In the last few years, a new type of consumer banking model has emerged that is disrupting traditional lending institutions: virtual banks. If you’re not already familiar with this new breed of digital-only banks, look up these three – GoBank, Moven, and Simple. While the particulars of what each virtual bank offers varies, their common goal is to simplify the ‘traditional’ banking process and make it more appealing to a generation that has grown up in a digital world.
Unlike traditional banks, GoBank, founded in 2012, doesn’t charge monthly checking account fees, though it does ask members to contribute anything from zero to $9 a month. Accessible from a smartphone app, GoBank’s unique features include the ability for users to check their accounts without having to input login details and a budgeting tool called “Fortune Teller” that aids in financial planning with a touch of wry humor. Ask the Fortune Teller if a particular purchase is a wise a decision and you might get a response like, “Think. When did you last see your mind?”
By comparison, Simple reviews a user’s account balances (including pending bills) and shows a “safe to spend” margin. Considering that 40% of Millennials are saddled with student debt and that 62% of those 18-34 only think they will need $500,000 in retirement savings, tools like this can serve as a major wakeup call while beginning to alter spending patterns.
Millennials Rising: Back to the Future
Lack of long-term financial planning and high debt ratio shortcomings aside, Millennials are poised to become the world’s largest spending group as they enter their top income earning years.
At about 80 million, Millennials are a slightly larger demographic group than Baby Boomers and, like their parents, are on track to dictate the world of fashion, travel, technology and consumer purchases. Already the group comprises one quarter of the U.S. population and represents more than $200 billion in collective buying power. Not surprisingly, Millennial smartphone ownership is high, with adoption rates as high as 71% in the U.S. A Zipcar study found that nearly 65% of Millennials would be more negatively impacted by losing their smartphones than losing their cars.
The transition of brick-and-mortar banks to virtual banks is an early testing ground for how fast marketers can cater to Generation Y’s evolving needs, while delivering a top-notch brand and customer experience. Growing up with smartphones, tablets and laptops instead of books, TV and newspapers means that Millennials’ relationship with banks is fundamentally different than older customers. Baby boomers and older Gen Xers grew up with the belief that having a local bank branch, post office and public library were essential institutions and the backbone of their town or community. For Millennials, that sense of community is instead powered by the mobile device, not the physical store or local bank.
Banking on a Generation’s Future
Virtual banks’ growth underscores that an ‘automated’ experience delivered via a mobile device can be effective at increasing the level of customer engagement and fostering long-term loyalty – as long as the user experience is intuitive, useful and adds value to the individual’s life.
While virtual banks may still be too new to gauge their long-term success – some worry about heightened fraud risk and in GoBank’s case, that it can take up to 10 days to access funds deposited on personal checks – mobile commerce will come to dominate transactions in the not-too-distant future. That’s because it will be a future dictated by Millennials’ desires and demands.
For brands, establishing relationships with Millennials today becomes an imperative for tomorrow’s loyalty program success. Millennials are still shaping their life’s story, and will not forget brands that invest in them before they’ve reached their full potential. Loyalty programs can also capitalize on Millennial debt and the incentive to save. Help them through these lean times, and the loyalty you build will be like money in the bank.
How is your brand engaging with Millennials? And how do you segment your loyalty program offerings to Millennials? Share your insights on loyalty marketing to Millennials in the comments below or by emailing us at firstname.lastname@example.org.
KEEPING YOUR CUSTOMERS LOYAL™