One of the most important and difficult-to-reach population segments for lenders is the “Millennial Generation.” While there is no universally accepted definition of a “Millennial,” most experts consider anyone born between 1982 and the end of the early 2000s to be part of that generation. What’s not up for debate is that they have grown up with technology and it has shaped their financial habits.
TRU-Insights is a leading market research firm that focuses on “tweens, teens & twenty somethings.” The Score caught up with Katie Sacksteder, vice president of TRU-Insights, to discuss lending and the Millennials after her keynote address on that subject at the Consumer Bankers Association conference in March.
Why should lenders care about the Millennial Generation of consumers?
Bankers, lenders and marketers should care about the Millennial Generation for three significant reasons. First, and most obviously, is their size. Millennials are the largest living generation in America, with 74 million members.
Second, as a cohort, they are entering their prime consuming years. Their lifestage is full of firsts: first job, first new automobile, first home, first time going on vacation on their own dime. At TRU, we say this early adult lifestage is a time where their lives are under construction. They are moving toward independence and starting to get settled by setting up their lives—including career, personal life, home, kids, etc. Most importantly, this is a time where they are starting to make their own brand decisions, with a self-sufficient point of view on anything and everything from laundry detergent to luxury brands to lenders.
Third, generally and historically, young people have always been incredibly influential. On pop culture and across categories, youth has always been on the leading edge of trends and change. This is especially true for tech-savvy, socially connected Millennials.
Therefore, as brands and marketers think about future opportunities, it’s important that they create connections with this cohort during this key lifestage.
What are Millennials’ attitudes toward credit?
From the TRU Study, two-thirds of Millennials in their twenties (age 20-29) are concerned about credit card debt. That is a number that has stayed steady for the past couple of years. Their average monthly credit card debt is, on average, just over $2,900. That number, however, has significantly decreased since 2009, when the average monthly credit card debt was just over $4,000. So, while Millennials are worried about credit card debt, they are also doing something about it.
We have also heard from many in this generation how important it is to live within their means. Many have learned lessons from watching their parents’ financial struggles through the recession. These young people, who’ve generally been included in discussions about family finances to a greater degree than were previous cohorts, frequently expound the importance of not buying (or wanting to buy) anything unless they have the money for it. That doesn’t mean that Millennials don’t use plastic for purchases. But it does demonstrate a shift in attitudes among Millennials about the role of credit and the importance of paying off debt versus previous generations.
How do Millennials want their financial services delivered and what tools do they look for?
Virtually. Virtual banking is simply easier and preferred for this digitally native generation. When it comes to virtual banking tools, Millennials we spoke to seek tools to simplify and enable two aspects of their financial activity: easy transactions and aggregating finances.
First, many discussed the inconvenience of carrying cash and expressed added worry about losing cash if they do carry it. A lost card can be replaced and funds reimbursed; lost cash is gone forever. Since many do not carry or want to carry cash, paying with plastic and virtual transactions are the preferred methods for payments or transferring money. When it comes to tools, on-the-go is a key element for Millennials: 37 percent* of 20-somethings downloaded a free mobile money-management app for their phone within the past 12 months.
Second, Millennials discussed the desire for financial tools that can aggregate all financial activity into one central “place.” With busy lives, a central hub that aids in their management of money coming in—direct pay—and money going out—payments, student loans and credit cards—is helpful.
*Source: the 2013 TRU Study
What mistakes do lenders make when providing products or services to these consumers?
At TRU, we have a macro-theme we’ve observed when it comes to Millennials called The Next Easier Thing. Ease may trump innovation for a generation weaned on Google and touch screens. Today’s young consumers expect massive choice, overlaid by an easy interface. We urge brands and marketers to focus on tools that make interactions easier, rather than just introducing novelty for novelty’s sake.
Banks may also be worried that they lack a personal relationship with this young consumer. However, Millennials’ busy, on-the-go lives require virtual tools and services that allow for instantaneous interactions. Virtual is real for them. This real-time relationship has the potential to create a more immediate, intimate connection and conversation with brands than the in-person, outdated relationships valued by parents.
What’s next? Are new technologies emerging that Millennials are beginning to use?
Mobile tools. We’ve heard from Millennials that one reason plastic is preferred over cash is that it’s so much easier—just swipe your card and go. Mobile tools take easier one step further… with fewer items to manage, mobile eliminates the need to keep track of plastic.
Much has been written lately about how major credit card companies are innovating around mobile wallets. We think this mobile payment innovation is spot-on for Millennials, providing an opportunity for them to streamline to just their phone. Lost or forgotten cards would no longer be a concern, eliminating the hassle, for example, of going back to the bar to retrieve your forgotten credit card!
Current mobile tools sparked interest and enthusiasm among the Millennials we spoke to as well. Chase’s QuickPay was an exciting new tool some were using, a perfect fit for their busy, social lives. Many discussed the tools benefits as now, anytime they are out with friends or participating in any type of group activity, they can easily QuickPay one another rather than worrying about how and when to pay someone back.
Similarly, providing check deposits via mobile phones is also an innovation around “easier banking” that caught Millennials’ attention. Rather than hunt down an ATM, Millennials were excited to simply snap a photo to make a deposit.
Millennials want banking tools that allow them to bank on their terms—whenever, wherever, however they want!