Much has been made of late about millennials leaving the big banks in favor of smaller community banks or credit unions. According to the Accenture 2015 North American Consumer Digital Banking Survey, community banks saw a 5-percent uptick in millennial customers in 2014. Credit unions saw a 3-percent increase. The big guys, meanwhile, lost a whopping 16 percent of their millennial account holders.
The most common reasons cited for such a change revolve around dollars and cents — the big boys simply charge too much in account and ATM fees for this famously cost-conscious younger generation. According to a 2014 FICO study, consumers of all ages cited high fees as their prime reason for switching banks., but for millennials, it was an even more significant factor. Young consumers are in fact, according to FICO, five times more likely than someone age 50 or above to switch. And from there, they are three times more likely to open an account with a new bank. Increasingly, that is with an institution not named Bank of America or Wells Fargo or any other major national player. Accenture’s figures peg millennial transfer rates at about double that of other age groups overall. No matter how you look at it the kids are definitely not all right with sticking to the status quo if a better deal is out there to be had.
Not that the big boys are in any dire straits yet. They still hold 68 percent of the millennial market, significantly more than the 15 percent credit unions have and over seven times more than the 9 percent that do business with community or regional banks. In fact, millennials make up a much larger share of the big banks’ customer base than do baby boomers (43 percent) or generation Xers (55 percent).
So why does it matter? Well, the obvious answer is that at 83 million strong and fast becoming the dominant culture in American society, millennials are the future. Figuring out how to attract and retain them — either as workers or customers — is a task all industries are or should be very concerned about. But understanding them has proven challenging to traditional (read “stuffier”) industries like banks and other financial services.
“This generation is definitely a tough nut to crack,” says Beth Mills, a senior vice president with the California Bankers Association. “Every bank out there is struggling to understand them.”
The thinking, she says, has long been that larger banks have a leg up on community banks and credit unions because the smaller institutions lack the convenience that the big guys can manage in their sleep: more branches and ATMs, and the kind of online services that are so dear to a generation born and raised on technology. But Mills notes those scenarios are changing, particularly as technology improves enough to allow smaller banks and CUs to offer the same kind of online experience that allows millennials to conduct all their banking without ever stepping foot into a branch.
Millennials are also well-known for caring deeply about being part of their community, something a large national bank may find difficult to compete with. While that would seem to give the advantage back to the locals, Mills notes that many larger banks are getting much more adept at showcasing their own involvement in the community.
“The bottom line is that there isn’t one single direction or issue we can point to anymore,” she says. “It will be very interesting from here to see how all of these institutions set about to attract this generation.”