Generation Y: Why ‘Millenials’ are Worth a Second Look

By Stephen Nikitas

Financial institutions might be inclined to dismiss Generation Y.

After all, Gen Y – the demographic group also known as “Milennials” — boasts an unemployment rate of more than 13 percent and an average salary of $39,700. But while it may be currently struggling, Gen Y is still very optimistic about its financial future. Nearly 90 percent of Americans ages 18-34 believe they have enough money now or expect that they will in the future.

You should be optimistic, too.

According to Javelin Strategy and Research, Gen Y income will exceed that of Baby Boomers by 2015. By 2020, its income is projected to exceed that of both Baby Boomers and Gen X.That’s just seven years away.

By 2025, Gen Y’s combined income is expected to account for 46 percent of the nation’s income. Gen Y consumer spending is expected to grow to $1.4 trillion annually and represent 30 percent of total retail sales by 2020. So, while Gen Y might not have assets or a lot of spending power today, it will. And unless you go after this crowd now and get them firmly entrenched, you’ll miss a huge opportunity.

Tech-savvy? Yes, But Gen Y Prefers Branches for Account Opening

Gen Y doesn’t write a lot of checks, but it still needs tools to manage its money.

You might be very surprised to learn that, while it embraces online and mobile banking, Gen Y is more likely to open accounts in a branch. In a 2013 survey by Noverica, only 30 percent of consumers under age 30 said they expect to open their checking account at a bank or credit union website. Of the 30-39 age group, only 41 percent said they expected to open their accounts online.Furthermore, 58 percent of those under 30 said they wouldn’t even consider opening an account at a financial institution that didn’t have a branch nearby!

What this means is that you should actively target young consumers in and moving to your neighborhood to drive them into your branches. At this early stage in their financial lives, they are looking for information and tools to help them effectively manage their money. In addition to checks and deposit slips, they will welcome new account basics such as:

  • Interactive voice response and online account management tools;
  • Educational information on money management, investing, insurance and other services they might need; and
  • Instant-issue debit cards and ATMs for easy payments and fast access to their cash.

Debit cards and ATM machines make it easy for Gen Y to spend and, of course, increased card usage generates more interchange revenue for your institution.

Similar to the “Silent Generation,” Gen Y has experienced firsthand the pitfalls of a bad economy. Though they dream of better days ahead, Milennials are learning to live with less in the meantime. Aside from student loans, Gen Y typically doesn’t like to borrow. So, debit cards enable this highly debt-averse group to control spending.

Perhaps the desire to stretch their dollars and avoid debt fuels Milennials’ love for deals. They are coupon clippers and thrift store shoppers. If your Gen Y account holders won’t commit to a debit card, you might offer prepaid cards as an entry point to a relationship with your institution. One in six Gen Y customers choose prepaid cards as their preferred banking instruments, according to Javelin Strategy and Research, and 53 percent of Gen Y consumers say rewards would encourage their adoption and use of prepaid cards.

A prepaid card — with your name on it, of course — helps Milennials manage their expenditures while building credit histories. Offer to reward them for using your prepaid or debit card, and your Gen Y prospects might bite. Remember, Gen Y consumers are seeking assistance in managing their money, so giving them services that are convenient and meeting their short-term needs is likely to be appreciated.

Go With Gen Y to Next-Level Banking through Online Services

Once young account holders have come to the branch to open an account, use the technology they prefer to keep them connected to their assets and your institution.

Online and mobile banking, as well as online bill pay, are popular among Gen Y account holders, according to recent Bain & Company research:

  • People under age 35 comprise the largest group of mobile users, and people ages 25-35 are the heaviest mobile banking users;
  • In the U.S., 32 percent of customers surveyed in 2012 used their smartphones or tablets for some type of banking interaction during the previous three months; and
  • Customers with a higher frequency of mobile transactions are more likely to recommend their financial institution than low-frequency users.

Remote deposit capture (RDC) is one mobile banking service that is experiencing explosive growth, particularly in the Gen Y segment. According to Raddon Financial Group, 21 percent of all Gen Y households and 30 percent of higher-income (greater than $50,000 annually) Gen Y households use mobile deposit.

In addition, customers who used mobile remote deposit increased their monthly number of deposits by two percent. With these current usage trends, even a nominal “per deposit” fee could generate a significant amount of monthly income for your institution.

Pushing digital channels isn’t only a marketing must; it’s also a must for the bottom line.

