In what is being heralded as the biggest generational wealth transfer ever, an estimated 45 million U.S. households will pass down $68 trillion to their children over the next 25 years. And Gen Xers and millennials are expected to gain the largest part of that share, making them a crucial segment for banks and financial institutions (FIs) to attract and retain.
It’s all about who you know
When it comes to winning over the youngest of viable banking customers, those between 18 and 26 in age, it’s all about who you know. Our 2019 Performance Against Customer Expectations (PACE) report found that 75% of young millennials were referred to their primary bank, with 90% of those referrals coming from a family member. And among the family member referrals, 79% were from a parent or grandparent.
It’s clear that younger banking customers are making decisions based on peer and family recommendations and are rarely shopping around for banking services. This presents an opportune time for banks and financial institutions to leverage existing relationships with parents and friends to help usher in younger customers.
Community banks especially are in a unique position to take advantage of these preferences to target and reach younger banking customers. With 51% percent of their clients comprised of Baby Boomers, community banks’ best advocates are already banking with them. Similarly, over a third — 36% — of credit union members are Boomers.
Most importantly, with these boomers passing down the largest wealth transfer ever in the coming years, community banks could be seeing half their assets go out the door, if their heirs bank at a different financial institution.
To attract and ultimately retain this younger banking segment, community banks will need to shift their marketing strategy and focus on relationships and the features and solutions that matter most to this customer base.
A shift in marketing
In banking, attracting millennials begins with technology and digital self-service is now key to customer satisfaction. PACE survey results found 78% of young millennials bank through a mobile app, while 32% want to engage with their financial institution through social media. Yet, with boomers active in all channels, it’s critical to have a bold, multichannel strategy, with digital being at the core of customer connection. That means offering a personalized, simplified banking experience across all digital channels - online for boomers and via mobile for millennials.
This shift in strategy also reinforces the importance of banks of all sizes, to modernize every touch point of their customer journeys.
It’s all about balance
Community banks need to engage both millennials and boomers through digital channels that they use most often – for millennials, it’s mobile; for boomers, it’s online. Priming the pump for referrals must be through digital channels.
It also means offering solutions geared around the millennial life stages: Think high-yield savings accounts or educational seminars on college debt. Such efforts build goodwill with your existing consumer base and provide a sound financial footing for the younger generation which will soon purchase homes, start families, and save for retirement.
However, a focus on younger banking customers can’t come at the expense of your existing members and customers. Boomer consumers need to know their bank still cares about their wants and needs, whether it be in person or via digital channels.
Finding a balance between marketing new services and maintaining deep relationships with consumers regardless of age, is key.
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Tags: Digital Innovation, Technology