Generation Y, made up of 18 to 34 year olds, is the first generation to have grown up surrounded by the digital world. As banks are now discovering, this has shaped its demands in terms of financial services. Ellie Chambers investigates how banks are working to attract millennials
In terms of profitability, the younger generation might not be the most attractive to banks.
Go deeper with GlobalData
They tend to be lower earners, only use the most basic banking products and be the least satisfied with their primary financial services provider, according to Deloitte research published in 2013.
But banks must invest now in the young adults of Generation Y if they are to reap the benefits when they reach the peak of their earning potential.
While Gen Y expects different things in from the digital channel, there is no evidence to suggest they are any more likely to switch their financial services provider, sticking with the one that nets them early.
The younger generation is already demonstrating that it has very different needs to those of the baby boomers or Generation X.
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By GlobalDataAccording to research from banking software developer Intelligence Environments, 61% of 18-30 year olds in the UK would prefer to message their bank with applications like WhatsApp, while 69% never call their financial services provider.
With a survey by First Direct showing that Generation Y do not consider opening a bank account a mark of independence as their parents once might have, banks must appeal to young people before they lose their relevance.
Going out on a limb
Trying to appeal to millennials through the branch might seem counter-intuitive. It’s no secret that young people are leading the shift towards online and mobile banking, with 57% saying online was their main method of banking in a vouchercloud survey.
The same survey revealed that a shocking 50% of 18-30 year olds do not know where their local bank branch is and one sixth have never visited.
Nevertheless, some banks are going out on a limb by attempting to appeal to young people through their branch strategy.
Several banks, at the same time as reducing their overall branch networks, have set up flagship branches fitted out with digital equipment including tablets, touchscreen surfaces and even robots.
One such bank is Brazil’s Bradesco, which features robotic guides, on-screen consultants and biometric interfaces, and allows customers to receive personalised financial advice from digital avatars in its Sao Paolo branch.
Research from Capgemini shows "90% of consumers prefer face-to-face advice for complex products", with branches remaining the most widely preferred channel for both applying for loans (53%) and obtaining support from a banking representative (48%).
Showcasing cutting edge technology seems a shrewd way to make the branch more attractive to young people, with the figures showing that efforts to attract the children of the digital age can’t come a moment too soon.
A study by Accenture published in May showed that four in ten young North American adults (18-34 year olds) would consider switching to a branchless digital bank, and 70% would bank with companies not usually associated with financial services.
Work on your social skills
One thing many banks seem agreed on is that social media is at the heart of engagement with the young.
First Direct is one bank that the younger generation seems to identify with, and Andy Forbes, head of product, says the bank makes a point of reaching out to its younger customers through their preferred channels.
He says: "First Direct is inherently a switcher brand and this particular generation form a large part of the switcher market – 51% of switchers are under the age of 34 – so it’s hugely important to us that we understand how they consume media and what their needs are.
"Social media is playing an increasingly strong part of engaging with our customers, whether it’s engaging on Facebook, twitter or our new Tumblr blog which we’ve just launched to support a competition to redesign the First Direct Arena bar.
"In terms of advertising, we also find that aggregators such as Moneysupermarket work very well for this market but for engagement digital channels seems to be the channels of choice."
With 29,000 likes on Facebook and a quarter of a million views on its most popular YouTube video, First Direct clearly has the mainstream social media platforms covered, but the lender has not neglected the traditional channels and knows exactly when they are likely to find their younger customers at home, in front of the television.
Forbes explains: "With our TV campaigns we know the best times to make the most of our budget in order to connect with this audience is Sunday night and often on Channel 4.
"However, we also know that we’re a nation that doesn’t just watch TV but is also looking at other media so later this year when our new campaign starts, we’ll be connecting through twitter at the same time!"
Digital killed the telephone bank?
With online and telephone banking available 24/7, another attraction of First Direct is that the brand places the instant gratification that is so important to Generation Y at the centre of its business model.
Perhaps confounding expectations and certainly contradicting IE’s research, Forbes says that millennials are as likely to use telephone banking as any other generation.
"Yes, they use digital channels but maybe because they need quick access to balances etc. But our research shows that 60% of our 18-25 year olds have used telephone banking in the last three months and for 26-35 year olds it’s 55%.
"Currently they’re as likely to use it as any other age group."
Digital natives they may be, but even 18-30 year olds still need to speak to someone at their bank on occasion and the constant availability of telephone operators, along with the absence of an automated call system, gives them the instantaneous response they prize.
"They’ve grown up in a digital revolution," says Forbes. "Using the internet and mobile to transact your life is second nature.
"However, they still need the reassurance that someone is at the end of the phone if they have a problem."
I want it all and I want it now
When appealing to the younger generation, it might be tempting to stick to the digital channels they are known for using.
However, the figures on telephone banking from First Direct and the preference of consumers for going into branch for advice on complex products shows that banks neglect these channels at their peril.
Generation Y’s use of telephone banking and engagement with TV adverts shows that it can be reached through traditional channels and young people don’t always need to be treated like a different class of customer.
But the instant gratification that this new generation requires does mean that if banks don’t give them what they want, when they want it, they’ll go elsewhere.
