Look to Gen Y, and shift strategy accordingly
Gen Y holds the promise of future growth for community banks that have a customer base that is getting older and gradually exiting the workforce. One-third of the 80 million Americans that comprise Gen Y have never had a traditional banking relationship, yet, in the next 10 years, they will account for three-quarters of the entire US workforce. This is a potential gold mine for community banks looking to replace their aging customers, but it is also an eye-opener since many community banks are ill-equipped, with marketing and product strategies that are off-target when it comes to attracting and retaining Gen Y customers.
Compared to their predecessors, Gen Y are more tech-savvy, more socially engaged (more than 80% have at least one social networking profile), and more Internet-connected. These attributes are not one-offs; they are continuing trends reshaping how consumers interact with their financial institutions and what they expect of them. The challenge facing community banks is how to incorporate the preferences, habits, and needs of Gen Y into their growth strategies in a way that doesn’t alienate their existing customers. The banks that can figure out the right mix of marketing tactics and product offering will have the winning recipe to attract the next generation of consumers, and the generation behind them.
Banks need to think of mobile first as the most important attribute of gaining traction with Gen Y. The primacy of a rich mobile banking app that delivers necessary functionality wrapped inside a compelling user experience is undeniable to Gen Y. In a recent survey, 90% of Gen Y consumers surveyed reported using either online or mobile tools for everyday banking activities. As reliance for Internet access continues to shift away from the computer towards the smartphone, the amount of time the Gen Y consumers spend on mobile banking apps will only increase, especially given the pace with which mobile banking apps are maturing with new features like mobile deposit, loan origination, PFM tools, and new account opening capabilities.
Given Gen Y’s expectations around the mobile experience, banks need to reconsider where they prioritize product development decisions for mobile banking relative to other product categories. The majority of community banks have yet to develop strategies that account for the burgeoning importance Gen Y places on their mobile banking apps, yet national and regional banks are investing heavily in developing and promoting unique mobile apps that redefine their brand as relevant and valuable to this new crop of consumers.
Until now, most community banks have done a mediocre job of reaching and attracting Gen Y. True, at this point they don’t offer the highest amount of revenue potential, but they will within the next decade, and banks need to act now to begin building relationships with this key demographic to make sure they don’t miss out on future growth potential. As Gen Y begins to become the dominant segment of the workforce, they will need banking relationships to manage their finances in the long-term, but community banks, so far, have failed at establishing their value to these young consumers. Community banks have a choice to make; adjust your product and marketing strategy now, or miss out on future growth opportunities and watch national banks continue to capture the lion’s share of the next generation. The choice is yours.
Read this article on CB Insight.