The roughly 80 million Millennials in the United States (according to the U.S. Bureau of Labor Statistics) surpassed Generation X as the largest demographic cohort in 2015. They spend approximately $600 billion annually (projected to rise to a whopping $1.4 trillion by 2020), accounting for 30 percent of total retail sales, according to the Who Are the Millennials and What Do They Really Want? report by Accenture. This sizable chunk of potential business should be of considerable interest to community banks and credit unions, as around 68% of Millennials currently use large national banks, while just 24% use regional banks (9%) and credit unions (15%). There is clearly room for growth on the part of the smaller institutions if they can provide a comparable type of branch and online experience to that of the nationals. The question is what do Millennials expect from a retail banking environment, and how can smaller banks provide it?
The New Retail Paradigm
A recent report by Synchrony Financial, entitled The Future of Retail included a list of four retail insights that typify the attitudes shaping the new paradigm. The four examples provided were as follows:
- Show Me
- Entertain Me
- Teach Me
- Help Me
These are the values and expectations of a generation that has grown up online, with virtual reality video games, DVR, and smartphones that enable them to connect to or research anything on the planet instantaneously. They are comfortable with being pampered and catered to to the Nth degree. Gen X’ers and Baby Boomers aren’t as acclimated as Millennials to a culture that indulges their every whim in real time, and retail branch design historically reflected this. But things have changed, and will continue to change over the next decade, with the retail experience across all industries becoming increasingly personalized and data-driven.
“Show Me/Entertain Me/Teach Me/Help Me” reflects several Millennial shopping habits which are markedly different from those of previous generations. “Show Me” is the most pragmatic of the four insights, and refers to the brand’s ability to produce what it says it can. This may mean a store having the ability to special-produce custom order goods in real time, while using the means of production as a main selling point. Baby Boomers and Gen X’ers may recall these type of demonstrations performed in an informal and spontaneous way by store staff, but certainly not offered as a major piece of a brand’s value proposition like it is today. “Entertain Me” comes in the form of digital interactive technology, complimentary food or beverages, a live band, or some other engaging and somewhat unorthodox activity that catches the attention of customers. “Teach Me” might refer to a demonstration of how a product works (e.g. an Apple Genius bar type scenario) which admittedly also happened decades ago, but not in the structured customer-friendly manner in which it does today. “Help Me” can either be taken literally, i.e., offering assistance at a time of need or emergency, or else providing time- and effort-saving benefits via technology, such as retailer apps that enable customers to order ahead of time, check availability of a good, or, in the case of a bank or credit union, make an appointment to meet with a wealth management adviser.
But Don’t Millennials Prefer to Shop and Bank Online?
Surprisingly, the answer is no. In the Accenture study it was found that 86% of millennials plan to be using a bank/credit union branch in the near future, and in Salesforce’s 2016 Study on Customer Experience for Banks, it was discovered that 81% of younger Millennials (aged 18 to 25) and 71% of older Millennials (aged 25-35) also used branches. It’s one thing to know that Millennials like visiting branches, but more important to know how to meet their expectations. As stated above, 68% of them have accounts at national banks, which offer a first rate online/mobile experience, as well as a level of convenience that some smaller banks may have previously struggled to match. However, it is possible to equal the branch performance and design caliber of national banks by working with financial industry design specialists who effectively function as a de facto design-build division for smaller banks and credit unions. The best of these companies can consult with financial institutions and provide a unique, custom solution that embodies the new retail paradigm and will earn the loyalty of the vast emerging Millennial market. Millennials will make up 50% of the workforce in the next five years and 75% in the next decade (Business.Com; How Companies are Changing Their Culture to Attract (And Retain) Millennials), which means there’s a tipping point approaching that will see virtually all branches designed around Millennial tastes, including their insatiable demand for technology, convenience and personalization. In addition, the people staffing these branches, and especially those in leadership positions, will be attracted to companies that are known to have moved with the times. The demographics of our workplaces will change dramatically over the next decade. The time to start building the foundations of your retail banking future is now. Millennials have an uncanny nose for authenticity, and organizations cannot simply hold on until the last minute before declaring themselves relevant and current. The proof of the pudding is in long-term credibility, and brands need to start appealing to Millennials ASAP.
Millennial Life, Loyalty and Authenticity
Millennials collectively believe the adage, “follow your bliss” and it’s important for them to live a meaningful life. They are the first generation to grasp these concept on a mainstream level and apply it to everything, from their shopping habits, their jobs, and the causes that they make their own (which are often also their shopping habits and their jobs). Some commentators have stated that Millennials aren’t particularly loyal to brands, but according to Millennial Loyalty Statistics: The Ultimate Collection, 80% of Millennials participate in retail loyalty programs, and “fun” is an important loyalty driver with 60% of Millennials. This ties directly back to the importance of modern branch design, convenience, and the new wave of compelling graphics and retail communications that are “must-haves” for today’s banks and credit unions.
