Getting to the New Normal – Financial Services in the Millennial Age

Getting to the New Normal – Financial Services in the Millennial Age

shutterstock_334074959Love them or hate them, Millennials are poised to dramatically change the world of financial services – and in many cases the change has already begun. What makes this group, the largest generation in the history of the U.S. and the world, unique and how are some companies adapting to meet their needs? Much has been written about Millennials1; from the bad (lazy, entitled, self-obsessed narcissists) to the good (open-minded, upbeat, and collaborative) but one thing is obvious: they can’t be ignored. As the largest generation in the history of both the U.S. and the world, the 84 million people that make up the Millennial generation will be spending $200 billion annually by 2017 and $10 trillion over their lifetimes, just in the U.S. alone2. With the first wave of Millennials poised on the threshold of middle age, what makes this generation tick and how can businesses tap into their enormous potential?

The Stakes are High for Financial Services in Particular

In 2013, Viacom Media Networks published the Millennial Disruption Index and the news wasn’t good for the banking industry. Not only were all 4 of the leading banks among the ten least loved of 73 brands named, but 53% of respondents didn’t think that their bank offered anything different from any other bank. Furthermore, 73% would be more excited by a new financial services offering from the likes of Google or Apple than they would be from their own nationwide bank. If these results are any indication, then financial services has work to do when it comes to wooing Millennials.

What Makes a Millennial a Millennial

Millennials are the first generation of true digital natives: they’re used to having an ability to instantly share and receive information and over 50% report that they regularly play video games (hello PokemonGo!), compared to ~25% of Gen X’ers3. Millennials have lower incomes and higher debt, primarily from student loans, than previous generations, spurring them to live at home longer, marry later, and making them more likely to rent than to own; spawning the “sharing economy”. They are keen on collaboration and are often motivated by social causes and a need for meaning in their work. Given these profound differences, how can companies adjust their strategies to both cope and grow? Four financial services examples can be found from Citizens Bank of Providence, Rhode Island, OptionsHouse, PolicyGenius, and Customer Engagement Technologies’ “PaySwag”.

To Catch a Millennial, You Have to Think Like a Millennial

shutterstock_399933106Citizens Bank of Providence, Rhode Island had a problem: they were getting low response rates for student loan applications. Customers would start applications but they didn’t respond to traditional phone calls or emails for follow up, and this, in turn, led to delays in closing on loan applications, costing time and money. In order to address this issue, Citizens Bank had to find new ways to interact with their customers.

The company recognized that Millennials were 40 times more likely to take action when sent a text message, so they developed Citizens Bank Wire; a new mobile messaging function that captures the customer’s mobile number at the time of application and then is able to send text messages instead of email or phone calls. Citizens Bank Wire was designed to look and feel like a social media app, which engendered instant comfort with their prospects.

The results were dramatic: loan completions are 10% higher and time to completion for student loans is 40% lower for those that use Citizens Bank Wire. Based on this success, Citizens Bank is exploring other ways that they might be able to enhance their business by offering additional products and services through Central Bank Wire4.

Creating the Turbo Tax of Life Insurance

For PolicyGenius, the objective wasn’t so much to only address the insurance needs of Millennials, but rather to understand how they relate to a brand in an experiential way and apply that to building processes that apply to all consumers. 

Several key elements emerged along the way: customers wanted access to information that could teach them about the product without being pressured to purchase, they wanted to have the product and process described in a transparent way that removed mystery, and they wanted to do business with someone that they could trust. According to Francois de Lame, Founder and Chief of Marketing at PolicyGenius, the goal was to “create the Turbo Tax of insurance: it simplifies the process and gives you comfort that you are doing the process correctly”.

Policy Genius is a purely digital brand with a digital presence that is enhanced by human interaction that are actual employees of the firm, not fee or commission-based agents, generating trust and collaboration with customers. As such, they are a prime example of a brand built for the Millennial market.

Delivering Millennial Value to Options Traders

shutterstock_293871527The hallmarks of the Millennial age are driving the business development practices at OptionsHouse, an online broker with a speciality in trading of listed options contracts. A “mobile-first” development strategy coupled with a transparent educational focus that delivers an egalitarian product experience all tie back to traits and characteristics that are so important to Millennial investors.

In terms of development, rigorous discipline ensures that users on all devices, from phones to PC’s, have the seamless and enjoyable experience that this generation of global natives demands. Care is given to get direct feedback from users so that the very best in user experience is delivered. A focus on education is central to success as the Millennial generation evolves from a “savings only” mentality that arose from the Great Recession to a trading and investing approach that comes with more success. 

“Central to our education efforts is TradeLab”, according to Director of Product Management, Matt Wesche. “TradeLab has an elegant design that presents a great deal of information in a clear and concise format that even incorporates emoticons for simple and direct feedback.”

OptionsHouse has an egalitarian approach that aligns with Millennial values: all users, both large and small, have access to the same tools and there are easy to use guides for learning how to expand trading knowledge. Put all of this together and OptionsHouse is leading their competitors in developing new customers, with the average age of their customer dropping by 8 years, right into the heart of the Millennial generation, in the last year alone.

Building a Better Mousetrap Based on Millennial Attributes

Taking things a step further, what if it was possible to leverage the attributes of Millennials in a way that fundamentally transformed customer engagement and both buyers and sellers had a more positive experience? And what if it could be done in a less than attractive area like debt collection? That’s what Customer Engagement Technologies is attempting to do with it’s PaySwag app.

PaySwag aims to make debt collection a more positive experience by adopting gaming techniques, better communication, and collaboration. To appeal to the online gaming tendencies of Millennials, PaySwag allows users to earn rewards points by making payments on time or watching educational videos. PaySwag also adopts the text message mode and pushes payment notifications to clients instead of phone calls, mail, or email. Finally, PaySwag gets closer to their customer by letting them negotiate payment times and terms if they run into unexpected life events. What’s more, they can initiate a negotiation based upon their schedule, not the “9 to 5” of a brick and mortar business. 

PaySwag was launched at Finovate in September 2015 so results are still preliminary. However, one subprime lender used the app for 12 months and was able to recoup $3.5 million. No matter how this experiment turns out, more companies are going to tap into the social, mobile, digital, and collaboration tendencies of Millennials in order to transform businesses5.

When the New Becomes the Norm

It’s sometimes hard to believe that Spotify, AirBnB, and Facebook have all become ubiquitous in the last 10 years. We have grown accustomed to radical transformation from new products and services like these but what if they are only the tip of the iceberg? With the Millennial generation coming into their own (the CEO’s of all three companies mentioned above are Millennials) what has been seen as new is going to become more common as radical transformation becomes the norm.

1Millennials are broadly defined as those born between 1980 and 2000. 2Micah Solomon, December 29 2014, Forbes Magazine 3Goldman Sachs, Millennials Coming of Age 4American Banker, “How to Close the Deal with Millennials: Don’t Waste Their Time”, June 27, 2016 5American Banker, “Can an App Fix Debt Collectors’ Image? This Startup Thinks So”, September 24, 2015

2017-09-01T10:48:50+00:00July 21, 2016|Categories: Digital Transformation, Fusion Blog|Tags: , , , , |

About the Author:

Chuck Mackie
Chuck Mackie is a consultant with Maven Wave focusing on creating cutting-edge content and thought leadership articles in the areas of financial services, healthcare, and technology. He joined Maven Wave in 2010 and prior work experiences include stints at IntercontinentalExchange (ICE), Trading Technologies, and the CME Group. He has a Masters degree in marketing from Kellogg/Northwestern and a BA in Economics and Humanities from Coe College.