Robert Stowe England
Robert Stowe England Nov 4, 2016

Millennials embrace banking innovation

As they overtake Baby Boomers as America’s largest generation, Millennials may not automatically equal mobile tech—but in the banking world, it’s getting pretty close. Mobile banking adoption rates among Millennials are sky high: two in three banking consumers 18 to 29 did some type of mobile banking in the prior year, according to the Federal Reserve’s most recent annual survey of mobile use in financial services.

Banks have of course responded by launching mobile platforms and apps that can deposit checks in seconds and move money between accounts with a few finger swipes. Yet Millennials are often a picky lot, demanding bank services that work with all the fluidity of hunting down a Starbucks via Siri.

“Millennials are looking for a frictionless, easy to use platform,” says Isio Nelson, senior vice president of emerging and differentiated services at Equifax Inc. of Atlanta, Ga. “They are not brand loyal. They will change providers very quickly if they find anything that’s difficult for them to use.”

For banks seeking a starting point in pleasing this crowd, look at the category of monitoring account balances and recent transactions—an activity performed by 94 percent of mobile banking customers in the prior year. The next most frequent mobile banking activity? Transferring money between accounts (58 percent). And in a high-tech wrinkle barely conceivable a decade ago, 49 percent have remotely deposited checks using a mobile phone’s camera in the past year, according to the Federal Reserve. 

And according to a soon-to-be-released study by Mitek, more than a quarter of all Millennials are interested in applying for a mortgage using the camera on their mobile device.   The numbers jump from 15 percent for the youngest Millennials (18 – 22), to almost 40 percent for the oldest Millennials (29 – 34), who are “extremely interested” in applying for a mortgage by taking pictures of documents with their smartphone rather than filling out paperwork.

Thanks to a rising consumer preference for mobile and ATMs, there was been a dramatic turnaround in where and how checks are deposited, according to Michelle Moore, head of digital banking at retail banking giant Bank of America in Charlotte, N.C.

Five years ago 65 percent of checks deposited at Bank of America were done at retail branches and 35 percent of checks were deposited at an ATM. “Today those numbers are reversed, so that 35 percent of check deposits are done in a financial center [or branch] and 65 percent through automated channels, with almost 20 percent now being done through a mobile device,” says Moore.

In the third quarter of 2016, Bank of America processed 280,000 checks a day on mobile devices: the equivalent of the total daily check deposit volume at 800 financial centers, according to Moore. And it’s a safe bet Millennials, if not leading the charge, account for a large chunk of that activity.

Keeping Young Customers

Banks with customer-pleasing mobile platforms and apps are more likely to stem the exodus of Millennial customers to other providers, according to Jim Miller, senior director of banking services in the financial services practice at J.D. Power & Associates of Westlake Village, Ca.

J.D. Power annually surveys retail banking customers and ranks top retail banks on how well they do in achieving customer satisfaction—the latter increased when a mobile platform truly works well.  “What’s fascinating is that customers also become more satisfied with other aspects of the banking relationship,” Miller says.

Yet mobile banking is not advancing rapidly on every front. For example, only 24 percent of mobile banking customers have used their phones to make mobile payments. That level rises to 30 percent for younger consumers.

Give their preference for all things mobile, it may be surprising to some that Millennials have been slower to embrace mobile payments, says David Weliver, a Millennial himself and founder and editor of Money Under 30, a financial advice website based in Portland, Maine.

Apple Pay is not taking off,” Weliver contends, and here’s why: “The convenience you’re getting from paying by phone versus reaching into your pocket and pulling out a debit card isn’t so high that it would completely change behavior.”

Consumer Power

Yet mobile is winning in large part because it puts “power in the hands of consumers” to have more control over how and when they interact with banks, according to Alyson Clarke, principal analyst, eBusiness and channel strategy, Forrester Research, Inc. of Cambridge, Mass. “Mobile is no longer a channel. Mobile is becoming the heart of all interactions you have, particularly in financial services,” she says.

Clarke points to the growing array of technological features in smart phones—from biometrics to the ability to capture document images and even legal signatures. “Financial service centers should stop thinking about mobile as a channel and start thinking about mobile devices in particular, no matter what the interaction is with the bank,” Clarke says.

Additionally, Weliver says banks have to become more nimble if they are to avoid falling behind: “Banks will get with it in time. In the meantime they are at risk of losing market share.”

Weliver identifies some of the FinTech upstarts already capturing market share. For example, Simple offers no fee online checking and savings accounts with budgeting tools. Then there’s Social Finance, Inc. or SoFi, a San Francisco company that refinances college debt at lower rates and offers personal loans.

Betterment LLC of New York City and Acorn Global Investments of Oakville, Ontario in Canada are online brokerage firms that open accounts with initial contributions as low as $50, Weliver notes. And then there’s Aspiration Partners, Inc. of Marina Del Rey, Calif., which offers middle-class households investment opportunities, such equity stakes in startups, once available only to millionaires.

Yet Millennials, who in many other things refuse to be pigeonholed, also like face-to-face personal interactions with financial service providers when they feel a situation warrants it.

“Most Millennial customers will go into branches to open a checking account,” notes Miller. “Even with all the new mobile technology there are times when a person wants someone to help them. Sometimes you need some affirmation, when you’re young and don’t know what the options are.”

First Tennessee Bank recently did a survey of Millennials and found some surprises about the young generation’s retail banking channel preferences, according to Aaron Chestnut, director of marketing at the Memphis-based bank.

“We saw some things we expected to see,” notes Chestnut. “Millennials want an industry leading bank with online and mobile capabilities. But we also saw some things that were a surprise to us, including an interest in bank-provided in-person guidance.”

“Millennials are different in the way they view things, but not so different from other generations when it comes to some core themes. We found that to be a little bit counterintuitive,” says Chestnut.

In other words: Keep your mobile offerings open to this generation—but stay mobile in your quest to avoid the generation of banking stereotypes.

Robert Stowe England is a financial journalist who writes about retail and investment banking, financial markets and investing strategies. He is the author of five books, including “Black Box Casino: How Wall Street’s Risky Shadow Banking Crashed Global Finance.”

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