Options and Opportunities

Transcription

1 Options and Opportunities Forging Lasting Banking Relationships with Millennials 1

2 Options and Opportunities Forging Lasting Banking Relationships with Millennials TABLE OF CONTENTS SUMMING IT UP FICO: HERE TO HELP YOU SUCCEED 1

3 Millennials now comprise the largest population segment ever in U.S. history, and that segment is growing as a percentage of the overall population. Opportunities abound for banks and financial service providers that understand this generation and can address their unique requirements. More Millennials than Baby Boomers Largest population cohort* in U.S. history This FICO report on Millennials and banks delivers key insights and discusses how to effectively engage with this key demographic. Based on the results of a recent FICO survey, you will learn about Millennial bank switching behavior (how often and why), what types of financial institutions they prefer, which channels banks can use to engage them more effectively, and much more. 76M Boomers 56M Boomers 79M Millennials 78M Millennials % larger than the baby-boom generation *U.S. Census Bureau,

4 1 Millennials More Likely to Switch Millennials Millennials are less loyal to their primary banks than other consumers. The survey showed that Millennials are five times more likely than those over age 50 to close all accounts with their primary bank. They are three times more likely to open a new account with another bank. Because of their increased openness to switch banks, financial institutions have an opportunity to target this segment more than others for new customer acquisition. At the same time, banks need to protect against losing their own Millennial customers. Section three discusses some of the key factors that can be highlighted in retention or new acquisition campaigns. 5X More likely to close all accounts with primary bank 3X More likely to open a new account with a primary bank *Comparison of to 50+ age demographics. Base: Total (n=991); (n=147), 50+ (n=557). Q: Thinking about your plans for banking for the next 12 months, how likely is it that you will.? 3

5 2 Millennials Use National Banks as Their Primary Bank 68% of Millennials have a national bank for their primary bank. Only 15% use a credit union and only 9% have a regional bank as a primary bank. More Millennials bank at national banks than any other generational group (55% for GenX and 43% for Boomers). Millennials also have more products at their primary bank. They have 3.49 products compared with 3.3 products for Boomers. They also have the highest percentage at 21% with five or more products at their primary bank nearly five percentage points higher than GenX or Boomers. National banks should embrace Millennials. They have overwhelmingly chosen them as their primary banking institution over other financial institutions. Because they use a large number of products, banks should manage Millennials at the customer level as opposed to the account level for fee waivers, overdrafts and authorizations to protect against the higher attrition risk they present. For regional banks and credit unions, the next section will highlight some of the areas that can be targeted for switching campaigns. Primary Bank Type for Millennials 68% 15% A national bank 9% A regional bank Credit union Base: Total (n=991); (n=147), (n=287), 50+ (n=557). Q: Which of the following best describes your bank? 4

6 3 Why They Leave: Perceived High Fees, ATM Issues, Negative Experiences Why Millennials One-third of surveyed Millennials cited excessive service fees (real or perceived) as the single main reason they switched banks. This was closely followed by a negative experience with a bank representative and ATM-related issues (too few, inconveniently located, or fees too high). Negative digital experiences with both online and mobile had a much bigger negative impact on Millennials than on other age groups. 34% Leave Banks Account fees too high To build loyalty with this segment, financial institutions should be sure to use strong analytics to make fee waiver decisions that take into account both short term profits, the complete set of products the customer has with the bank, and long term attrition risk. Fees were cited not only by Millennials, but also Gen X and Boomers as the number one reason to leave a bank. 27% 24% Negative experience with a representative of the bank There were too few ATM locations Base: Those who have moved their checking account; (n=43), 35 to 49 (n=93), 50+ (n=213) Q15A: Thinking about when you switched your primary checking account in the past, which of the following reasons were factors in motivating you to leave your former bank 5

7 4 Digital Channels are the Way to Market to Millennials While and direct mail are still the highest areas of preference for Millennials to get marketing information, social media, television ads and word-of-mouth recommendations are often 2x or 3x higher as preferences than other generational groups. Marketing Preferences As banks consider new customer acquisition or retention campaigns, they should take the following into consideration: Invest in integrated marketing campaigns that feature touch points to connect with Millennial prospects in the channels they frequent (social, direct mail, , television). SOCIAL MEDIA TELEVISION ADS Insure that marketing and communication efforts between channels are coordinated. WORD-OF-MOUTH 2x or 3x higher as preferences than other generational groups. 6

8 5 Multiple Digital Channels and Devices are Used for Key Banking Activities Millennials are significantly more likely to transact with their bank through mobile apps than other age groups (26% prefer mobile apps, compared to 12% for GenX and 3% for Boomers). But they still prefer to use a bank s website over mobile apps. They also use the desktop computer at similar rates to a smartphone. Smartphone and Tablet Usage by Age Group Millennials use a broad set of channels and devices to interact with their bank. Banks need to keep communications and customer experiences consistent between channels and well-orchestrated. 90% 38% 63% 30% Millennials Smartphone 50+ Millennials 50+ Tablet Base: Total (n=991); (n=147), (n=287), 50+ (n=557) Q20: Do you use any of the following on a regular basis? Base: Those who use smartphone/tablet (n=625); (n=138), (n=220), 50+ (n=267) 7

