There’s no denying the millennial generation, considered to be those born between 1981 and 1996, have been raised in a highly digital and media saturated world. With the 15-year age gap though, even millennials claim there are personality differences between the younger and older members of this group. One thing is for sure, most companies have realized the importance of this generation and are trying to find ways to connect with them by creating interactions that resonate and potentially transform into customer loyalty. This remains true for companies in the retail and financial institution sectors who have invested heavily in the digital world. They aimed to try and attract this segment, thinking that it was the best route to secure the business of this very profitable generation and remain competitive in the market.
Current industry trends have triggered retailers and financial institutions to make critical assumptions that have deceived them and are leading them to a path that is not as profitable as they believe. One assumption is that millennials only use digital payments, but this simply is not true. A research study conducted by the European Central Bank has determined that they have on average between 40 to 50 euros in their wallets. This is still below the average of 65 euros carried by older generations, but the point to be made is that they hold a larger amount of cash on hand than most believe. Another surprising statistic ECB found is that almost 80% of millennials’ transactions are done in cash which is higher than the European average of 78.8%. A final interesting piece of information from an Experian study is that millennials own fewer credit cards then other generations. On average they possess 2.52 cards, while Generation X possess 3.22 and Baby Boomers have 3.53 on average. Taking these interesting findings into consideration, it’s now safe to state millennials carry more cash than originally assumed and they have less credit cards in their wallets that they also use less frequently.
These statistical finding are intriguing, but many will ask why do millennials use cash and have less credit cards, when all I am hearing is the opposite? A wealth of reasons could be provided to answer why, but three factors ultimately played a central role:
1. The Financial Crisis
2. Student Loans/Debt
3. Lifestyle & Spending Habits
Millennials lived through the financial crisis of 2008 and witnessed the effects of out-of-control debt. Most of the older portion of the group recently graduated or were set to graduate into an economy with low job availability and were already burdened with student loan debt. According to Federal Reserve and Student Loan Hero, the current total student loan amount in the US is $1.4 Trillion spread out among 44 million of American student loans, which means that every borrower has to pay every month $351. Millennials were faced with the decision to remain debt conscious in their spending habits while seeking employment or going back to school and increase their student loan debt. Coupled with these experiences, many understood lifestyle changes would need to be made and spending habits would need to be adjusted. By having fewer credit cards and more cash on hand, it is easier to only spend the cash available, instead of relying on credit to make purchases.
The second major assumption is that millennials never go to branch locations to complete transactions. Some reports have even been published claiming millennials prefer to visit the dentist over paying a visit to their bank’s branch. This statement is countered by another Accenture report on bank branches that found of all customers, 87% of them felt they would continue to use branch location and of millennial customers 86% of them felt the same. They contribute their continuous use to trust and sense that they receive more value from human interaction when handling their finances. Even digital banks, like Iam Bank, who focus their business model on meeting millennials’ needs, have come to realize the importance of human customer interactions.
“We’ve done a lot of research and it all comes down to trust and credibility… For us, the research shows that people have a massive distrust of purely digital offerings. They need to have a human touch, they need to be able to communicate with someone.”
Overall, despite the financial industry’s expectations that there is an impending death of the branch, recent surveys and supported views by digital banks like Iam Bank show consumers, especially millennial customers, will continue to demand a human touch in banking.
At the end of the day, even though many trends indicate that digital solutions are the path retailers and financial intuitions need to take to resonate with millennials, this path is not so direct. Millennials certainly use digital platforms daily, but they have not entirely moved away from traditional lifestyle choices like using cash. They have had to become smart about their spending and how they utilize their cash and credit cards. Retailers and financial institutions need to find a median where they continue to develop digital platforms, but also meet the traditional needs of this generation. These actions will hopefully resonate with millennials and build brand loyalty.
