Community Banks CAN Appeal to Millennials- And Even Make Money Off Them Too
With a population of over 80 million in the United States, making them the largest generation by size, Millennials are known for creating a much different lifestyle for themselves from past generations--including how they bank. Overwhelmingly, they are giving their business to the financial giants and digital bank disruptors that offer them instant gratification, low-fee banking.
Their preference for big banks isn’t surprising. Up until recent years, Millennials were largely ignored by the community banking industry because they have not been as quick to make the same financial moves their parents and grandparents had made, including buying a home.
However, the tide has now shifted: The 2017 National Association of REALTORS Home Buyer and Seller Generational Trends Report states that “One consistent finding for the last four years of reports has been that buyers 36 years and younger (Millennials/Gen Yers) is the largest share of home buyers at 34 percent.” It’s safe to say Millennials- at least some of them- are now reaching a status where they can be profitable to their banking institutions.
Because of this, now is the time for community banks to rev up their Millennial marketing and outreach efforts, and it takes more than a banking app to do so. Sure, we have all heard the refrain over and over: “The key to a Millennial’s business is smart-phone banking convenience.” And yes, digital experience is essential for gaining and retaining the Millennial customer. But, community banks are hard pressed to compete on the same technology playing field as the Mega Banks, so there is clearly more to the equation.
The question is, how can community banks further appeal to this young group and stand to compete with their formidable competition? Expertly-tuned marketing and playing to Millennials’ lifestyle interests is the answer. NewDominion Bank in Charlotte N.C. has already proven this.
This bank has honed-in on a trending Millennial interest- visiting breweries- and used it to their marketing benefit. In 2016 they launched a rebranding campaign, “Banking Handcrafted.” Part of their new approach included hosting money management seminars at local breweries where the Millennial crowd could enjoy a beer while talking finances.
The bank paired their Millennial-oriented events with a robust social media presence, posting about the events and summarizing the shared advice, such as how to prepare for a down payment, on Facebook. NewDominion’s loans increased 13%, while deposits grew by 9%, showing that their creative efforts served them very well.
However, we acknowledge that it isn’t always so easy to make money off the Millennial banking customer. While many are indeed starting to make major life decisions, including starting a business, investing, and buying a home – a substantial portion of Millennials are not yet to that point. After all, the youngest Millennials are only 22 years of age and according to instamotor.com, 24 percent who are fully employed report still receiving help from their parents with bill-paying.
Adding to the problem, Millennials are identified as being more fee averse than older adults. A 2016 FICO report found those aged 25 to 34 were two to three times more likely to switch to a different financial institution than members of other generations, with their top reason being fees. But of course, banking is a business. Perhaps the big banks can wait for more Millennials to prove profitable while in the meantime giving services away. However, this doesn’t bode well for most community banks that already struggle with thinning margins.
Fortunately, there are opportunities to build-in fees elsewhere. Upgraded online banking accounts, money transfer services, specialty money management tools, and so on. Not to mention, Millennials are notorious for paying for subscription accounts- Netflix, music services, monthly makeup sample boxes, even special packages delivered throughout the year for their pets. The point being, Millennials will spend money on services they deem to be value-adding and aligning with their lifestyle and personal identity.
First Financial Bank in Abilene Texas has taken note of consumer subscription behavior and has been a pioneer in executing a successful subscription/monthly fee checking account. The bank offers a seven-dollar a month service, which allows customers to save money on a variety of amenities, including road side assistance and phone insurance. As a bonus, customers receive coupons for local shopping. Not only has this been pleasing to the Millennial customer, but over a third of the bank’s overall customers have opted in to the special account.
First Financial is yet more proof that, with the right marketing and service offerings, community banks can win over Millennials. There is good news for the banks that haven’t yet reached that point, though: 80% of Millennials are open to switching banks, according to a 2017 Financial Brand article.
If small banks gain Millennial loyalty now, they have a clear long-term advantage. As it’s been said, the young adults will be continuing to reach major life stages that go hand in hand with seeking additional, revenue-generating services from their bank of choice. So, as a final note, we strongly urge you to use your Millennial team members, and even onboarding more of the young, change-oriented employees, to help identify creative marketing and product solutions aimed at their peers. Consider creating a “Millennial Innovation Team” to head full-power towards engaging the largest generation. Truly, you can’t afford to delay.