As the rising star of American generations, Millennials are earning grown-up distinctions that make this group of young adults a prime target for financial institutions looking to grow their household portfolios. For instance, the long-term Millennial employment and economic potential are particularly promising. In 2015, they officially took over the workplace, with 53.5 million Millennial workers representing one in three U.S. employees, according to a recently released Pew Research Center report. Here we share new data from Aite Group that reinforces the big opportunity they present to retail banks and credit unions with surprising insights around how Millennials often engage in traditional banking processes – and it’s probably not what you think.
If you thought they would shun traditional banking, you’re in for a pleasant surprise.
As the first generation to grow up with the internet and smart phones, Millennials fully embrace technology and its many conveniences. It had been predicted they would choose high-tech options like Google Wallet and Apple Pay over traditional banking services.
However, the Aite Group report reveals trends that are surprising forecasters. Millennials are embracing tradition by opening more checking accounts in person, at the branch, than any other generation except for seniors. More specifically, the Aite report, titled U.S. Trends in Checking Account Opening, shows that 73% of Millennials applied for a checking account at the financial institution location, instead of using the bank or credit union’s website, a mobile app or over the phone. This was higher than Baby Boomers at 69% and Generation X (Gen X) at 66%. Millennials were only outpaced by Seniors, who applied for a checking account in person 93% of the time.
What’s more, they’re opening DDAs at a fast pace, with a full third of all new accounts, 33%, opened during the two-year period observed in the Aite report being Millennial accounts. That’s second only to Gen X, which opened 50% of accounts, and somewhat predictably far ahead of Baby Boomers at 15% and Seniors at 4%.
There’s more good news, in the form of bad news, so to speak.
Now comes the somewhat sobering news. The Aite data also shows a lot of those Millennials who visited a branch location to open an account actually started the process electronically but ultimately ended up at the branch, generally due to some sort of process friction. More exactly, 37% of Millennials applied online or through an app before visiting a branch location. Not surprisingly, when asked to rank the ease of account opening, Millennials provided the lowest “excellent” rating at 34%, and the highest level of ambivalence, with 18% ranking the account opening process as “neutral.”
So, let’s distill the facts. Millennials are applying for checking accounts in high numbers, and they don’t mind visiting the financial institution to do it. Yet, many are starting the application process electronically, and decide to switch channels in order to complete the process, hence the lower satisfaction levels.
The good news is, this actually suggests opportunity within the channels themselves, particularly mobile apps.
Connectivity and mobile banking are important to this generation. By pushing beyond basic mobile transactions, such as deposits and balance inquiries, and offering a secure, streamlined mobile account opening option, banks may capture a growing share of Millennials earlier in the process. Dynamic, multi-sourced mobile account opening solutions exist today that integrate sophisticated functionality with robust data and analytics to help facilitate a faster, frictionless onboarding process. These tools generally require less typing on a mobile phone or tablet, and allow consumers to apply for a new DDA, get approval often in minutes and fund the account on the spot.
What’s more, some mobile apps and online tools can be configured to automatically make relevant prescreen offers during the account opening process to help instantly cross-sell other products. The Aite data interestingly shows that across all generations, including Millennials, 48% of consumers accepted at least one additional product offer during new account opening. Prescreening at account opening can help financial institutions maximize account values from the start, deepen account holder relationships and make a favorable impression on young consumers seeking to establish and maintain financial credibility.
For retail banks and credit unions looking to acquire core profitable households, Millennials are an ideal target. As they begin to take over the workplace, their financial needs will quickly expand. By facilitating quick, convenient mobile account opening and strategically cross-selling meaningful financial products earlier in the process, financial institutions can offer a better customer experience that helps drive less channel switching and process abandonment, while also laying the foundation for stronger, more loyal consumer relationships in the future.
Mr. Jones is a vice president and retail banking leader with Atlanta-based Equifax Inc. He can be reached at email@example.com.