When it comes to crafting financial services, one approach won’t do it all. Success is all in the tailoring.
From overall banking preferences down to credit card programs, Millennials (25-34), Gen Xers (35-49), Baby Boomers (50-64), and Retirees (65+) can feel very differently about how they bank and interact with their financial institution.
Our team at Vantiv partnered with Socratic Technologies to find out whether banking preferences vary across generations, and—more importantly—what financial institutions can do to improve customer satisfaction and loyalty. Over 1,000 consumers between the ages of 25-65 were surveyed on the importance of reward programs, fraud protection benefits, investment advice, and credit card products.
Unsurprisingly, what matters most to Millennials isn’t exactly a deal-breaker for Baby Boomers and Retirees. But with all of their differences comes an interesting similarity as it pertains to mobile banking apps.
What do you think consumers want most from their mobile banking apps? Account notifications? The ability to deposit a check? Making a payment? Any of those guesses would be wrong. Rather, we found that 48% of all consumers surveyed said that the ability to turn their card accounts on/off is the most valuable feature of mobile banking apps.
But, for now, it’s back to the differences. Below, we detail generational differences from the survey and discuss how banks can best understand—and meet the needs of— consumers with different banking preferences.
Millennials: “Reward Seekers”
For millennials, it’s not just about the dollars they spend, but the dollars they get rewarded in return.
In fact, millennials participate in cash back reward programs more than any other generation. Our survey revealed that over 60% of millennial consumers participate in cashback rewards programs and 38% use card accounts instead of cash simply because of debit and credit card rewards programs.
And, if you thought millennials used cards instead of cash for only larger purchases, you’d be wrong.
A recent survey finding from CreditCards.com, which polled U.S. credit card holders, discovered that 64% of millennials use a debit or credit card when making small purchases, and that 18-29 year olds are the only demographic polled that prefers cards to cash for purchases under $5.
Millennials were the least inclined demographic to show brand loyalty towards an institution, with a staggering 42% of consumers saying they would switch financial institutions simply for convenience.
To improve millennial customer satisfaction and increase brand loyalty, a robust rewards program is the way to their hearts.
Gen Xers: “Security Advocates”
It turns out that a consumers’ priorities change as they grow older. And, while Gen Xers are still very fond of plastic cards, they, unlike a majority of millennials, have accumulated some wealth and are now concerned with protecting it. This is compounded by the fact that over one-third (37%) of respondents were skeptical of financial institutions post-crisis. In fact, Gen Xers were the most skeptical generation about financial services, post-crisis.
Compared to other generations, Gen Xers feel most strongly about the need for credit cards to offer security features and fraud protection benefits.
EMV-enabled credit and debit cards have helped. But while the transition to EMV has reduced fraud at point-of-sale terminals, the industry now expects to see a rise in card-not-present (CNP) fraud.
For banks, this means implementing additional fraud protection parameters and adjusting security strategies as fraud continues to evolve to meet the complexities of new payments methods.
In addition to highly valuing security, 50% of Gen Xers surveyed also stated that they are willing to seek investment advice from their financial institution. Given their accumulated wealth, Gen Xers want to make the most out of it. And if investing their wealth is the path a financial institution says a Gen Xer should follow, then the demographic is all ears.
Baby Boomers: “Cost Savers”
For Baby Boomers, the dream of retirement—or the terror, depending on their savings—inches closer every day. That retirement home or golf membership isn’t going to pay for itself, and Boomers are looking for any opportunity to save.
Whether using a primary card or opening a new card account, Baby Boomers overwhelmingly seek out credit cards with low or no annual fees. In fact, according to our survey findings, it was the number one feature they consider when making the decision. (Though these consumers also use cashback programs heavily, with the 60% of this generation doing so coming in just behind millennials.)
Our read: If financial institutions provided fewer rewards to Boomers, and instead, allocated that money towards decreasing their annual fee, they could improve boomer customer satisfaction and increase their own gross profit margins.
The clock is ticking. With millennials expected to surpass boomers in spending power by 2018, now is the time for financial institutions to address critical service gaps and cash in on this lucrative demographic.
Retirees: “Brand Loyalists”
Last, but certainly not least, we get to the retirees. At this point in their lives, it looks like they’re sticking with their current financial institution and want their banking experience to be as easy as possible.
Our survey findings confirm this to be true, with only 20% of retirees saying that they would change financial institutions for convenience. That rate proved to be the lowest of all the age groups surveyed. Retirees are brand loyal and the least skeptical group concerning financial institutions. Only 24% said that they no longer trust financial institutions.
In addition, retirees proved to be the least likely (a mere 29%) to seek investment advice from their financial institution. Retirees believe they know how to manage their money. It’s up to banks to make it easy for them to control. By contrast, 50% of millennials and 50% of Gen Xers would take such advice.
In order to improve customer satisfaction and brand loyalty across generations, banks need to focus on what each generation values from their banking experience. Whether its reward programs, security, savings, or ease of use, financial institutions have the tools at hand to make it happen.
About the author
Mick Oppy, vice-president of financial institution products at Vantiv. The company, based in Cincinnati, provides payments processing and other technology to merchants and financial institutions.