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What you must know about millennials

Financial know-how slim now, but they will be key consumer and business credit market

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What you must know about millennials

A torch is being passed, yet there is little fanfare accompanying this momentous occasion.

The millennial generation has, for the first time, surpassed Generation X and the baby boomers as the most populous living generation.

In 2015 the number of millennials finally outpaced baby boomers, according to Pew Research Center.1 For bankers, pressing questions include:

• How will this generational changing of the guard impact consumer behavior?

• What can be done to earn the loyalty of millennial customers and prospects?

• And what about millennial company owners’ attitudes towards business credit, a key market for many community banks?

In order to win the hearts, minds, and wallets of this growing population segment, lenders need to gain a deeper understanding of what makes millennials tick; what drives their financial decisions; and how they view themselves in the world of commerce.

What makes millennials different?

It’s important to keep in mind that a large portion of millennials, who currently range in age from 18 to 34, are still establishing their career and financial paths.

Earning the trust of millennials is by no means a simple task, particularly in light of their unique perspective. This generation has come of age during a time of social and economic turmoil. Having grown up with everything from terrorist attacks, a global recession, crushing student debt, and high unemployment, millennials have vastly different views from their counterparts in Gen X and the baby boom generation.

In addition, the explosive advancement of personal technology and social connectivity has changed the way this generation expects to interact with businesses, utilize credit, and make financial decisions. For example, a recent Experian consumer survey found that millennials tend to embrace technology, are quick to try new offerings, and will rapidly abandon loyalty for better products and services. 2

It is not uncommon to hear bankers at conferences scoff that “millennials are broke.” But as this generation becomes the primary driver of the economy, lenders will be well-served to invest resources to build long-term relationships with this diverse, well-connected generation.

Slow start on financial journey

Largely because of the weak job market over the past decade, many millennials have had a slow start to their financial journey compared with preceding generations.

Many have continued to live with their families well into their 20s and seemingly are in no rush to start families of their own. During this time, many have tended to be less engaged in financial matters. While many older millennials are making inroads toward achieving greater financial health, the younger members of this generation still have a long way to go.

Young millennials may have lower levels of debt, but they typically also have lower levels of savings and are relatively unaware of their household’s financial situation.

One might assume this group is less engaged because another household member is making financial decisions, which means they have yet to take responsibility for their own financial well-being. Supporting this, in fact, is Experian’s finding that only 38% of younger millennials indicate that they are a primary financial decision maker.

To come up with a winning strategy for building trust and establishing lasting relationships, lenders need to understand where millennials are on their personal financial journey.

Book-smart, credit-challenged

Millennials as a whole tend to be well-educated. A Pew Research Center study from 2010 estimated that 54% of this generation has at least some college education, making it the most educated generation in history.3

This may explain why millennials tend to be independent thinkers who enjoy bucking the established trends of other generations. Instead of being eager to secure credit, they have delayed accessing credit longer than their Gen X and boomer counterparts. For example, fewer millennials are opening bankcard accounts—only 27% have recently opened accounts, compared with 46% of their Gen X counterparts at the same age.4

Broadly speaking, millennials may be book-smart, but they tend to be credit-challenged—and yet they often don’t appear to know it.

A recent survey by Experian found that 71% of millennials consider themselves to be knowledgeable about their credit, while in truth their perception is far from accurate.5 For example, they estimate that their generation’s average credit score is 654—it actually is much lower at 625.

Millennials also miss the mark when estimating their generation’s average debt, believing it to be $26,600, when it actually is nearly double at $52,200. Two reasons for this gap between perception and reality: Millennials rarely check their credit reports, and one in three don’t know their credit score.

While millennials as a whole have kept their debt exposure lower than other generations, they also have the lowest credit scores and the least understanding of their credit. This translates into a generation that is less engaged and has a diminished ability to obtain higher-priced consumer items—a fact of particular concern to many industries, such as automotive and real estate.

Driven to be entrepreneurs

Not surprisingly, millennials view employment differently from other generations.

For example, 57% of millennials feel that their work is more than “just a job.”6 While money is important, they’re motivated to be a part of something bigger than themselves that will have a positive impact on their local communities or even the world.

Forbes magazine reported the results of a 2014 survey by Bentley University indicating that unlike past generations, who sought the prestige of moving up the corporate ladder, millennials can be considered the “True Entrepreneur Generation.”7 Experian research reinforces this finding, revealing that 67% of millennials have the goal of starting their own business.

In looking at the credit and payment behavior of millennial small-business owners, Experian has found that despite having the lowest commercial and consumer credit scores among the generations, millennial small-business owners are the most credit-active generation.

Since length of credit history is a major contributor to a positive credit profile, it’s not surprising that millennials have the lowest commercial and consumer credit scores. But look to the long term.

There is every reason to believe that members of this generation will continue to strengthen their credit scores over time, making them a vital and active business force in the marketplace. Becoming a trusted partner to millennials inevitably will open doors to tremendous future possibilities for banks looking to tap into the growth of these small-business entrepreneurs.

Taking long-term approach with millennials

Millennials undoubtedly have had their fair share of challenges when it comes to personal finances, but an Experian study found that 71% of this generation remains confident about their financial future.8 In the next decade or so, millennials will begin starting families, buying homes and, for many, chasing their entrepreneurial dreams.

In order to tap into this emerging demographic base, lenders need to take a long-term approach that focuses on developing trust and creating brand preference with this crucial market. Working closely with millennials will create new opportunities for banks.


1 Richard Fry, “This Year, Millennials Will Overtake Baby Boomers,” Pew Research Center, January 2015

2 Millennials and Credit: Survey results, Experian, November 2015

3Millennials: A Portrait Of Generation Next,” Pew Research Center, 2010

4Millennials Have The Lowest Credit Scores Of All Generations,” Experian, July 2015

5Experian Survey: “Millennials Are Behind in Credit Knowledge but Progressive in Using Technology to Manage Finances,” Nov. 2015

6 Experian Marketing Services: Millennial Financial Outlook, 2014

7 Rob Asghar, “Study: Millennials Are The True Entrepreneur Generation,” Forbes: Leadership Blog, Nov. 2014

8 Millennials and Credit: Survey results, Experian, Nov. 2015

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