By Jessica SchauerWith more interactions taking place digitally, it is possible to go beyond historic market segmentation models based on simple demographic data, such as age and household income, to gain greater insights into today’s consumers. A thorough understanding of consumers across generations can position banks to achieve short and long-term revenue goals while enhancing customer engagement.
In the U.S., boomers now control 50 percent of the wealth. Helping them spend, save and manage their money as they approach retirement can be a top priority for banks. Millennials, on the other hand, hold only 4 percent of the country’s wealth, and their current financial needs are more limited, especially now. But millennials remain an appealing future growth segment, particularly as they begin to inherit wealth from previous generations.
So what should banks do? Ignoring millennials isn’t an option. Although they have been hit hard by the pandemic, they will accumulate assets and inherit wealth. It is equally important to not miss out on the immediate growth opportunities that boomers offer as they plan for retirement.
To build engagement and serve the evolving needs of both segments, especially amid current economic uncertainty, successful strategies include adopting transformative digital technologies and tailoring financial products and channels capabilities to both generations.
Digital as the everyday banking channel
Fintechs and financial providers are focusing new technologies and accelerating digital transformation strategies during COVID-19. Millennials may be more open to those options, but digital banking services appeal to boomers, too. Even before the pandemic, almost half (49 percent) of boomers preferred online and mobile options to interact with their primary financial institution, according to a 2020 consumer trends survey from Fiserv conducted by the Harris Poll.
The survey found that boomers have more online banking logins via a desktop or laptop per month (9.6) than millennials (7.3). But millennials prefer mobile, logging in to their bank’s site via mobile 13.7 times per month, compared to 11.6 mobile logins for boomers.
By deploying strong identity theft protection and account security controls, banks can help assure older consumers their personal and financial information is protected.
Tech-savvy boomers lead complex financial Lives
Boomers now comprise approximately 82 million consumers. Many face the need to accelerate retirement savings, manage finances for children and aging parents, pay off debt before retirement and keep an eye on 401(k) balances and protecting and controlling their accumulated wealth.
The American Bankers Association estimates that offering boomers new products and services could generate as much as $82 billion in additional deposits and $443 billion in additional investable assets. And, according to Javelin research, this generation wants and needs the following from their digital banking application:
- Automated and tracked savings that accumulate thousands of dollars versus a few cents
- Tools to help manage financial matters for elderly parents and children, including alerts and notifications
- Visibility to all bills paid, including automatic credit and debit card withdrawals
- Person-to-person payments with the ability to include notes explaining the payments
- Solutions to easily track and understand investment progress
- Comprehensive views of aggregated net worth and financial fitness scores
What millennials want from banks
Millennials represent approximately 76 million consumers. As a group, they’re slightly less likely to be highly satisfied with their primary financial institution and slightly more likely to have changed their primary bank or credit union in the past 12 months, according to the 2019 Expectations and Experiences: Household Finances consumer trends survey from Fiserv. And, as stated in the Javelin report cited above, millennials are serious about their financial health and expect their banks to provide:
- Personal financial management tools
- Savings tools that allow them to set and automatically reach goals
- Rewards (83 percent of millennials would switch their financial institution for better rewards)
- Person-to-person payments
Millennials and boomers are both growth markets
Both generations remain large market segments for growth, and both are clamoring for more personal content, financial advice and tools. As banks construct digital strategies, the challenge is to leverage limited resources to digitally acquire, engage and serve both market segments for short- and long-term growth with essential digital banking capabilities.
When segmenting customers, a balance between demographics, digital sophistication and financial acumen is critical. Each generation has its own digital banking preferences and peculiarities. It’s important to remember that age doesn’t always equate to digital savviness—and digital savviness doesn’t always equate to financial expertise.
Jessica Schauer is marketing strategist and director of marketing, digital channels at Fiserv.