Today's Banks Need a Millennial Banking Technology Framework

Today's banks? Actually finsurgents preached to banks to become more Millennial-centric 3-4 years ago. Then fintechs focused on Millennials started going out of business one by one. Thankfully, banks didn't take that advice. Will Millennials Bankrupt Neobanks?

Thanks for your comment Ketharaman. I agree with your point on the imperative for banks to have already become Millennial-centric a few years back. That's why as a cautionary word of advice I've ended my article with a 'Better late than never'.

Maybe my sarcasm was too subtle because I meant exactly the opposite: Better never than late.

Many assumptions made by neobanks about Millennials have turned out to be false. Fact is: (1) 60%+ wealth is in the hands of Baby Boomers (2) Millennials have taken a huge amount of student loans from traditional loans. Whether they like traditional banks or not, they can't escape traditional banks. The more relevant question is whether traditional banks want to deal with broke Millennials (3) Millennials have poor adoption of mobile payments despite high adoption of mobile phones and mobile banking (Source: Financial Brand). 

As a result, neobanks have been struggling to grow and achieve any meaningful market share. Far from disrupting traditional banks, neobanks have started chanting the bank-fintech partnership in an attempt to prolong their survival. If banks had taken the advice of finsurgents' advice about targeting millennials, they would've been in a bad shape today. Thankfully, they didn't do that and therefore continue to go laughing all the way to the - ahem - bank.

Interesting point of view Ketharaman. I think every piece of research needs to be looked at with a bigger eye on the context. My research is not focused on neobanks but banks in general. There are two ways banks would also be looking at Millennial Banking stats: Develop a robust Millennial Banking strategy and use unfavourable stats as an opportunity to their advantage or drop the idea entirely and not consider them as a target audience as you're suggesting. The latter is not going to be an option with the explosion of Millennials in a few years from now. If you've read the "Millennialization of Everything: How to Win When Millennials Rule the World", by Jeremy Balkin, Head of Innovation at HSBC, you'd know what I'm talking about. Let me put forth a few counter-arguments to state my stand,

The fact that majority of the wealth as you've said is concentrated in the hands of Baby Boomers is an opportunity for banks to make Millennials more financially literate and drive decision-making through information and products tailored to their needs. This is exactly what Santander Bank did with its Prosper and Thrive millennial focused content-hub that won them the prestigious Content Marketing award from CMI. Millennials are great savers, having seen their parents struggle during the Great Recession. What better strategy than have banks enable the digital-savvy Millennials to save more with intelligent financial apps?

Let me come to the point of student loans and whether traditional banks would want to deal with broke millennials. Citizens Bank could have either dropped the idea or transformed their relationships with Millennials through a personalized digital solution that enabled higher completion rates for student application loans. If they hadn't delved deeper into their Millennial engagement strategy they couldn't have experienced a 10% increase in loan completions and a 40% reduction in the time it took to process applications. This yielded a staggering $136.4 million in booked loans. These examples are from the Financial Brand.

The same Financial Brand source that you've cited states that banks need to do more to make use of the gold-mine of opportunity in dealing with Millennials. They didn't cite ignoring them as a solution: digital or otherwise.

That's why when we see DBS going all out to woo their Millennial customers with their Marina Regatta, there's hope that banks would take a deeper look into experiential banking and transform their Millennial relationships. This is just one instance and I've cited a lot of them in my Millennial Banking Scoop series.

The future lies in Millennial Banking and banks that succeed would be the ones that take their Millennial agenda seriously. It's an opportunity for them to squander, that's how I look at it.

No, my context was not just neobanks. It was banks as well.

IMO, you're confusing banks with non-profits.

1. Yes, imparting financial literacy to Millennials is a noble goal but what's in for banks?
2. Yes, making Millennials save more with intelligent financial apps is a noble goal. But the moment banks - or even nonbank fintechs like Digit - try to levy a fee for the service, the same Millennials rise up in arms to protest against the fee. So what's in it for banks to provide such apps? 
3. Intelligent financial apps - aka PFM / MoMMAs - have been around for nearly 10 years but they've still not contributed in any significant way to a bank's revenues or profits. 

I could go on and on but my point is this: Right or wrong, moral or immoral, the highly profitable business model of banks is predicated upon going where the money is, not where the money is needed. The last time the government urged them to change that model and go where the money is needed was the root cause of the GFC.

As the old saying goes, "A bank is a place that will lend you money if you can prove that you don't need it." And Millennials can't.

The bottom line is that banks need to adapt and integrate digitally disruptive technologies in the changing landscape. They realize that convenience for the Millennial results in profitability, even if it's for a longer term horizon. It's a win-win situation and not necessarily a noble cause. That's why recent trends have actually shown the interest banks have taken in luring their Millennial customers for the former. Banks understand that experience-driven banking translates into higher transactional gains as Citizens Bank realized with their loan completions. Doesn't higher transactional value result in future profits for banks with a more personalized solution? All it took was a tailored solution that spoke to the Millennial's needs.

