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Millennials Help Accelerate Banking’s Evolution
Published Tuesday, March 21, 2017

Up to 90 percent of financial transactions are done online or through mobile banking, according to a national study done by Bottomline Technologies and The Center for Generational Kinetics. In fact, it’s routine to deposit checks by smartphone, check balances by text, use digital wallet for Apple, Android or Samsung Pay, and even use peer-to-peer apps to connect with someone’s email, cellphone or Facebook account to pay them.

And since none of those activities involve visiting a physical bank, traditional financial institutions are rethinking how they do business. Many using those products are millennials, who were born between the early 1980s and early 2000s and they are the largest segment of the workforce, accounting for 50 percent of new customers at some banks. Thus, offering services to attract these digital savvy customers is critical to the future success of banks.

“I think everyone recognizes that millennials are a very influential generation in history,” says Christiana Thornton, president of the NH Bankers Association in Concord. “It really has started to shape the way banks are doing business and what they’re looking at for the future, recognizing that over the next 30 years this generation is also expected to inherit $30 trillion.”

But it is not just millennials demanding these technological advances. Digital products and services are now the cost of doing business. “It would be a mistake to say there are bright lines around this group and that people older or younger don’t have some of the same expectations,” says Norm Deluca, general manager of digital banking at Bottomline Technologies, a Portsmouth-based financial technology provider of cloud-based digital banking, fraud prevention, payment, financial document, insurance and health care solutions. “The millennial generation is more of an accelerator driving these trends.”

New Hampshire, which has one of the oldest populations in the nation, is proof not just millennials want technology. “Definitely millennials are here, but you can’t ignore our other clientele either,” says Cynthia Hemeon-Plessner, senior vice president and marketing officer for NH Mutual Bancorp, an alliance of Meredith Village Savings Bank and
Merrimack County Savings Bank. This year, the bank increased the security of online purchases using a bank debit card by flagging large purchases out of the ordinary and asking for verification.

And while Generation X and the baby boomers grew up waiting in lines to deposit checks, it is those two generations, not millennials, who were the first to adopt remote capture deposit as they found it more convenient, says Ron Magoon, president and COO at Franklin Savings Bank.

A national study, “How Millennial Decision-Makers are Changing Relationships Between Businesses and Banks,” by Bottomline and The Center for Generational Kinetics, found that 38 percent of business decision makers have already moved beyond commercial banks for banking and related financial needs. And 50 percent of those are on the lookout or would consider switching to a bank with better integrated services. That number jumps to 66 percent when only millennial business decision makers
are considered.

To meet these needs, NH banks are doing everything from creating financial education programs specifically for millennials to amping up their digital offerings. At Eastern Bank, voice biometrics uses voice recognition to identify customers when they call the company’s 800 number, providing a higher level of security and convenience. Bank of NH, based in Laconia, is in the process of optimizing processes for opening a new account and applying for a loan through mobile devices. “If you’ve got young consumers, they have to be able to do everything on their cellphone,” says Vickie Routhier, executive vice president and chief retail banking and marketing officer for Bank of NH. “They want to be able to do all of this stuff on the fly.”

Service Still a Focus
For all the things that people can do online, bank branches still play a critical role. If you need a loan you often want to speak to a person, and that, bankers say, is where banks can make a difference. Where branches were once a hub for transaction activity, they are now more service and education focused.

Branch redesigns at many banks eliminate teller lines and focus on areas for customers to meet privately with bankers. Meanwhile, smart ATMs allow cash and checks to be deposited without having to fill out a deposit slip or use an envelope. “Millennials’ expectations have been set from day one as consumers about how easy, intuitive, rewarding and seamless using technology should be,” says Deluca. “Those are just hardwired expectations. It doesn’t matter whether they’re a consumer or working as assistant comptroller of a company, their expectations of using technology are so much higher, deeper and accentuated.”

But technology only takes you so far, and, at some point, you want to speak with a person. The goal is to find the perfect balance between having the best in technology, and the personal touch, trust and expertise provided by banking professionals where and when people want it.

“What we find through conversation and industry surveys is that especially millennials want to know there is a brick and mortar location nearby so, if and when they have a problem, they have somewhere to go,” says Magoon. “It’s turning into a service hub rather than a transaction hub.”

Often saddled with student loan debt, millennials tend to delay major life events, like owning a home. When they are ready for a loan or to refinance student loan debt or credit card debt, they often want to be educated first about their options.

