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Are traditional bank services becoming obsolete?

Kelly Dilworth

When my husband and I first started shopping around for a personal loan to help fund our cross-country move, we disagreed about where to start. I wanted to research my options online and scan financial news sites for advice, while my husband — a late-Generation Xer born in the 1970s — insisted on driving to a local bank branch and meeting face-to-face with a personal banker.

“But we don’t have time,” I protested. We were already stretched thin trying to balance full-time work with an infant who won’t let us clock out. Driving 10 minutes to a bank and waiting for an appointment felt onerous and unnecessary. We could gather all the information we needed just by looking it up online.

Are traditional bank services becoming obsolete?

By researching the information ourselves online, I thought, we’d also be able to avoid getting pressured into a higher cost loan than we could potentially get elsewhere — and we’d be able to read the terms of the loan on our own time rather than rush through them in someone else’s office.

To me, driving to a bank and meeting face-to-face with an adviser is not only time-consuming, it’s a surefire way to limit my options and risk missing out on better deals. According to a spate of recent studies, I’m not the only millennial who feels that way.

For example, research released last month by IpsosMedia CT and LinkedIn found that nearly 34 percent of millennials prefer to research their financial options themselves rather than trust an adviser to do the research for them. Meanwhile, 50 percent want help from some kind of adviser, but only after they’ve looked into their options themselves. Most millennials also prefer to seek out financial information online through social networks, review sites and other online sources.

Additional studies have found that, unlike previous generations, millennials don’t feel much loyalty toward traditional banks and don’t feel a need for traditional services. For example, a frequently cited study from Viacom Media found that millennials are happy to shop around for services that offer a better fit for them. They’re also willing to try a nontraditional bank instead. In addition, the study found that millennials are more enthusiastic about alternative offerings from popular tech companies such as Google, Apple and Amazon than they are about new services from traditional nationwide banks. About a third of millennials don’t even think they’ll need a bank five years from now.

The studies have led to a considerable amount of handwringing among bankers who rely on traditional branch-based services to generate revenue. Because so many millennials prefer to shop around for banking services rather than stick with one company, it’s harder to make money off of them. Traditional bank branches are also disappearing because, like me, fewer people are interested in visiting them in person.

Meanwhile, alternative lenders are actively courting millennials by offering faster, Web-based services that are sleeker, simpler to use and often less expensive. For example, the alternative lender SoFi offers low-rate personal loans that millennials can apply for online without meeting someone in person. “The millennial generation is much more comfortable getting on their computer or tablet or phone and applying there and not needing to be face-to-face with someone in a building,” said SoFi co-founder Dan Macklin in a March 2015 interview about alternative lenders. According to Macklin, people can apply for loans from SoFi while commuting on a bus or waiting in line for something else. “They don’t have to carve out an hour appointment halfway through their day to disrupt their workday,” he said. “That’s what millennials want,” he added. I agree.

In our case, my husband and I decided to search online for a personal loan, where we found some surprisingly low rates. We haven’t applied for anything yet, but we’ve agreed that we’ll be able to save more overall by working with a nontraditional lender. 

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