9 6 Mobile App Users are More Loyal Customers who are frequent users of their bank s mobile app (at least once a week) are more satisfied with their bank and will recommend that bank to others (78% very likely to recommend, 4% unlikely to recommend). Non-users of mobile apps are twice as likely to be dissatisfied and not recommend that bank (67% very likely to recommend, 8% unlikely to recommend). Mobile app usage clearly translates into loyalty for Millennials. Banks should build and enhance mobile application functionality and learn how to communicate that functionality to users effectively. Develop marketing campaigns such as tell-a-friend incentives and offers targeted to app users to support their likelihood to recommend. App Usage Increases Satisfaction 83% Satisfied Uses bank s app 1/week+ App Usage Increases Recommendations 78% Likely to recommend 71% Satisfied Does not use bank s app 67% Likely to recommend Uses bank s app 1/week+ Does not use bank s app Base: Uses bank s app 1/week+ (n=228), Uses bank s app <1/week (n=73), Smartphone/tablet users who do not use bank s app (n=324) Q11: Overall, how satisfied are you with [PRIMARY BANK]? Q12: How likely are you to recommend [PRIMARY BANK] to a friend or colleague? 8

10 7 Millennials May Not be Aware That Their Bank Offers a Mobile App Almost a quarter of surveyed Millennials listed the lack of a mobile banking app as the main barrier to engaging with a bank. Thirteen percent answered that they didn t know if their bank even offered a mobile app. Awareness Around Availability of Mobile App Millennials may not be receiving the information they need to bank in the way that they want. With the associated loyalty-building factors of app usage, it is important for financial institutions with apps to communicate their existence to customers. Recommend banks: Gain a better understanding of where Millennial customers are getting information about their banking services. Develop app marketing and communications campaigns to let customers know about their app services and features. 21% 8% NOT AWARE Millennials NOT AWARE 50+ Base: Smartphone/tablet users who do not use primary bank s app (n=324); (n=51), (n=101), 50+ (n=172) Q22: Why don t you use [PRIMARY BANK] s app? 9

11 8 Texting is Preferred Millennials More Likely to Prefer Texting for Key Notifications Millennials want more communication with their banks through texting. Compared with older age groups, Millennials are notably more likely to use and prefer texting for banking purposes for such things as notification of suspicious charges and credit limit warnings. Developing more text communication with Millennials is a loyalty-building opportunity. Recommend banks: Develop and expand texting services for items like alerts, mobile payments and financial management. 3X 2.5X Automated Account Balance Update Late Payment Reminder Coordinate between different communications channels to assure that customers are not being touched multiple times with different messages. Bill Payment Reminder Credit Limit Warning 2X Notification of Suspicious Charges Compared to 50+ demographic. Base: (n=147), (n=287), 50+ (n=557) Q17: For each of the following account activities with [PRIMARY BANK], A) How do you typically conduct each activity? B) What would be your preferred way of conducting each activity? Q18: For each of the following types of information you might receive from [PRIMARY BANK], A) How do you typically receive each of the following types of information? B) What would be your preferred way of receiving each type of information? 10

12 9 When They Like Their Bank They Tell Others 56% of surveyed Millennials have recommended their bank in the past, and a positive service experience is a clear driver for them to recommend their bank to others. Service satisfaction ranks paramount, but lower fees, convenience, friendly and helpful assistance, and product options are also important in raising the overall level of satisfaction. Building loyalty with the Millennial segment creates multiple wins. Not only do they develop into loyal customers, they are also more likely to promote their bank and services. Develop campaigns and digital functionality that leverage the Millennial propensity to evangelize tell-a-friend incentives, sharing capabilities and social media-based driven campaigns. Recommended Banks in the Past 44% Millennials 56% No Yes Reasons for Recommendation Base: Total (n=991) Q13: Have you recommended [PRIMARY BANK] to anyone in the past? Base: Those who have recommended their primary bank to someone in the past (n= 599) Q13A: Please describe what it was about [PRIMARY BANK] that prompted you to recommend it to a friend or colleague. Please be as specific as possible. 11

13 SUMMING IT UP Millennials are a significant and growing demographic that must become a key component of any bank s efforts around customer-loyalty and new customer acquisition. Millennials have very specific ways that they like to bank and want options in banking services and communication channels. They re also much more likely to switch banks when their needs aren t met. To acquire and nurture this dynamic generation of consumers, banks should consider: Millennials are using large national banks and consuming more services from them than other demographic groups. They also have a much higher likelihood of switching. Banks need to focus on managing them at the customer level across all products, leveraging deep analytics, to ensure short-term decisions (such as fee waivers) are evaluated based on long-term profitability and attrition risk. Millennials are heavier technology users overall. Leveraging digital features should be a key area of focus when banks develop customer acquisition and retention strategies. Banks should invest resources in marketing their app to this subgroup through a mix of digital channels. Text messaging is a channel to prioritize as there is opportunity to deliver on an unmet need by providing the communications Millennials want by text (communications such as suspicious transaction alerts and overdraft alerts). 12

14 FICO: HERE TO HELP YOU SUCCEED FICO helps organizations deepen customer relationships and grow profits by blending powerful analytics with the right customer communication strategies on mobile and traditional channels. Our unmatched analytics expertise, proven experience and industry-leading technology are ready to help your bank achieve its marketing, sales, and customer management goals, whether for Millennials or any other demographic group. For more information North America toll-free Latin America & Caribbean Europe, Middle East & Africa +44 (0) Asia Pacific About this Survey: The survey data collection was obtained with a 12-minute online interview conducted between March 5th and March 15th, Focused on the U.S. general population, participants were 25 years old or greater, involved with financial decision-making and had at minimum a checking account. The survey had 991 completions, and data was weighted by age, gender, and region to reflect U.S. Census data. 13