The ABCs of Engaging Gen Y

So, knowing how Gen Y prefers to engage with financial institutions, how do you make it work to your advantage? Some simple ABCs might work for this group.

Appeal: As with all marketing, successfully appealing to the values of the target audience is the way to go. In other words, your target audience needs to know “what’s in it for me?”

We know that Gen Y values:

  • Attention:Inviting Millennials to your branch, where you educate them on financial basics and on the products and services they need, makes them feel welcomed and appreciated. After you have acquired a Gen Y account holder, it’s important to stay in touch and promote services that are beneficial to him or her. A careful outreach program, via the right channel at the right time with the right message, is absolutely imperative.
  • Convenience:Whether it’s a convenient debit or prepaid card, shared ATM network, free or low-cost online bill pay, mobile check deposits or other conveniences your institution offers, you must effectively promote them to Gen Y.
  • Technology:Gen Y is the most tech-savvy generation yet. Millennials expect to be able to do what they need to do when they want to do it, using the channel that’s most convenient at the moment. Let them know that you recognize their high-tech needs by offering multiple ways to stay connected to their accounts and your institution.

Banking Habits: Your goal with Gen Y should be to create the right banking habits, so that Gen Y account holders turn to you to meet their financial needs today and in the future. According to Javelin, the door is open. Only 38 percent of Millennials say they are “very satisfied” with their primary financial institution, versus 45 percent for all consumers.

Financial institutions have enormous opportunities with Gen Y. According to Javelin:

  • Only one out of every two Gen Y consumers has a credit card;
  • Only 20 percent of Gen Y has a mortgage; and
  • Only 11 percent of Gen Y has stock or investment funds.

Are these numbers so low because Gen Y doesn’t need these products? Perhaps. But they will!

At this point in their financial lives, Gen Y might be more driven by channel than by needs. But those needs will grow. And if you don’t have them on board, cross-selling credit cards, mortgages and other loans and financial products won’t happen. So, the key is to focus on promoting the right types of services in the early years of the Gen Y relationship.

Online and mobile banking and bill pay present the best opportunities and also keep your costs low. Then, as Gen Yers mature into their huge financial potential, they will already be in relationship with your institution and ready to hear about the products and services you can offer them at the next life stage.

Communication: From a cycle perspective, the cadence of a post-acquisition welcome — outreach at 30-day, 60-day, 90-day and 365-day intervals — is on target for Gen Y. The key is how to do it.

Incorporating multiple channels is a must: digital, email, texting, phone and direct mail are all complementary. According to Epsilon, “As consumer channel preference continues to evolve, marketers need to integrate the various sources consumers turn to when seeking brand and product information. Two to three channels are the most common way to communicate and build trust with a consumer.”

Even though Gen Y is a technology-centric crowd, more recent research from Epsilon tells us that direct mail is the most preferred channel for receipt of communications about financial services. According to Epsilon’s 2013 Channel Preference Study, 38 percent of U.S. consumers agree that direct mail is the preferred channel to receive financial services information.

“Interestingly, U.S. consumers report an emotional boost from receiving direct mail,” Epsilon says, “with 60 percent agreeing that they ‘enjoy checking the mailbox for postal mail.’”

In fact, direct mail is a very strong communication channel for Gen Y, with 92 percent of Millennials saying they choosing this medium when selecting a store. They also find an average of 75 percent of their mail valuable. And 73 percent say they have made a purchase using a coupon they received in the mail.Clearly, this group does read and respond to direct mail offers. So, you should definitely include direct mail in your media plan for Gen Y.

If you haven’t considered Gen Y in your growth plan, now is the time. This dynamic group has the potential to become the highest-earning generation to date. A few simple tips can earn you its business and its loyalty:

  • Pay attention to Gen Y and share its optimism regarding their financial future;
  • As they earn more, offer Millennials products and services at every lifecycle that will help them achieve their financial goals; and
  • Allow Millennials’ technology preferences to dictate the channels in which you will communicate and keep them connected to their assets.


Stephen Nikitas is a senior strategist at Harland Clarke. The company’s Acquisition Solution welcomes and engages new Gen Y account holders through a series of targeted, data-driven multichannel communications. To learn more, call 1.800.351.3843, email or visit

Strategic Link is the NWCUA’s wholly-owned service corporation, using the power of aggregation to provide the Association’s member credit unions with exclusive high-quality, competitively-priced products and discounted services. Contact Director of Strategic Partnerships Craig Reed today to find out how Strategic Link can help your credit union save money while meeting its goals in 2013 and beyond:

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