Why Your Bank Should Be Working for You
Looking back, 2008 had a huge impact on the way I viewed my parent’s financial situation. What I once deemed solid and unshakable suddenly looked fragile and uncertain. As I watched their savings deplete and jobs disappear, my own view on finances changed irrevocably. I began to operate with the belief that trust in financial institutions shouldn’t be a given. I began to believe that financial advice should be taken with a grain of salt.
For myself and other Millennials, catastrophe struck at a pivotal point. It happened right as we were entering adulthood and flexing our financial muscles. All at once, the stock market crumbled, the housing market collapsed, and large financial institutions folded. Even eight years later, this shake-up has had a noticeable impact on one relationship: that of financial institutions and their millennial customers.
Millennials are placing importance on areas big banks might have overlooked in the past. Things like digital accessibility and fraud prevention are high on their list. And to get them, Millennials are more than willing to trade in one bank for another in the blink of an eye.
Eye-Opening Statistics About Millennials' Expectations from their Banks
Earlier this year, Facebook released a study called, “Millennials and Money: The Unfiltered Journey." Here are some of the study's findings:
- 45% of Millennials are open to switching banks, credit cards, or brokerage accounts
- 44% of Millennials do not feel their bank understands them
- 8% trust financial institutions for guidance
- 40% of money conversations on Facebook are driven by Millennials
What does all this mean? It changes everything about what a customer expects from their bank. Here are just a few of those expectations:
Key Findings Of Millennials' Banking Behavior
Brick and Mortar Banks Are Becoming Less Relevant
Well, not exactly. Brick and mortar banks are still very much alive. But many Millennials handle their financial tasks online - not from inside a bank branch. With the rise of mobile banking and finance apps, trekking to a bank branch can seem inconvenient and unnecessary.
Fraud Prevention is a Number One Concern
Breaches are sure to raise red flags for most customers, but particularly with Millennials. According to a survey conducted by FICO, 29% of Millennials will close a bank account after just one incident of fraud. Out of the rest of the population, only 22% would close their account.
With more than 700 data breaches reported in 2015 alone, it’s no wonder security is now a large concern.
Financial Advice Has to Come from Specific Places to Be Trusted
Remember how many Millennials are taking to Facebook to chat about money? This trend points to another important difference between this generation and older generations: the role peer influence plays in decision making.
According to The Wall Street Journal, Millennials would rather seek input from their friends and loved ones than go to a financial advisor or financial institution. In fact, according to The Millennial Disruption Index, 71% of Millennials said they would rather go to the dentist than listen to what banks are saying.
Now that’s serious.
Millennials Aren't Big Fans of Big Banks
While generations past might have seen bank size as an indicator of stability, that's no longer the case. Remember, Millennials saw many of those banks flounder in 2008. Many Millennials now ditching big banks for smaller banks and local credit unions instead. Why? Lower fees, higher rewards, and better customer service are just a few reasons that come to mind. Many would also rather support local business than see big banks get any bigger.
According to Bloomberg, a survey conducted by Accenture found that community banks received a 5% uptick in millennial customers in 2014. At the same time, big national and regional banks lost the same group to the tune of 16%.
Millennial Brand Loyalty is Alive - But Not for Financial Institutions
For Millennials, brand loyalty exists, just not in the banking world. And financial products are cause for excitement...if they come from somewhere other than a financial institution.
According to The Millennial Disruption Index, 73% of Millennials would be more excited about a digital financial product offered by a brand like Google or Apple than by their bank. In the eyes of Millennials, tech companies reign supreme. And many bank apps cause more frustration than this digital-savvy generation will deal with.
Millennials Are Sick of Paying Lofty Fees
A study by Pew found that Millennials are repeat overdraft offenders. And they're contending with lofty fees as a result. Half of the heaviest overdrafters pay six or more fees in one year. That's an amount that can take a big bite out of any bank balance.
Before you jump to conclusions about Millennials not knowing how to manage their money, understand this. Many blame a lack of transparency for this and other fee pitfalls. “Overdraft protection,” for instance, can be misleading. It doesn’t protect you from overdrafting your account. Overdraft protection simply allows a transaction to go through even when funds aren’t available. But that's not exactly what the name sounds like.
This lack of transparency is taking a toll on Millennials' relationships with big banks.
Traditional Banking Products Aren’t Necessarily What Millennials Want
Millennials are contending with a heavy burden of student loan debt. That means certain financial milestones (like home ownership) aren’t necessarily realistic for them. Banks that rely on mortgages and home equity loans might have to rethink this strategy for Millennials.
Also, with new solutions like peer-to-peer lending, some Millennials are rethinking traditional banking products altogether.
So, what do Millennials want?
According to Facebook’s research, what Millennials want from their bank isn’t all that complicated. Here's a breakdown of what they're looking for:
They Want to Understand and Be Understood
While their parents and grandparents might have found money conversations distasteful, Millennials don't. Millennials want to talk about their finances. They want access to information to help them improve the things they're struggling with.
They Want to Be Rewarded
Millennials want to feel as if their business is important and their loyalty will be rewarded. If a bank is rigid with fees and the customer service is lacking, it’s easy to jump ship. Instead, if banks consider each situation individually and reward customers with better products, Millennials might be willing to stick around.
They Want Solutions Specific to Them
Millennials want solutions that cater to their specific financial situations. They don't want one-size-fits-all solutions. They want banking to fit in seamlessly with their lives, with everything centering around convenience and usability.
Banks need to understand where their Millennial customers are coming from (including their lifestyle preferences) in order to bolster trust and loyalty.
How Can You Find a Bank that Works for You?
Are you one of the many Millennials struggling to find a bank that meets your needs? You're not alone. But don't worry, it is possible to get what you want.
Know What’s Important to You
Are you a frequent visitor to the ATM? Then you need a bank that doesn’t charge lofty ATM fees. Would you rather deposit checks on your phone than at a local bank branch? Then you need a bank with a good app and mobile capabilities.
Know what’s important to you and you’ll be able to weed out the rest.
Do Your Research
You might be swayed by a good signup bonus - and that's fine. Just make sure that bonus isn't covering up other fees you'll pay for later.
Do your research on banks. Evaluate fees, available banking products, interest rates, customer service ratings, and digital capabilities. This will ensure that you don’t end up with a banking headache down the road.
Take Responsibility for Your Financial Education
Fine print might be a pain to read, but it could be costly not to. Don’t depend on a financial institution to provide for you a financial education. You might have to do a little digging on your own to ensure that what you sign up for is in your best interest. After all, banks are still businesses, and they're dedicated to bringing in profit.
There is a multitude of resources available to bolster your financial literacy. All you have to do is take the time to look.
It's Up to You to Cultivate Your Best Banking Experience
Reading some of these stats, it's clear that consumers are calling for change. But you don't have to wait around for your bank to wake up to this in order to get what you want. By following the steps outlined above, you can ensure that you work with a financial institution that works best for you. It's easy to pick the bank that has the most ATMs or that's closest to your home or work. But falling back on the seemingly obvious choice can cost you.
When all is said and done, only you can be held responsible for your financial health. That's something that was clearly seen in 2008. Anyone with a strong emergency fund and plan in place for economic turmoil was able to get through with their finances unscathed.
But anyone relying on their banks or employers to save the day was more at risk of financial ruin. It's up to you to save for the future, plan for emergencies, and choose the type of bank that will help you do both of these things. You wouldn't want to leave your future to chance, would you?