How Millennial habits impact banking innovation and customer service
CX Best PracticesFintech and Financial Services
Their spending power is coveted, their habits are disruptive, their cultural influence is far-reaching — but what kind of influence do Millennials truly have over business innovation?
Are Millennials as important to the evolution of financial technology (fintech) as they are to that of e-commerce or social media? What draws them to certain financial apps, and what keeps them coming back?
Using reliable research and the guidance of industry experts, we’ll explore the answers to those questions, and how those answers can (and should) change the way you view customer service for users of all ages.
Part 1: Millennials’ hold over mobile
Millennials are frequently derided for their self-absorption, lack of independence and penchant for frivolous spending, yet this group — mainly made up of people born between 1980 and the end of the ’90s/start of the 2000s — is the most populous, highly educated, technologically savvy and adaptable generation in recent memory. Following the Great Recession, Millennials entered the workforce amid record unemployment rates and drastically reduced earning potential compared to their predecessors — yet they remain optimistic about their economic futures.
Immediately preceding them is another group forced to inherit a dire economic outlook: Generation X. Born between 1965–1980, Gen X was the first demographic cohort in recent U.S. history to earn less than their parents. This is in contrast with the Baby Boomer experience, an age group born during the extremely prosperous post-WWII era, who gained wealth in the ’80s, and lost big in the economic crisis of ’07.
While they all experienced hardships, each group’s relationship with money and level of trust in financial institutions is unique. The biggest and most successful fintech companies — from mobile banking, to digital payments, to investment apps and beyond — are well aware of this, and they devote considerable resources to further understanding the preferences of each demographic. They know that each cohort has different expectations and comfort levels regarding the intersection of personal finance and technology, and not every group can be satisfied with one solution.
This constant balancing act presents unique challenges for the financial services industry, but also pushes innovation and encourages a nuanced, personalized approach to customer service.
The era of mobile banking
In the early days of online banking, customers logged into their accounts on their desktop computers, made regular visits to physical branch locations to make deposits and withdrawals, and called contact centers when they needed assistance.
Today, according to Salesforce’s 2017 Connected Banking Customer Report, “Nearly one-third of Millennials with a checking or savings account stated that they leverage their bank’s mobile app for most routine transactions such as deposits and transfers, compared to just 17 percent of Gen-Xers and six percent of Baby Boomers.”
While Boomers and Gen-Xers use mobile banking as an occasional resource, the Millennial cohort considers it essential. “This is a very special demographic that’s never not known the internet or mobile,” says Peggy Anne Salz, chief analyst and content strategist at research and consulting firm MobileGroove. “They’ve only known convenience. Think about how that colors your life and what you expect from companies.”
The rise of mobile payments
According to FICO’s Millennial Insight Report, “Most consumers are more concerned with having their traditional banking needs met by their primary bank rather than satisfying those needs via alternative payment providers.”
But that trend may soon shift.
Payment apps like Venmo or PayPal provide a trustworthy, fast and socially driven medium to exchange money. These qualities appeal to Millennials’ expectations of fast service and their tendency towards cashless forms of payment. Furthermore, Millennials engage in more expense-sharing than other age group — like going Dutch at restaurants or splitting cab fare during a night out. FICO reports that 52 percent of people aged 18–34 are already using or are likely to use a non-traditional payment company like Venmo, versus 27 percent of people aged 50 years or older.
Though its usage is still low compared to alternative payment apps, mobile payment via “digital wallets” — like ApplePay or Google Wallet — is poised for massive growth. Once again, Millennials are seen as the key for tapping into this potential as they are twice as likely to use mobile payment services as Gen-Xers and Boomers. On top of that, many of these services are built into apps that Millennials already use — including Lyft, Uber, Ticketmaster and Airbnb — allowing cashless purchasing with instant checkout.
The Millennial myth
Given the wildly different socioeconomic environments into which they were born, it’s no surprise that Millennials, Gen-Xers and Baby Boomers budget, save and invest differently. But the differences may come as a surprise to those who subscribe to the myth of the lazy Millennial with a “YOLO” attitude toward personal finance. In fact, Millennials are more frugal in spending, fastidious in saving and cautious in investing than their older counterparts.
According to the Legg Mason 2017 Global Investment Survey, only 14 percent of Millennials have zero savings or investments, compared to 19 percent of Baby Boomers and 25 percent of Gen-Xers. Despite the fact that 85 percent of Millennials consider themselves “very conservative” when it comes to long-term investing, they also report the highest returns with 9.22 percent. Gen-Xers on the other hand saw an 8.14 percent yield and Boomers only reported a 5.66 percent return.
