Banks find themselves tongue-tied in conversation with younger users

11 MAY 2015

NEW BLOG: No one likes bankers much these days. But millennials appear to hate them more than the rest of us. And there is plenty of research to prove it. A 2014 survey in the UK by Scratch, a consultancy owned by media giant Viacom, found banks made up four of the ten most hated brands among those born between 1981 and 2000 (definitions vary but this is the one used by Scratch for millennials).

And it gets worse for banks. One third of the 10,000 millennials surveyed by Scratch believe they can happily exist without using the current banking system. Similarly, another survey last year by Bankrate, a consumer finance firm, found more than 6 out of 10 18-29 year olds in the US do not have a credit card. The survey involved 1,160 respondents. Contrast that with the over-30s where only 35 per cent do not have a card.

Austerity, student loans, as well as legislation designed to protect consumers against higher interest rates associated with some credit cards, have all suppressed take-up among younger users, according to the survey. However, they are not turning away completely from conventional finance. For instance, they are more comfortable with pre-paid debit cards, says the Bankrate survey. So perhaps what is shifting here is an attitude to debt, forged by those growing up during austerity and starting on the long road of repaying student loans.

Can millennials in the US and other western markets cut links with traditional banks? Well yes, a growing number of mobile-only, or at least mobile-first, banking and wallet apps are catering to them. And the smarter ones among the old order are adjusting. File global banking giant BBVA’s acquisition of US start-up bank Simple last year in that category. Francisco Gonzalez, BBVA’s CEO, talked about how to adjust the bank to a more mobile-oriented strategy at GSMA Mobile World Congress 2015.

BBVA hopes to pick up some business via Simple from the younger generation who would not otherwise give it the time of day. And maybe also glean some useful data that can be redeployed elsewhere in its business.

In a similar vein, Indian software giant Infosys just released a white label, mobile-only banking app. The firm claims it is a first for the millennial market (which it defines as anyone born around the year 2000, so those aged between 12 and 18 years of age).

Amit Dua, vice president & regional head of advanced markets & global accounts at Infosys, told Mobile World Live: “In the past a parent took a son or daughter to the bank. Here, we take the bank to them, using their own terminology. There is nothing like a saving account. We talk about ‘goals or ‘desires’ be they educational or buying an Xbox.”

The traditional language of banking is put to one side. Think ‘goals management’ rather than ‘savings’, or ‘do transactions’ instead of ‘payments’.

Account holders can even click through to an online marketplace from the banking app to buy the product towards which they have been saving. Dua said taking a percentage of this transaction could represent a new revenue stream for banks, in addition to the prime motive of snagging desirable customers at a young age.

A second revenue stream might appeal to banks, although they should be braced to incur some parental wrath (and negative publicity) by directing children’s savings towards e-commerce sites. And of course, the target market might feel this all too obvious a ploy.

Overall, Infosys’ solution appears to be presenting the traditional financial instruments, just under a new name. Banks’ problem with reaching young people is presented as a linguistic one, essentially finding the right language to address them, rather than an existential one that millennials are looking for a radical different type of service,

Will the Infosys approach work? Perhaps. Or maybe banks need a more fundamental re-think about how they present themselves to younger customers, or indeed all prospective account holders. If they fail to do so, then others are willing to jump in and take advantage.

The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.

Author

Richard Handford

Richard is the editor of Mobile World Live’s money channel and a contributor to the daily news service. He is an experienced technology and business journalist who previously worked as a freelancer for many publications over the last decade including...

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