In our previous blog, “Can design revolutionize the customer experience in banking” we discussed how banking can leverage design to uplift the overall experience of customers while addressing the unique challenges of every customer segment. This blog explores millennials as a consumer group and investigates their unique motivations and challenges with respect to the financial services industry.
The writing is on the wall- millennials do not have the patience for traditional banking. The term ‘millennials’ represents the demographic cohort of individuals born in the last two decades of the last century. As a generation, these individuals have grown up with a deep disdain for large corporate banks. The scepticism is not largely unfounded; this generation has witnessed many instances of political and economic turmoil that has deepened their suspicions of the banking industry. The global economic crisis of 2008, shook the world at large, while several banking frauds in the last decade alone, have impacted how millennials plan their financial trajectory.
However, millennials now represent half the population and constitute the largest growing demographic contributing to wealth creation in the economy. Banks need to capitalize on this unique opportunity to bridge the gap between their product offerings and millennials’ financial needs. This segment cannot be ignored; it will prove to be the key moneymaker for most organizations.
Why millennials run away from banks?
According to our research, around 24% of Millennials do not wish to visit a bank due to fear of excessive paperwork and lethargic procedures. The over-complicated processes and staff’s oblivious attitude towards the customers, especially the millennial customers, force people of this generation to explore other options. This customer migration results in a loss of significant potential revenue of the financial organizations.
Here are a few of the leading challenges faced by banks in attracting millennial customers:
1. Perceive banking transactions as an insipid activity
Millennials are natives of the digital age. This means that this is the first generation that is always ‘logged in’ into the internet:- a plethora of engaging content always vying for users' attention. Compared to all the constant distraction on the web, banking can seem pretty lifeless and uninspiring in the race to grab eyeballs.
2. A unique way of interaction with Banks
Millennials are highly tech-savvy and updated with new trends and disruptions. Every customer of this segment does basic research before purchasing a product or service, be it a physical commodity or a financial scheme. Even the digital products launched by the banks have failed to make an impact on the users as they lacked focus on improvising the user experience of the users. If Banks are not actively upgrading their channels to reach, engage, attract, onboard and retain these young people, they are going to miss a major chunk of their potential customers.
3. Tough competition from Fintechs
The interest of Millennials for using a Banking platform boils down to the usability and accessibility of the product. The new generation fintech service providers and payment banks are highlighting the sharp contrast between the traditional process heavy way of the banks and the more intuitive solutions of today. Millennials are widespread adopters of smarter financial solutions designed to make transactions easy and seamless, all in a matter of minutes. Compare the simplicity of sending money from a phone to another versus standing in long queues at a bank branch.
How can banks charm millennials?
The answer is 'through design and tech'. To win over the Millennials and to keep them motivated about the offerings, Banks should become interesting. Customer-centric design approach should become an integral part of any banks' corporate culture. This enables the bank to empathise with the customer segments, to define the core problems and to ideate an ideal solution for the target segment tailored to their needs. Instead of being just a capital provider for the millennials, banks must get into a larger role of empowering, supporting and delighting the users in every way. Let's see how.
Go mobile and get interesting
One promising approach to engage millennials is through engaging mobile app. Young people require motivations and triggers to initiate a banking procedure, and that can be brought through engaging applications that guides, advice and nudges the user to take an action. Global banks have launched great smartphone apps that reduce transaction friction and discourage bank hopping. Great UX & UI Design coupled with robust tech is the key towards building a reliable and engaging application.
Embrace the big tech( AI and ML)
32% of financial service providers are already using AI technologies like Predictive Analytics, Voice Recognition, among others, according to a joint research conducted by the National Business Research Institute and Narrative Science. Features such as AI bots, digital payment advisers and biometric fraud detection mechanisms will guide the banks towards a higher quality of services to a wider customer base. This will translate to increased revenue, reduced costs and boost in profits.
Instant Customer Service
Most Millennials demand instant customer service and are annoyed when they have to wait for any service. This is the bane of being at the forefront of a generation with depleting attention spans. In order to appeal to impress this age group, banks must provide service at their convenience, at their fingertips, anytime, at all times. Banks can adopt many ingenious design strategies ranging from interactive user interfaces, easy to use online self-service, gamification of different features, chatbots that accepts appointments around the clock to capture business in this segment that was otherwise neglected. Leading banks can take inspiration from popular eCommerce websites and applications that enjoy mass adoption and appeal.
Encashing on Reward Programme and cashbacks
This is also the generation that can be duly termed as “reward seekers”. As mentioned before, since the attention of millennial users is so divided, they need to be incentivized to focus their energies on one offering. In most transactions, millennials don’t just think about the money they spend but are enticed by the rewards they get in return. This explains the popularity of cashback reward programs among the cohort. It is not just the pure concept of reward systems that pleases the user group, but also its interface and gamification aspects. This is a feature that modern day fintech players like Paytm, Mobikwik, et cetera, have implemented really well to ensure user retention. Research shows that Millennials are the least inclined towards showing brand loyalty. A staggering 42% say that they would switch to any other financial institution just for convenience. A robust reward program is a way to their hearts, but definitely not the only one.
Value for time and guidance for wealth generation
Since this generation values ease of app usage over anything else, an omnichannel banking experience is an ideal strategic approach for creating long-term value. This experimental group believes in smart cash than hard-earned money. Unlike Gen X, they have very little accumulated money and thus they want to be guided on how they could exponentially increase their riches without much effort. And with technology backing them up, they expect a personalised financial advisory from the banks. This is difficult to be delivered through a physical entity. This is when weaving Artificial Intelligence and Machine Learning into banking systems could help banks monitor a person’s cash inflow and outflow and recommend schemes that suit them at the convenience of their smartphones. The more personalized the services to their needs, the higher the incidence of repeat business and exponential word of mouth.
While there are a lot of roadblocks for banks in the race to win millennials, there are a lot of opportunities. Because big banks have traditionally underserved millennials, this generation has not formed loyalties to one bank or another. This leaves a huge scope for the banks to come up with a strategic approach to address the unique needs of the younger generation. This segment of potential customers is still largely untapped and awaits a few radical shifts in the overall banking ecosystem. Design first approach will ensure in setting up high value, long-term relationships with them ensuring a future of mutual success.
This blog has also been co-authored by our ex-employee Kanistha Saha Choudhury.