In addition to their unsung financial savvy, Millennials are more comfortable leveraging technology (particularly of the mobile variety) to navigate their finances. Making it of little wonder why the popularity of robo-advisors — like Betterment or Wealthsimple — have emerged to offer a user-friendly, low-risk approach to investing via automated portfolio management.
New fintech frontiers
A new crop of digital, personal-finance utilities has emerged to simultaneously capitalize on Millennials’ desire to budget, save and invest; their willingness to use the financial tech tools at their disposal; and their desire for a slick, authentic and user-friendly experience.
For example, apps like You Need a Budget (YNAB) help users learn to budget efficiently and responsibly. “There are new behaviors that Millennials don’t know, but they are being educated,” says Salz of MobileGroove. “Apps [like YNAB] are doing a great job of that because they are introducing it in a way that’s relevant but not overwhelming. An app shouldn’t scold you like your parents.”
While popular memes espouse Millennials’ aversion to “adulting,” many members of the 18–35 age group are using apps to tackle life milestones head on. Like YNAB, Honeyfi is a budgeting app that aims to take the stress out of saving — but there’s a twist: It’s designed for couples. It allows them to add bank accounts, credit cards, loans and investments from thousands of institutions. From there, couples can create a budget and divvy up expenses without having to merge bank accounts.
Sam Schultz, co-founder of Honeyfi, and his colleagues designed their app as a solution for couples at all stages, from new roommates to newly wed, and from first-time homeowners to first-time parents. “Millennials want to do the same things their parents did, but they have less money in the bank and are getting paid less than their parents were at their age,” explains Schultz.“Millennials tend to marry later and, because of this, they think of their money as their own. In fact, two-thirds of couples keep their finances partially or totally separate,” notes Schultz.
Honeyfi doesn’t aim to correct this tendency, but instead embraces it. It helps couples create a household budget and be more mindful of where their money is going, while offering the option to keep some things separate or even private. Honeyfi also appeals to its Millennial audience by including social features like the ability to comment on transactions and share insights between partners.
While some services guide Millennials through milestones, others aim to help them tackle the financial hurdles that obstruct their goals. Those who carry student debt (60 percent of Millennials) can use peer-to-peer lenders, like CommonBond, to refinance their loans. CommonBond matches borrowers with investors, providing thousands in savings to the former, and a return on investment to the latter. Given their upbringing in a sharing economy, it’s not surprising that Millennials are up to 10 times more likely to use peer-to-peer lenders than the over-50 demographic.
The Millennial monopoly
It’s clear that the mobile finance landscape is dominated by the Millennial demographic. They rely on the convenience of mobile banking, demand the instant gratification of spending through mobile payment services and trust in the guidance of personal finance apps in ways that older generations do not.
But should finance companies let this driving demographic completely shape their businesses, right down to customer service strategy?
Part 2: Using the Millennial model to seize customer service opportunities
It’s true that the demanding Millennial cohort expects a lot from customer service experiences. But if brands strive to meet their high expectations, while still giving due attention to the key needs of other customers, they can seize opportunities to improve overall service for all generations. Here are three key ways to make that happen.
Opportunity 1: By offering a personalized experience and authentic, helpful advice, financial services companies can build trust and generate brand loyalty.
Brand loyalty is never guaranteed — especially among Millennials. But if you can earn it from them, you can likely earn it from other groups, too. Radhika Duggal, VP of marketing at CommonBond, believes fintech brands can see more success in creating loyalty among various age groups by applying the personalized approach that Millennials seek. “Financial services companies that are taking the time to understand customer needs are the ones that will truly differentiate themselves and attract customers,” says Duggal.
More than previous generations, Millennials demand their customer experience to be tailored to their needs. In fact, if their current financial services company isn’t providing a personalized experience, Millennials are more than willing to switch providers.
Data is key to predicting customer preferences and needs while providing more personalized experience. Honeyfi, for example, uses the personal information shared in the app to make product offers relevant to the customer’s individual situation. Leveraging that information to make personalized offers is often where banks come up short. A report by FICO notes: “Banks are not taking advantage of the rich transaction and life-stage information they possess to make the right offers to their customers.”
With this in mind, financial services companies must take care to also prioritize the quality of recommendations over quantity. “Millennials can smell a hard sell from a mile away,” explains Salz. “By being selective about the offers being presented, companies can show they are thinking about the customer’s needs, not just products. That builds trust.”
Schultz of Honeyfi suggests that marketing and customer service departments should curate their offers and promotions to demonstrate care and thoughtfulness. “At Honeyfi, we made a promise that we would only partner with companies we trust and companies that will bring our customers value,” says Shultz.
