Millennials, our youngest adult generation, are struggling to save financially. A recent article in MarketWatch trumpeted a headline that 50 percent of Millennials have less than $1,000 in savings. Rather than continue down this dreary road, the article makes a hard about-face by showing older Millennials aged 25-34 are much better at saving when compared to their younger brethren aged 18-24. Over 20 percent of the slightly older group have savings in excess of $20,000. This suggests that once they get established in their careers Millennials take saving seriously.
That growing affluence makes this generational cohort a very attractive segment for banks seeking profitable account growth. After all, the typical next step once that savings base has been established is for these young adults to begin leveraging it to take out car loans and home loans, from which banks make most of their profits.
So what does a bank have to do to start building a relationship with young customers? Here are three imperatives:
- Make it easy
- Make it fun
- Make it free
1. Making it easy
Making it easy needs to start at the beginning of the relationship. No self-respecting Millennial wants to go to a bank branch to open an account. They want to do it on their smartphone.
Banks need to adapt what has traditionally been a paper-intensive process to the capabilities of mobile devices. A recent survey found more than two out of three Millennials (68 percent) prefer to use their phone’s camera instead of ever manually typing information on their mobile device. And nearly a third of survey respondents want to apply for a new account by simply taking a picture of their driver’s license.
Once the account is open, the Millennial’s desire for easy extends to verifying their identity on future transactions. Opus Research has found that 85 percent of consumers are dissatisfied with common authentication methods such as complex passwords, PINs and the oh-so frustrating “out of wallet” questions that are sometimes posed, such as “How much is the payment on your car loan?”
Contrast this with voice biometrics – using one’s voice to prove who you are – which has been shown to have a System Usability Scale score of 88.1, much higher than the 67.0 when a user is required to enter a password. And unlike a password or PIN, you never have to remember your own voice. Talk about easy!
2. Making it fun
Plenty has been written on “gamification” as a way to improve everything from employee productivity to childhood education. The best application of the concept, however, may in fact be found in banking.
In July, USAA and Nuance introduced a Savings Coach app to help Millennials save money. Along with other innovative features, the app leverages gaming features to turn what’s otherwise an intimidating task into an enjoyable game.
During a four-month pilot, the nearly 800 participating USAA members, aged 18-24, collectively saved close to $120,000. One member’s feedback noted, “You made a game out of saving, genius! I don’t put anything into savings now, so you guys are helping me out big time! Thanks.”
3. Making it free
For a generation raised on Napster, Bit Torrent and other peer-to-peer file sharing services, fees are anathema. If banks are going to attract cost-conscious consumers, they can’t charge for monthly account maintenance, ATM usage, or overdraft protection. Instead, they’ll need to aggressively promote that they don’t! That means to be profitable, banks will have to be efficient.
One way to do that without impairing the customer experience is to leverage sophisticated automation. A good example can be seen at Manulife Financial, who recently revamped their interactive voice response (IVR) system to incorporate both voice biometrics and natural language understanding. This prevents the customer from having to wade through long menus of options when they call – they can simply say what they need – increasing the percentage of requests that are handled completely within the IVR, shortening the handle time for those that require agent assistance and saving the bank from unnecessary costs.
Getting ready for Generation Z
While Millennials, also known as Generation Y, are bank’s current focus for growth, not far behind them are today’s teens and tweens – Generation Z. Their expectations for easy, fun and free banking will mirror their predecessors, but they’re going to add one more adjective to the mantra – smart. To learn more about how artificial intelligence will define the future of customer experience in banking, check out Greg Pal’s blog post on What’s Next.