By Ken Siegman
In 2014, The Millennial Disruption Index (Viacom Media Networks) projected banking as the industry with the highest risk of “disruption” from the millennial generation. Among the study’s findings, 73% of millennials surveyed said they would be more excited about a new financial services offering from Google, Amazon, Apple, Paypal, or Square than they would from their own nationwide bank.
While it included some compelling statistics, the report really didn’t come as much of a surprise. The handwriting has been on the wall. Millennial preferences have helped propel non-traditional players such as Quicken, Schwab, The ING Group, Capital One and others into the traditional deposit and lending markets that have long been the domain of brick-and-mortar banks.
What millennials want is no mystery.
Generally speaking, millennials are not much different than their parents in terms of making choices about their finances. They tend to exercise the values and practices instilled in them during their upbringing. In fact, research suggests they may actually be more financially attuned in some ways than previous generations. For example, the 15th Annual Transamerica Retirement Survey labeled millennial workers as an “emerging generation of retirement super savers.”
That said, millennials are much, much less accepting of “status quo”—for anything. That includes the products and services they use to manage their finances. Millennials are not afraid of change and willing to try new things and new technologies that offer convenience and allow them to interact with their bank when and how they choose. And they’re not hesitant to switch providers to get what they want; in the Millennial Disruption Index study, one in three said they were open to switching banks in the next 90 days.
If we’ve seen it coming, why aren’t banks reacting faster?
Despite the attention to millennials and recognition that they will soon be the country’s most influential generational segment in terms of purchasing power, banks generally have been slow to evolve their offerings to meet the demands of this segment. On the one hand, changing systems and processes can be expensive and time-consuming. Potentially more at play, though, may be a fear of alienating the rest of a bank’s customer base in order to win the hearts and business of one particular generation.
For banks today, the challenge is creating front-end platforms that engage millennials while effectively serving all of their customer segments—and introducing those new platforms faster than they have done in the past.
Biometrics provide a visible starting point.
One place to start is security, a hot button today for banking customers of all ages. This is particularly true as more customers use online and mobile channels, but it is also relevant to transactions through ATM and in-branch channels. There is more to the business case than potential fraud loss reductions: the unseen benefit could be the wow factor that appeals to millennials.
While current PIN/password security methods have been in place for 20+ years, newer and safer technologies have emerged for protecting financial information and transactions. And biometric authentication in particular goes beyond providing a more secure front-end for banking interactions. It also provides a very visible entrée to the point of contact, one that appeals to the millennial’s desire for convenience and advanced security capabilities. The industry’s larger players are responding.
- Mobile banking – Increasingly, mobile banking apps allow the option of biometric authentication for users who prefer it. Bank of America introduced mobile fingerprint and Touch ID sign-in last September. USAA mobile app users can now select to use either traditional PIN authentication or fingerprint, face, or voice biometrics to log in. Wells Fargo has been testing biometric authentication technology that scans the veins in smartphone users’ eyes to verify their identity.
- ATMs – Banks outside the United States have employed biometric technology at ATMs for nearly a decade. While U.S. banks have been slower to explore this technology, industry leaders such as Citigroup may be looking to change that.
- Branch services – In 2015, Barclays Bank in the United Kingdom introduced the Barclays Biometric Reader, which scans vein patterns in the finger, allowing corporate customers to access accounts and authorize transactions.
Banks need to reconsider their investment thesis in evolving technologies. While not a substitute for a true omni-channel experience and robust mobile banking capabilities, adoption of biometric technologies is one tangible step that can be symbolic of a bank’s ability to change—and set the tone for continued transformation. Banking products are seen as commodities by many millennials. The bank that wins will be the one that gives this large emerging group of customers both the products they need and coolest technology.
Level the playing field.
While the large banks have led the path to more contemporary technology capabilities, most have still not completely solved the omni-channel challenge. Even so, their recent progress is pushing banks of all sizes to accelerate their own transformation. Rather than waiting for traditional core system providers to develop relevant applications, this may be the time to consider jumping into the Fintech surge by investing in development of new financial technology or providing an “incubator” for such innovation. It could be the faster and easier path to introducing changes that level the playing field in the eyes of millennials.
Ken Siegman is a senior director in West Monroe Partners’ Banking practice and leads the firm’s Los Angeles office. He has 35 years of experience guiding business solutions for companies in the financial services, both as an industry executive and as a management consultant. Email: firstname.lastname@example.org.