There is just 20 years’ difference between the youngest Baby Boomer and the oldest of the so-called Millennial generation. But those two decades spell a big difference in how these generations view banks.
The arrival of mobile technology has forever changed the retail banking industry, giving birth to a new breed of tech-savvy bank customer, especially among consumers between the ages of 18 and 30. These so-called Millennials are a generation largely consisting of people who do not remember a time before the Internet and are often described as living on their smartphones.
For many, banking is an app on their iPhone, not a face-to-face transaction with a teller standing at a mahogany counter. And these customers are rapidly embracing mobile banking, an area where many Baby Boomers, concerned for the safety of their financial data, fear to tread.
Adding to the divergence, Baby Boomers, now entering retirement, have far more money at their disposal and account for a big chunk of bank deposits.
Neither group should be discounted. And banks that underestimate the challenges created by these diverging attitudes do so at their own peril.
The massive swell of babies born after World War II has for decades shaped U.S. politics and popular culture. They also control a considerable chunk of the nation’s wealth and bank deposits. Americans over the age of 55 generate roughly 47% of all income in the U.S., totaling roughly $4 billion. Gallup reports that half of these older bank customers report having $100,000 in investable personal assets and one-third say they have $50,000 in bank deposits.
Besides being richer than Millennials, Baby Boomers are also far more loyal banking customers. Data from Informa Research Service’s SEA Score, which measures member and customer engagement, show that those over 55 years of age are 37% more likely than Millennials to be loyal to their financial institutions.
Another way to look at it: Millennials are 63% less loyal than Boomers.
But while they may be a stickier bank customer, Baby Boomers are challenging customers because they tend to bank and invest their assets with many institutions. In fact, data from SEA Score shows that on average, they still have relationships with more than two financial institutions, and 20% have banking relationships with at least four financial institutions.
In short, they shop around for services, and are not afraid of online banking. In fact, they have embraced the trend. Research shows 43% of bank customers over the age of 55 prefer to bank online, though many still value the face-to-face encounter with a banker.
But at 83.1 million, Millennials, regarded as those born in the 1980s and 1990s, eclipsed Baby Boomers last year as the largest section of the U.S. population. These are the customers expected to fuel future growth for the banking industry. Baby Boomers are wealthier, but in the years to come Millennials will be needing car loans, mortgages for a vacation homes, retirement accounts and loans to start new businesses.
Right now, their banking needs are governed by their lifestyles.
Older Millennials came of age in the thick of the global financial crisis, and graduated from college buried in debt. More concerned about paying off student loans than buying a house or saving for retirement, this generation views a bank not as a trusted financial ally, but a means of quickly and efficiently processing financial transactions. For many, their bank is a name on the debit card linked to their Paypal account, or the Web site they use to pay their bills.
Sure, when picking a bank they will look for low fees and competitive rates. But Millennials also judge a bank by the quality of its mobile offerings. They also grew up with technology, and are far more trusting of it. Thus, more than one fifth of bank customers between the ages of 18 and 30 have applied for or purchased a mobile banking app in the past year, compared to just 6% of Baby Boomers.
Just how far the mobile banking revolution will go remains to be seen. One-third of Millennials say they won’t need a bank in the future, according to The Millennial Disruption Index, a survey conducted by Scratch, a unit of Viacom. Yet most still use banks.
Sue Hines is head of customer engagement at Informa Research Services. Sue has over 30 years’ experience in consulting and brand measurement. She brings deep understanding of consumer mindset and the ties that bind people to what they buy and the organizations with whom they do business.
Founded in 1983, Informa Research Services is the premier provider of customer/member engagement and loyalty studies, competitive product rate and fee intelligence, and delivery channel experience measurements to the financial services industry.