Can you discount the $136.4 million in booked loans and the future profits Citizens Bank would gain in the process. 

NowThis News partnered with JP Morgan Chase  to roll out a new content channel for millennials with a focus on personal finance. This new digital media would help millennials navigate their personal finances. A Deloitte study cited that 84% of millennials wanted active social engagement before making important financial decisions. When a Millennial is influenced by the content channel and goes on to make a purchase, it would result in profits for the bank.

According to America’s Small Business Development Center, 49% of millennials want to start their own business in the next three years while 54% would quit their job and start a business in the next six months with the ‘right resources’ that seems like an elusive entity. A Wells Fargo study also confirmed that 42% of millennials believed that banks were unlikely to give them a loan or a line of credit for their business because of their age.

As millennials depend on personal credit, to a great extent, to grow their business, this is a great opportunity for banks to cash in on this opportunity as the same survey pointed out that 76% of millennials are willing to pay more for financial products and services. Offering a seamless and customized lending application online can significantly improve convenience, speed and decision-making for millennials while also reducing operational costs for the bank.

Since we don't agree on the premise of banks targeting Millennials, we can agree to disagree in this case.

What Citizens Bank did now with student loans has nothing do with targeting of Millennials. It has been doing similar things forever with people of college-going age, whether they belonged to Baby Boomers or Gen X or Millennial generation. Ditto other banks. I'm wondering if you're confusing Millennials with people of a certain age.

The Wells Fargo study cited by you confirms exactly what I'm saying - banks don't want to give loans / LOC to Millennials.

Bankers are savvy business people - they know what people say in surveys is not necessarily what they do in actual practice. When BofA recently tweaked its checking account terms to make it harder to qualify for a free checking account, Millennials didn't say, "great, here's the money I'm willing to pay more as a Millennial for financial products and services". They didn't even threaten to close their accounts with BofA. Funnily, BofA doesn't want them, but they still want to cling to BofA.

You can keep quoting studies of what Millennials want from banks but all that matters is what banks are willing to provide them. It'd be helpful if you can quote reports wherein banks have acknowledged that they've made so much extra revenue or profits from Millennials by using a Millennial Framework to target and engage with Millennials in a specific manner. 

On your first point, let me quote the Financial Brand reference that i got for Citizens Bank, the title itself says "How Citizens Bank Found Their Digital Groove With Millennials": https://thefinancialbrand.com/64383/citizens-bank-digital-millennial-chatbot-strategy/. Was their strategy different when dealing with other target audiences like Baby Boomers? Yes, because the Millennial mindset and persona characteristics are very different: they have the constant fear of missing out (FOMO) and are far more digitally-savvy, expecting their banks to pick up the conversational thread from where they left off unlike the previous generations who don't expect the same from their banks. Hence when Millennials started the online loan application process with Citizens Bank and left out important information, there was a need for a secure one-on-one mobile messaging service that maintained this persistent stream of actionable communication. This was met only because Citizens Bank could take a relook at their Millennial engagement strategy.

The Wells Fargo study was meant to be looked at as an opportunity for banks as I've mentioned in my next para, "As millennials depend on personal credit, to a great extent, to grow their business, this is a great opportunity for banks to cash in on this opportunity as the same survey pointed out that 76% of millennials are willing to pay more for financial products and services."

Bank of America has often conducted studies on Millennials to understand their financial behaviour and looks committed to espousing Millennial Banking strategies from its corporate updates.   

True, the aim of writing this piece is offer a Thought Leadership framework for banks to use so that they can boost their Millennial Engagement in an evolving and dynamic landscape involving service partners, solution partners, aggregators and payment providers. It's akin to when Digital Transformation was gaining traction: frameworks were conceptualized and then companies got into a consulting phase to discover their Digital roadmap and then further their customer engagement strategies through an implementation roadmap. I'm recommending a Millennial Banking Technology Framework when very few banks have even thought about it, so it's early days. Once this gains sufficient momentum and banks have an implementaiton roadmap, can the ROI of the Millennial Banking Framework be realized. 

TBH, you're deluding yourself if you think previous generations were agreeable to restart the thread from the beginning at every touchpoint with the bank. If anything, Millennials are more tolerant of repetition, especially while dealing with authority figures like bankers. 

The way big banks work, Corporate Banking and Retail Banking operate as two silos. They rarely share any information, let alone details of their loan applicants. There's little scope for retail banking to target rejects of corporate banking. Assuming it even wants to. 

NO, it's NOT early days for millennial strategy. Banks have been trying it for several years. Just that it hasn't worked all that well and has almost exited their strategic agenda.

Like I said, trying to target Millennials is nothing new. Forrester Research analyst Sucharita Mulpuru said two years ago in Bloomberg: 

“There’s this obsession with millennials. The truth is millennials aren’t spending any money with anybody because they don’t have any.”