Successful banks are expected to be proactive and provide that education. Franklin Savings Bank formed a team two years ago specifically aimed at connecting with millennials. That team reviews all products, looks at ways to recruit millennial employees and has prompted the establishment of a learning center focused on millennials.

The bank recently offered an investing class for millennials. “Although they may not be able to invest yet (because of typically high student debt), it was a nice opportunity to start the conversation,” Magoon says. “Our investing class is able to provide a base of education and knowledge that they’ll need. It’s that education that matters to them.”

Eastern Bank recently partnered with EverFi, a third party financial education provider, for an online sweepstakes where entrants could win prizes for completing financial education modules.

“They want to be able to research in whatever channel they choose but still have that personal interaction before they pull the trigger on something more complex,” says Beth Johnson, chief marketing officer and head of consumer strategy at Citizens Bank. “It’s all about good digital cross-channel linkages.”

And simplicity. “Financial services are complex in nature,” she says. “But we have to figure out, how do we provide the simple tools they want, only adding complexity where it’s necessary?” For example, to explain equity, Citizens created a simple video posted on social media.

Also, the Citizens Helping Citizens Manage Money program has sent more than 400 volunteers into communities to share financial literacy education on everything from budgeting to investing. Citizens’ website has a content hub dedicated to student services, including information about student loan refinancing. The bank’s mobile app’s fast balance tool allows customers to check balances without logging into mobile banking. “We take the approach to make it simple,” Johnson says. “We don’t try to add so many bells and whistles.”

Many banks use online chat to communicate with customers. Johnson says Citizens has done brainstorming sessions with multiple generations to get feedback on how they use various social media channels like Snapchat and Instagram. “We’re being thoughtful about which messages our team members send on each social media [platform],” she says.

Opening Communication Channels
No matter how much technology or level of service a bank provides, the next challenge is convincing consumers to choose them.

“It’s no longer about what we say about ourselves, it’s about what others say about us,” Deluca says. “The importance of advertising and traditional marketing, telling the marketplace what is great about yourself and your bank, doesn’t work anymore. Millennials are influenced more by what their peers are saying. It’s about peer recommendations and peer influence.”

Nearly everyone agrees this isn’t a battle that will be won by technology alone. Millennials expect a comprehensive array of simplified and consolidated financial tools at their fingertips, but they also want connections. Think Starbucks and Apple stores, Deluca says.“What has made a lot of New Hampshire banks unique is those personal relationships,” Thornton says. “How do you still maintain that personal touch?  Any time it’s more personal, it’s less likely to be discontinued.”

That may be critical as banks try to wrangle business back from non-banks, or financial technology innovations like Apple, Samsung pay or online loan providers, called fintech in the industry. “A significant percentage of business banking decision-makers are using multiple financial services resources for their banking needs and are increasingly turning to non-bank providers … costing banks billions in lost market share and revenue,” according to Bottomline’s national study.

The challenge is to get millennials to understand banking’s benefits. For one, Thornton says, with today’s increasing cybersecurity and fraud threats, “Banks continue to be the most secure place for an individual to deposit their funds. We have state and federal regulators monitoring what we’re doing on a daily basis. That’s where we’re different from fintech companies.”

With that in mind, Service Credit Union in Portsmouth is marketing secure mobile products to customers, including instant alerts if someone is accessing their credit card. “It’s delivering services in the ways they want them delivered,” says David Van Rossum, president and CEO of Service Credit Union.

Banks will also soon be able to offer real-time payments for customers using cellphones. And with multi-channel platforms, a customer can start an online loan application on one device and finish it on another.

Then there’s the matter of trust. The national study showed business decision makers trust their current commercial bank or credit union more than a competing bank or non-bank financial services provider. In fact, 56 percent would rather get a cavity filled than change banks. “Most of our research confirms that while banks might be trusted less than they were historically, they’re still trusted more than most other sources of financial services or financial information,” Deluca says. “They have to do a good job of nurturing that. Banks need to recognize that what they’re really in a battle for is not just keeping their accounts but the primary ownership of a customer relationship, because that’s where they make the money.”

Social consciousness is one way to appeal to millennials. Franklin Savings Bank offers a rewards program supporting local businesses. Accrued points can be redeemed anywhere, though a customer gets twice as many points if they use the points locally. Bank of NH donates a $1 million a year to 400 nonprofits, Routhier says. “We make sure our customers know any profits we make are reinvested,” she says.

There’s no doubt how banks handle the influx of millennials will be a test. “I think there will be more separation between the winners and losers in banking,” Deluca says. “The ones that adapt more quickly are definitely going to be the ones that survive.”

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