Consumer Behavior - Banking
Mobile banking plays an important part in the choice of a first bank for millennials as 77% of them choose an initial bank that offers a mobile banking platform. Millennials are more likely to choose banks used by their families and friends, and 62% of them receive financial information from their parents. One-third of millennials can switch their banks in 90 days, and 82% of them are willing to switch their banks if offered better services such as ATM fee refunds and high returns on their savings.
HOW AND WHERE MILLENNIALS GET INFORMATION ON BANKS
Millennials get information on banks from the people they interact with frequently such as parents and friends and parents play the greater part in providing information. 62% of the millennials get financial advice from their parents, and 29% get that information from their friends. Parents play a great part in the financial decisions of millennials including the choice of banks. The millennials are twice as likely to seek the advice of their parents on matters finance compared to their banks.
FACTORS THAT MATTER WHEN CHOOSING AN INITIAL BANK
Research published by Bank Administration Institute in December 2015 explains that millennials choose their initial banks based on the recommendation from family and friends, availability of a nearby branch, convenient branches, and a vast network of ATM. 41% of millennials prefer choosing an initial bank similar to their family members or parents. The ownership of the bank also plays an important part and 46% of millennials prefer locally owned banks to a chain of banks. Convenience is important for the millennials and the bank should have online banking options. 77% of them choose an initial bank that provides online banking and in-branch options. The mobile banking platform plays a great role in their choice of banking. Millennials are three times more likely to open a bank account using their phones than in person and 61% agree that mobile banking makes it easier to track their transactions and spending. Mobile applications also make their transactions easier since 44% of millennials send money digitally, 40% use the applications to pay bills from their bank accounts, and 65% use them to check their account balances. The fees charged by banks influence the decision of millennials when choosing an initial bank. 93% of millennials prefer no-fees banking when choosing their initial bank.
WHY THEY SWITCH BANKS
The major reasons millennials switch banks are fees, negative experience, and frustrations. They are two to three times more likely to switch banks, and 45% of millennials aged 25 to 34 years old switch because of account fees such as ATM and low balance fees. The high fees also case 36% of millennials aged 18 to 24 years old to switch banks. A negative experience after missing a bank payment is the other reason millennials switch banks. They will also switch banks if it has few ATMs and its branch locations are inconvenient.
There are different levels of frustrations from banks that cause millennials to switch banks. 55% of millennials are frustrated by difficulties in resolving problems, 37% by the long queues, 33% by technology failure, and 29% by the inability to carry out online transactions. 23% of millennials are frustrated by inconsistent experiences, 22% by unpleasant interactions with employees, and 16% by limited banking options and the inability of the bank to customize their experiences. The frustrations and negative experiences will cause the millennials to switch banks and also talk to other people about the experiences. 26% of millennials will write public reviews of the bank on independent websites, 54% will tell everyone they know, and 25% will post about the experience on social media.
THE DECISION-MAKING PROCESS
The decision making process does not take long for the millennials. It mainly relies on their feelings towards the banks, their services, how well they meet their needs, and what the other banks are willing to offer after the switch. One-third of millennials are likely to switch their banks within the next ninety days.
Millennials are not very loyal to banks compared to other generations. They do not feel tied to banks and are twice as likely to switch their banks in 12 months compared to other generations. 82% of millennials are open to switching their banks, but it depends on the services offered by the other bank. 30% of millennials would switch banks if offered a year of free banking, 25% would switch after getting good reviews from their peers, and 12% would switch for a free cup of coffee each month. 65% of millennials will switch to a community bank if it offers mobile services such as mobile applications and mobile check deposit. 83% are likely to switch banks if they are offered better rewards such as ATM fee refunds and high interests after checking. They also seek high rewards on their savings. A perfect digital platform, solid content, and offering advice at different stages can develop the credibility that ensures the loyalty of millennials to banks.
THE DECISION-MAKING PROCESS OF DIFFERENT DEMOGRAPHICS
The different demographics of millennials are triggered by various reasons when deciding to switch their banks. Most of the younger millennials switch their banks after experiencing fraud-related activities compared to the older millennials. The other decision-making processes depend on how often they either use their mobile phones or computers for banking services and interactions. The younger millennials mainly use mobile phones to interact with their financial institutions compared to the older millennials who prefer using desktop computers.
In conclusion, millennials make decisions on the banks to use based on the advice from their parents and peers. 82% of them are likely to switch banks and one-third of millennials can switch within 90 days, but the choice depends on offers such as high rewards on savings, ATM fee refunds, and better mobile applications.