Millennials are the most educated, tech-savvy generation in the U.S. and represent a natural opportunity for the financial industry, but meeting their expectations will be a challenge for banks, according to the latest BBVA Compass report.
Millennials are starting adulthood in a more complex economic environment, writes BBVA Compass economist Marcial Nava. The 75 million U.S. consumers aged 18 to 34 are highly educated but laden with student debt, limiting their access to other forms of credit. They’re also delaying marriage and aren’t pursuing mortgages, credit cards and other financial services as much.
Moreover, the financial crisis dented their trust in institutions, especially the financial industry, and new actors — in peer-to-peer lending, crowdfunding, payment platforms and virtual currencies — are stepping in to capitalize by offering value propositions based on simplicity and transparency.
“A vast number of young adults demand banks to engage in the kind of relationship that helps them not only to access credit but to navigate the intricacy of their financial life cycle,” Nava wrote. “If banks do not embrace these changes, non-banks will.”
In fact, Nava wrote, millennials fully expect innovation in banking to come from outside of the industry. And while many millennials are tethered to their smartphones, simply offering online and mobile banking won’t be enough to build a long-lasting relationship with this market, Nava writes.
Instead, banks should create a strategy for this segment, he says. Banks should advise young people on how to manage their finances, seek millennials’ feedback, hire young employees and partner with financial disruptors, among other initiatives, to reach this group.
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