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Engaging Millennials -- The New Cash Cows of Banks

- By Chetna Narayanan and Siddhartha Chanda

Millennials seem to be the blue-eyed audience across industries, and they are turning out to be the most prominent influencers as they are disrupting everything from technology to cultural ideologies. They live on the edges of digital touchpoints and are expected to become the world's largest living generation in a year or two. We feel this 'selfie' generation is going to be the greatest disruptor of the banking industry, in terms of how products / services are delivered and how it is being communicated.

As digital natives, millennials are generally not drawn towards traditional banking models. Rather, they prefer to keep banks at arm's length and be more transaction-driven than relationship-driven. This demographic segment is prone to clicks and swipes, mobile dependencies, and are saying 'no' to calls and meetings. Recent statistics suggest, four in ten millennials are customers of non-traditional banking providers for some their financial needs like check cashing, money transfers, orders, and such. Moreover, according to an Ipsos and Linkedin survey, millennials are more likely to believe that banks will not be their primary financial institution in the future. This is really worrying for traditional banks, as it is estimated that this particular group is controlling approximately more than a trillion of liquid assets, and it is expected to get tripled by 2020. Moreover, they will also be benefitting from the inherited wealth of their baby boomer parents, which will make this segment even more lucrative for banks.

So, what can the leading financial institutions do to build effective relationships with these probable cash cows? We can think of three aspects. In one of the surveys done by a leading consulting house, it was pointed out that being financially secure is the most important goal of the millennials and they detest uncertainty. The millennials argue that since banks know a lot about their finances and spending patterns, banks should advise them on how to reach their financial goals and act as their financial caretaker  instead of just selling them products. On this front, investing in a personalized, intuitive financial management tool would definitely help this group make better decisions about their finances. That said, it does not mean that the tool would just aggregate the data and throw information at the customers, waiting for any action to be taken by them. Rather, the approach has to be more personalized so that it reduces the users' effort to take any action. For example, it can include pro-active budget planning and, for that matter, a warning pop-up saying that the user can disrupt the monthly budget if a particular transaction is made.

Banks can take a cue from how the FinTechs are focusing on this area and come up with innovative solutions. As an illustration, Personetics uses predictive analytics to provide real-time personalized guidance on the users' finances. Simple, an automated budget and savings app, informs customers about future bills, pending transactions, and details of regular transactions, in advance, so that the customer knows exactly how much to spend from the existing balance. Qapital, a personal finance mobile application firm, makes saving fun by rewarding users every time they reached a goal.

Secondly, banks can look at usability. Millennials are looking for seamless user experience with the same look and feel from one device to another. App usability rating is one of the key factors for selecting a bank. Again, looking at how FinTechs have innovated themselves here - Klarna, a Swedish e-commerce company, provides a very smooth payment option for users by requiring only the email ID and ZIP code with the 'pay later' option, which helps customers to pay at their own convenience.

The third aspect is communication.  Millennials expect zero delays in communication, whether it is a friend or a corporation they are entrusted with. Hence, banks need to carefully study their digital and behavioral preferences and communicate through the right channel at the right time. Banks should also keep the content relevant and personalized so that the millennials get a sense of being involved and informed and not just a subject being marketed to.

So, what does this mean for the banks? All the aspects that we have discussed above definitely talk about being digital, but that is not restricted to only this group. More than that, what banks need to do right now is redefine the relationship they currently have with customers. They have to strike a fine chord between offering a personalized banking and improve their reputation with digital offerings at the same time.

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