Both credit unions and banks have to reach younger consumers if they want to thrive in the future. While you might want to, you can’t write off Generation Y (those born between 1982 and 2003). However, the importance of this niche market goes beyond just the need to younger.
When it comes to the Millennial Generation they are going to have a huge impact on financial institutions. A recent article in The Dallas Morning News summarized their headline this way: “Make way for the millennials, America’s economic force of the future.”
The piece provided many insights about Millenials—especially ones that will have an economic impact on financial institutions. Below are a few highlights along with my take on what it means for credit unions and banks:
- “They’ll spend more money on new technology, they’ll start the next Google, and they’ll become the main breadwinners for their families.”
- What it means for financial institutions: Embrace your technology tools or die. Mobile banking, wearable technology and even biometric technology are not options; they are must-haves. Stop being a laggard when it comes to your banking technology.
- “Estimates of millennials’ purchasing power vary widely, but a U.S. Chamber of Commerce report put their annual spending at $200 billion — a fraction the size of the $1.2 trillion U.S. Hispanic consumer market.”
- What it means for financial institutions: This may sound contradictory, but you don’t HAVE to reach Gen. Y to be successful. You can target an even more powerful niche: U.S. Hispanics.
- “The average millennial earned $33,883 in 2013, compared with $40,352 for workers of all ages,according to data from the U.S. Census Bureau.”
- What it means for financial institutions: Heavily market your credit cards. While their income is low, their spending is high. That means many of them have significant credit card debt. You could also take a “counter” approach and educate them about the disadvantages of high balance credit cards.
- “The average amount of student debt for college graduates in 2013 was $28,400, up 2 percent from 2012,according to the latest data from the Institute for College Access and Success.”
- What it means for financial institutions: Look for ways to help recent college graduates refinance those college loans. They have tons of collegiate debt. Consider creating a special refinance college loan debt product. Also consider how this high student loan debt is going to impact credit scores and loan applications.
- “For now, millennials’ employment, income and debt struggles have kept many of them from buying a home, a trend that echoes through the economy. Overall, low homeownership rates mean millennials are not building home equity and not benefiting from home price appreciation.”
- What it means for financial institutions: Nothing good from a long-term perspective. If you are relying on mortgages to grow your loan balances, don’t look to Gen. Y. Many simply cannot afford homes these days. Fight this trend by designing creative ways to help millenials get into their first home.
- “A recent survey by Principal Financial Group found that nearly two-thirds of workers who are 23 to 35 started saving for retirement before they were 25, but less than one-third save 10 percent of their salary through an employer-sponsored plan.”
- What it means for financial institutions: If they aren’t saving for retirement through their employer, they have to be doing it somewhere else. That “somewhere else” should be your credit union or bank. Heavily promote “do it yourself” financial planning through your financial institution.
The Millennial Generation is indeed going to have a heavy impact. Not just on society. Not just on the economy. But also on credit unions and banks.