for specialized fintech (financial technology) alternatives. According to a Gallup poll, Millennials are 2.5 times more likely than Baby Boomers and 1.5 more likely than Gen Xers to switch banks.
Rewarding matters – 80% of Millennials would be willing to switch banks for better rewards as mentioned in a Kasava Survey. For example, these include a higher interest rate on deposit accounts, cash back on purchases and foreign ATM fee refunds. In addition, 94% of Millennials are prioritizing a no-fee banking offer.
Artificial Intelligence (AI) is a key differentiator – chatbots were the beginning of AI for companies to ease the customer service. But when completely automatized, it often lacked self-learning capabilities―quickly becoming frustrating. As Bill Gates said: “We always overestimate the change that will occur in the next 2 years and underestimate the change that will occur in the next 10”.
AI has the potential for many practical applications for traditional banks and Fintech industry including:
- Reduce the payment fraud
- Improve service leveraging predictive analytics and real-time personalization
- Assist consumers with financial decisions by suggesting opportunities based on the user profile, habits, risk and financial situation
Mercator Advisory Group recently published a recent study of 80 start-ups utilizing AI for the fintech and banking industry. The study includes NextUser, a San Francisco and New York based AI SaaS platform that has developed new personalization applications to help banks stay relevant to the millennial retail consumer. Research from Business Insider has identified most of the use cases for AI in finance as demonstrated in the diagram below. They feature NextUser’s key AI partner, IB Watson.