Fintech companies can also integrate other types of personalization to connect with their customers. Honeyfi profiles its customers in a blog series called “Humans of Honeyfi” that features interviews of couples who are app users, asking questions like, “What’s a money lesson you guys wish you learned sooner?” and “Using only emojis, describe your relationship.” Such details promote stronger brand loyalty among Millennials because they feel that they are interacting with human beings rather than faceless corporate entities.
Customer trust in financial institutions is diminishing across the board, particularly in banks’ ability to provide advice. As such, it’s vital that contact center staff be ready to guide customers to the right solutions without bias or upselling. Or, as Salz neatly summarizes, “If this is personal finance, it needs to be personal.”
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Opportunity 2: By diversifying their communication channels and focusing on rapid response, customer care departments can improve overall satisfaction.
Millennials may be glued to their smartphones, but they don’t always want to use phone calls as their main method of communication. That’s why it’s crucial for banks to implement an omnichannel approach to their customer srvice strategy with Millennials.
According to FICO, 43 percent of Millennials don’t think that their bank communicates to them through their preferred communication channels. If the information is time-sensitive, Millennials expect to be communicated with in real-time via text messages and push notifications on their mobile devices. But if the information isn’t time-sensitive, Millennials actually prefer to be notified via email. In fact, email is still the primary channel that all age groups rely on to receive notifications and communicate with their banks when information isn’t time-sensitive.
There is also a need for rapid and seamless customer service response. “Being responsive and responding to all inbound customer inquiries quickly is the number-one best practice companies’ customer service departments should follow when serving members of the various generations,” says Duggal of CommonBond.
While in the past, rapid, around-the-clock customer service may have been impractical, new technologies like chatbots and other AI-powered tools offer banks and fintech companies cost-effective methods to match the customer service preferences of each individual customer. It’s important to keep in mind however, that contrary to their reputation, Millennials actually align with older generations in their preference to communicate in-person when they have a problem that needs to be fixed.
Opportunity 3: By recognizing and embracing the unique needs of Baby Boomers and Gen-Xers, customer service departments can bring older generations into the fold.
While addressing Millennial’s demand for quick, high-quality service is likely to raise overall satisfaction, the specific needs of Boomers and Gen-Xers shouldn’t be left out of any comprehensive customer service strategy. There’s still a growing demand for digital banking among these groups and it can be harnessed by making their experiences feel comfortable and familiar.
Contact centers should closely emulate the experience of going to the local bank branch. “By using normal and conversational language, you can connect with customers and make them know you are sympathetic to their situation,” Schultz elaborates.
While most Millennials possess an innate tech intuition, Boomers and Gen-Xers respond better to new features when properly educated on their use. Henry P. Carey, a financial advisor at Waddell & Reed, Inc. and a bona-fide Millennial himself, stresses the importance of viewing customer interactions with older customers as learning opportunities. “Working as an advisor today, my job revolves around a number of different fintech programs. It’s not only my job to advise financially, but also act as a guide in regard to the technology used,” Carey says. “If I can teach someone who is less tech savvy to use a software program, it helps ease business as well as improve the client experience.”
By taking advantage of these teachable moments during calls and other communications, customer service providers can transform financial and technical anxieties into personal empowerment.
Of course, this is made all the more difficult in an industry where older and less tech-savvy customers are the frequent targets of financial fraud. To that end, customer service providers should be prepared to involve advisors or family members in communication with these customers in order to help them navigate the complicated fintech landscape. “Every Millennial has had parents ask them to fix simple technical issues, and when you do, it’s like you’re a genius,” says Carey. “With fintech, the issues are obviously more complex, but you have the same opportunity to to give your clients that ‘Aha!‘ moment, which increases your credibility and trustworthiness in their eyes.”
Take it personally
Despite the holdouts and outliers, banking and finance has gone mobile — and when it comes to mobile, Millennials hold a lot of sway. Like any other technology, however, fintech is changing fast. In the blink of an eye, Generation Z and subsequent generations — each with their own preferences, histories and desires — will grow up and unseat Millennials as the market of the moment.
Rather than obsess over what any one group wants, and pander to them in the short-term, fintech companies can reap long-term loyalty and customer satisfaction by focusing on what all three generations and their successors have in common.
Each age demographic takes the world of mobile technology — and especially mobile finance — very personally. “A mobile phone is your most personal device. The device that you will never lend to anyone. You won’t go to bed without it. It’s the first thing you see when you get up, ” Salz notes. “It’s extremely personal. Your apps are extremely personal. The technology is there to be very personal.”
Yes, all generations spend, save, surf and swipe a little differently — but ultimately they all just want to be recognized, heard and valued. Grant these wishes and they’ll stay with you — from website, to mobile, to whatever tech trend comes next.