There is some good news in Bankrate’s June Financial Security Index: financial security reached a record high. That still means 24 percent of adults say they have no money saved for an emergency like a layoff or medical bill. And even though this is its lowest level since the survey began in 2011, a whopping 25% of millennials say they have no emergency savings whatsoever.
Millennials are desperate for help managing their money. As Andrea Woroch, a consumer saving expert explains, “A lot of millennials have seen their parent suffer financially through the recession, and so they are trying to be savvier with their money.” They make conscious efforts with lifestyle choices from living with roommates and taking moonlighting gigs to delaying major purchases and shunning credit cards. Saddled with student loan debt, it’s the number one reason they are not buying homes, according to the Federal Reserve Bank. Also consider that although they are the furthest from retirement, they contribute more to their retirement plans than Gen Xers or Baby Boomers.
Clearly, millennials have savings on their mind. It’s no wonder that there are a plethora of fintech solutions lined up to help. Millennials have more choice than ever before – from standalone apps like Acorn and Digit to challenger banks like iam bank and Varo Money, to name a few.
There is no reason for traditional retail banks to be left out of helping millennials improve their financial well-being. In fact, there has never been a better time to evolve from helping them move their money to help them manage their money.
You’re sitting on a gold mine
At the heart of someone’s financial well-being is their financial data – how much do they spend, what do they spend it on, how much debt do they have, what do they have saved for a rainy day and invested for the future, and more. Turning this raw data into actionable and relevant recommendations is the difference between helping someone move their money and pay their rent from checking to managing their money, saving for a house.
Seamlessly processing your customers’ data to predict your customers’ financial needs requires you to take this often disparate and uncategorized data (or poorly categorized) and augment and enrich it. With enriched data, you can derive insights and see the patterns in the data that allow you to create customized, personalized and contextual recommendations. It’s an opportunity to proactively inform the customer, not only increasing engagement but also improving brand loyalty.
Your recommendations can be triggered by account activity such as a large deposit that hits their checking account and leads to a recommendation that some portion is moved to saving, or a customer-defined goal, such as eating out less this month means more money to reach their savings goal.
You have a unique advantage to use the data to proactively inform your millennials about their spending patterns and saving goals.
You have many products and many channels
Unlike the fintech options, you’re more than a savings app – you’re a full-service and trusted provider with checking, loans, credit cards, mortgages and more. Over time a fintech savings app could grow to add more products but that’s where you start on day one. Use that to your advantage and don’t let fintech savings apps chip away at your customer base.
And, you’re more than a digital-only bank. You have a relationship with your customers wherever they are – in your mobile app, on your website, in your social media channels and messaging platforms, on the phone with customer care, and, of course, in the branch.
You can truly meet your millennials in the moment with your omni-channels. Financial well-being and saving is not something they sit down and do – it’s woven into their everyday with the decisions they make throughout the day.
Put a stake in the ground and be more than the app they use to check their balance before they buy their airline ticket. Help them save for that airline ticket and the trip they are planning. Highlight benefits of the credit card they can use on this trip and offer them travel insurance. Let them know when bills are due and how those expenses are going to impact their goals. Get woven into their everyday life.
Technology on the inside and out
It goes without saying, millennials are digital by nature, but frankly that’s not entirely unique. More than 70 percent of consumers would be willing to receive computer-generated banking advice, as noted in an Accenture survey. In addition, Gartner estimates that by 2020, customers will manage 85 percent of their relationship with a business without interacting with a human.
In response, many banks are embracing artificial intelligence to create bots or virtual assistants that interact with customers. The AI ingests banking knowledge and all of nitty-gritty details about a bank’s products and services. Banking bots are designed to deflect and triage customer care calls – answer questions and solve problems. They have proven very useful for helping customers but also for decreasing customer care costs.
But, flip that around. Now, imagine if those bots and assistants did more than customer support and actually used their natural language understanding and reasoning to not only find a routing number, but also find a better way to save money. The same AI platforms banks are using for support can be used for customer-first banking experiences. Of course, in our regulated industry, financial advice is different than gleaning insights and surfacing patterns. The latter is more about using AI to present data-driven insights and ideas so the customer can make informed decisions on their own – showing how the little things add up or tying together short term and long term financial goals.
User experience matters to millennials
Tick tock. Millennials will be the largest adult demographic group in the world by the end of the decade. Couple that with the fact that 57 percent would change their bank relationship for a better technology experience. This makes presentation and delivery of financial well-being advice a key to effectively engaging your young, tech-savvy customers. You have to go well beyond putting a budget and goals dashboard in your mobile app. The quality of the user experiences and customer journeys you create will matter deeply – you need to add real value and not noise.
Not just financial well-being – financial literacy too
Financial well-being goes hand in hand with financial literacy. According to research, the gaps in financial literacy are responsible for a portion of the massive wealth inequality in the US. What consumers don’t know about topics like mortgages, credit cards, and payday loans hurts them.
Two-thirds of Americans cannot pass a basic literacy test, and when millennials were tested on financial concepts, only 24% demonstrated basic financial knowledge. This gap is an opportunity for banks to be good teachers.
Use the financial well-being experiences you create as an opportunity to also increase their financial literacy – put it in plain English and explain things without the banking jargon, and ask if they want to know more or why. Millennials can turn to you with questions they may worry are silly without experiencing the nervousness or embarrassment incurred by asking their friends or family members those questions.
Their well-being is your well-being
The “Kodak” moment is almost a cliche, but it’s no longer a debate – banks must embrace digital transformations to create entirely new banking experience to meet the demands and expectations of today’s millennials. They are looking for help and you can jump in or watch them save with someone else.