Focus on those two initiatives to capture the next generation of customers
October 28, 2010
By Sam Golbach
You undoubtedly have heard or read a lot about the so-called Millennials children of the Baby Boomers. Millennials—also known as Echo Boomers, and incorporating Gen Y—were born between roughly 1980 and 1995. They represent a multitude of millions—an estimated 80 million or more. Like their elders, they are destined to be the most powerful consumer group ever known. In 2010 alone, they represent $306 billion in spending power—and they also expect to inherit $17.8 trillion.
But what does your institution really know about serving Millennials?
These Echo Boomers are not like their parents. It’s these differences that underscore why financial institutions must recognize the distinctions and deliver products and services that reflect them. For one thing, Millennials represents moms and dads, young professionals and students weaned on constant connection.
They gravitate toward the latest tech breakthrough. They tap their circle of friends via high-speed internet access, mobile phones, search engines and social networks. They use email, instant messaging, and texting. Three in four have a Facebook or MySpace account. Millennials also feel personally responsible for making a difference in the world. They’re all for saving the environment, but they also want it to come with an economic benefit.
This generation can’t live without 24/7 ATM access, online account opening and bill payment. They increasingly demand person-to-person payments, mobile banking, mobile payments and, mobile check deposit. They don’t read newspaper ads; they look at websites, Facebook pages and actively read blogs and use Twitter to both inform and entertain themselves about brands and companies. That’s where financial institutions need to do their enticing.
And once you hook them, they tend to be loyal. Nearly 70% of 750 recent college graduates surveyed by Synergistics Research said they kept their checking account with the same institution they used when they were in college.
Millennials = mobile
Millennials love their mobile phones, and are adopting mobile banking. Many more will adopt it when their concerns about security evaporate. Empathica Consumer recently surveyed more than 15,000 Americans and Canadians about banking. The results showed that 51% of U.S. consumers and 60% of Canadian consumers don’t yet trust the security of mobile banking.
At the same time, those who use it express a surprisingly high level of affection for their financial institution, the Empathica research showed. This suggests it won’t be long before most Millennials will conduct all of their day-to-day banking activities with their mobile device. While only 15 financial institutions, mostly credit unions, offered mobile remote deposit as of June 2010, according to a Celent survey, 200,000 of their customers already were using the service.
Many more financial institutions have begun or are beginning pilot projects with likely launches in 2011. Giant JP Morgan Chase has already rolled out such a product, which lets customers take digital photos of checks with their mobile and submit the image for deposit. Even for wait-and-see Millennials, they likely won’t do business with a financial institution that doesn’t offer remote deposit capture. Eventually, that could prove painful to that institution’s bottom line as the salaries of Gen Yers top those of Gen X and they start looking for mortgages and long-term investments.
Risk monitoring is the answer
So what should you do now? How can you offer the latest in deposit technology to build loyalty in a group whose financial demographic isn’t yet ideal, and may fall outside the ideal for what you still consider a risky deposit channel? The answer lies in risk monitoring. It involves setting up the thresholds and rules that allow you to be comfortable with Millennials while giving them the freedom to make their deposits using their favored medium: the mobile phone.
Risk monitoring employs sophisticated rules that set limits and ferret out risky behaviors. It should combine with an easy-to-use interface for administration, reviewing and making decisions. These actions include those that bridge the gap between risk aversion and risk management, such as queuing for load balancing and prioritization.
Going paperless for green-conscious millennials
Financial institutions should take advantage of another prominent trait of Gen Yers. They’re more environmentally aware than their predecessors. Specifically, this provides the opening for institutions to finally get a real handle on going paperless. It’s still true that from opening a new account and applying for a mortgage to making financial investments, paperwork abounds. This isn’t just about going green for institutions; it’s about saving green.
A paperwork morass truly exists. In a November 2009 report, Aite Group found that surveyed banks printed about 1.5 billion documents just as part of the new account process. On average, banks hire five people to photocopy new-account documents, and the process takes 2.7 days. If the banks deployed fully paperless strategies at their branches, they would save printing 1.5 billion documents.
Thanks to tech advances, software is available that literally stops the printing of paper that would just be scanned later. You print this paper today because you need to give a customer something to read and sign. However, the new software integrates with all the other banking technology to allow a customer to read along and sign right on an iPad, eliminating the need to print out the paper. Wausau Financial Systems, for one, has patent-pending software that delivers this.
Millennials say they like to know what the businesses they frequent are doing on the environmental front. Surveys show that they pass this information along to family and friends. So financial institutions should consider other uses of technology to cut paper and save money. For instance, a versatile scanner now can capture everything from driver’s licenses to birth certificates to passports. As for driver’s license photos, you can use a webcam to take customers’ photos as they’re opening an account. And anything you capture during the transaction is capable of being linked automatically.
Besides being environmentally friendly, a paperless environment also improves security and compliance. Going paperless means paper isn’t floating around that, potentially, could get lost, viewed by unauthorized eyes, misfiled or misplaced. That’s critical, considering that the average document is copied nine to 11 times, according to research. And paperwork is costly. Research shows a misfiled document costs $125 and each lost document costs $350 to $700.
Those costs add up, since, at any given time, between three-and-five percent of an organization’s files are lost or misplaced. Large organizations lose a document every 12 seconds. And, the research shows, two-thirds of data loss is related directly to blunders by users.
As for compliance, with a paperless system, from the moment a transaction is executed, an audit exists of everyone who viewed it. This lends itself to automated workflow, taking days off the time it takes in a paper-based bank to get paperwork approved. It also reduces risk and improves customer service by making the transaction immediately available throughout your organization.
It’s clear that Millennials should matter to financial institutions, especially if the institutions are serious about “banking without walls,” considered by many to be banking’s future. Millennials will move banking in that direction. It reflects their deep interest in saving time through technology, as well as their interest in safeguarding the environment through green initiatives such as going paperless.
So, how strongly are you capturing your next generation of customers? If your reply is “not very,” you may soon find yourself falling behind competitors that recognize Millennials are their future retail banking customers. Indeed, one survey suggests that institutions have an opportunity to boost revenues up to 10% by embracing Gen Y now. That should serve as the best incentive for marching to the same drumbeat as Millennials.
Sam Golbach is vice-president, Deposit Management and Paperless Solutions at Wausau Financial Systems, responsible for product management and product line profitability for the company’s remote capture, check processing and document management and workflow solutions.
Now that you’ve read this article, read a banker-written book review of The M-Factor: How the Millennial Generation Is Rocking The Workplace
[This article was posted on October 28, 2010, on the website of ABA Banking Journal, www.ababj.com, and is copyright 2010 by the American Bankers Association.]