Millennials are thumbing their noses at credit cards and traditional banking services, according to multiple reports, and that’s making some people in the financial services industry nervous about how they’re going to attract such a picky crowd.
According to First Annapolis consultant Ben Brown, banks are eager to capture millennials’ attention and draw them in as customers. But millennials’ skeptical attitude toward traditional banking services is forcing banks to seriously rethink how they serve their youngest customers.
“Millennials are a bigger and more diverse generation than the boomers and even the youngest millennials (born in 2000) will soon be financial services consumers,” wrote Brown in a January 2015 research note. However, unlike their baby boomer parents, “these consumers prefer digital channels, seem slow to use revolving credit and lack many of the brand allegiances of their parents.”
According to a three-year study by Viacom Media’s research and consulting firm Scratch, the same group that led the Occupy Wall Street movement and protests against debit card fees is famously suspicious of big national banks, such as Chase and Bank of America, and frequently prefers to do business with local institutions and startups instead.
Many are also leery of using high-interest credit cards, according to multiple studies, and a growing number are embracing reloadable cards as a less risky alternative.
“Millennials don’t hate banks,” wrote Viacom’s Chanel Cathey in a write-up of the Scratch study. “Far worse, traditional banks are becoming irrelevant, as the largest generational cohort in history looks elsewhere to meet their needs.”
For example, “half of millennials are counting on tech startups to overhaul the way the banks work,” wrote Cathey. In addition, 73 percent say they would rather see a new financial services offering from a major tech company such as Google, Apple, Amazon, PayPal or Square than from a major nationwide bank.
Meanwhile, 68 percent of millennials expect that the way they access their money in five years will be “totally different” than how they access it now. Seventy percent think they’ll pay for goods and services differently. And 33 percent doubt that they’ll even need a bank to lend and store their money and make purchases.
“It’s clear that the financial services industry is struggling to engage and inspire millennials — as consumers and employees — foretelling what could be the beginning of significant change in the sector,” wrote Cathey.