From a financial perspective, Millennials are entering their peak earning years. They are at the point of making long-term life plans, of becoming homeowners and parents, and financial institutions have to be ready to cater to this, and beyond. Industry pressures are coming from two directions; from the larger retail world and its innovative new formats, and competitors within the financial industry itself who have already transformed their branches to meet new client expectations and are succeeding with the change. Community banks and credit unions should embrace the possibilities that will come when they make themselves into competitors for customers/members against the big banks. They will do this by reforming the customer journey and integrating certain elements into the customer experience.
So What Do Millennials Want in a Bank Branch?
A Good Company Culture
Company culture in community banks and credit unions speaks to both the customer side and the employee sides of the dialogue tower. Millennials love companies that give employees second chances, that spend real time training them in new roles. Employees of yesteryear were more used to a hard “pass/fail” mentality during their initial three-month trial period, just as they were used to being faced with more difficult exams in school and college. These days, college exams are largely multiple choice, and opportunities to earn “extra credit” abound. While older people may sneer at these softer criteria, there is no way to turn back the clock. The new way of thinking and doing things is taking over, and we need to become accustomed to it. Millennials are also attracted to brands that genuinely care about causes outside their company, and even their industry. This refers to preferences, attitudes and activities within the financial institution itself that benefit a cause that brings people together and solves a problem. 55% of Millennials who were told about company cause work in a job interview said the company’s involvement with causes helped persuade them to take the job.
But what does this have to do with bank branches? A lot.
As the universal banker concept becomes the norm, branches and their staff will take on a new personality. Organizations that recognize and support individual employees’ specific talents and passions will be desirable employers and will retain staff throughout their careers. Overall job satisfaction will be higher, and staff will be inspired to become more autonomous, which leads to greater diversity of ideas. Banks and credit unions already promote community campaigns and causes on social media, by telling stories and posting photographs, and this behavior is only going to increase in frequency. All of this background activity will provide a foundation that breeds consistency in staffing, and confers a welcoming, fresh and friendly atmosphere on the branches themselves. This will extend to the community as a whole, which will bring in new customers eager to do business with a financial institution that “gets it”.
Convenience is King
Online banking is going to continue to make gains upon branch banking in terms of transactions. This will create a demand for quick and easy transactions in branches to match those performed on PCs or other devices. Branch locations, and branch models designed around those locations’ chief delivery channels, will become the priority formula for success, along with (in most cases) reduced footprints and impactful brand merchandising. Smaller, highly visible branches in well-trafficked niche locations, that use the latest technology and are staffed by universal bankers, are what will attract Millennials. These may be:
Micro-branches inside larger retailers such as supermarkets.
Small (less than 1,000 sq. ft.) street-accessible branches automated via ITMs.
Small (less than 1,000 sq. ft.) branches with a dialogue tower, cash recyclers and universal bankers.
Full-service branches with automated basic transactions and more complicated banking activities being performed by specialists.
Banks and credit unions are on the brink of a consumer shift that will see branch visitor demographics change dramatically. Whatever the branch type, it would have to be seamlessly connected to the online platform, and by 2020 should be an omnichannel experience where customers can bank online at home, or walk into a branch while making a purchase of a banking product on their phone, transfer mid-process to a universal banker’s tablet, and possibly on to a private office on another device without the customer’s journey along the conversion funnel being interrupted. Millennials expect the world to come to them via their Web-connected devices, and to come to them fast. When they’re forced to wait for service or information they quickly become impatient. It pays to design the branch interior with this in mind, with a certain amount of digital signage, large flat screen TVs, and other sharper branding elements integrated into both the interior and exterior of the branch space. Having the right branch in the right place at this time, with fully modernized delivery channels and retail communications, is crucial to attracting what will be a large wave of potential new customers over the next five to ten years.
There is much work to be done, but it is doable. The brand voice and philosophy has to be authentic, and it must come from the top of the organization. Branch staff have to be happy and secure in their jobs. Branch model and strategy should be lean, built around the main delivery channels for each branch, and sited in the most convenient locations. Lastly, the branch must be alive; signage, branding, merchandising, digital and interactive kiosks, ITMs, etc., can all help promote the fact that your brand personality is worth embarking on an adventure with. In short, financial institutions need to convince Millennials that they’d prefer to be stranded on a desert island with their people, and not the guys down the street.