Why Millennials prefer banking with non-financial brands

Carly Olsten doesn’t have a natural affinity for traditional banks. The 23-year-old digital strategist was taught while growing up in small-town Massachusetts to be “savvy and skeptical” of big financial institutions by her parents, who favored the personalized service they got from their local credit union.

Now, Olsten believes that traditional banks are “tired and slow,” and don’t offer convenient hours of operation. “If I’m being totally honest, they’re usually staffed with older people that I have a hard time relating to,” she says.

Meanwhile, Clara Suggett, a 23-year-old student and ski instructor in British Columbia, Canada, admits that, although there’s “something solid” about traditional banks, she and others her age are more likely to trust a tech company. “I think it’s because we have so much interaction with them [on the day-to-day],” she says. “A positive about big tech companies is that they simplify their language. I guess a bank could recruit me as a customer by putting the banking jargon into more recognized terms,” says Suggett.

Olsten’s and Suggett’s perspectives on traditional banks and fast-growing tech companies aren’t unique. A report from Scratch, a creative-consulting team operating within media company Viacom, revealed that 71 percent of Millennial consumers would rather go to the dentist than listen to a message from a bank.

For traditional banks that’s a sobering thought, made even more unsettling by another data point from the study: A full three-quarters of Millennials would rather get their financial services from a tech company like Amazon, PayPal or Google.

Banking with tech companies is an increasingly viable option for consumers of all kinds. PayPal has already revolutionized the way we pay for goods and services, and industry analysts have predicted that Amazon is “the tech giant most likely to become a dominant player” in the emerging financial technology (fintech) space. So where does that leave banks and other financial firms hoping to connect with the coveted Millennial audience?

Gaining a generation’s trust

According to Mike Brown, an analyst with student loan marketplace LendEDU, history is to blame for Millennials’ widespread wariness of banks. “It’s all rooted in the financial crisis of 2007 and 2008. For younger Millennials who were growing up during that time, it left a bad taste in their mouths.”

As Olsten notes, tech companies have a lot of appeal. “Customer service is better at technology companies because they’re younger, faster, more competitive and willing to do anything to serve me — including (providing) around-the-clock service,” she says.

In order to gain this generation’s trust, traditional financial services companies will have to go head-to-head with powerful opponents. PayPal and Amazon have become a part of the daily Millennial experience. By providing mobile solutions and services built around convenience, they make it easy for consumers to get the goods, content and customer service they need, all in one place.

The brand-name recognition is also worth a lot. For every Amazon, there are 20 banks and 200 fintechs, all competing for the same customers. It takes a truly fantastic product and exceptional customer service to gain traction with younger generations, which is why tech companies are a threat to banks. “The interests of these companies feels more win-win because they don’t place money as the goal at the forefront like a bank would. It’s more ‘let us serve you’ in my mind,” says Olsten.

The value of relevance

Connecting with Millennials requires at least an honest attempt at recognizing and embodying their values. Citibank has made inroads with the Gen Y audience by identifying what matters to them. Its parent company, Citigroup, offers Millennial employees the ability to take a year off work to volunteer — a perk that’s sure to change the way consumers view this massive, multinational company.

A report from consumer-engagement company Engagement Labs reveals that Citibank has earned the distinction of being one of the brands that Millennial men aged 25 to 39 talk about most, alongside Heineken, FOX Sports and Corona.

Citibank also regularly uses its Twitter account to invite consumers with questions or concerns to get in touch. Its customer service is visible and always-on. “Millennials are attracted to brands in the space where they live most — digital,” says Mario Natarelli, managing partner with MBLM, an agency that ranks brands based on emotional connections, or brand intimacy. “If you look at top brands overall for Millennials, they’re digital companies.”

In MBLM’s latest report about the financial services industry, PayPal ranked first, but was followed closely by Chase and Visa. That’s because Visa has a large percentage of “fusing customers” — consumers who feel deeply linked to the brand. Chase, meanwhile, had a strong intimacy quotient score overall, meaning it ranks highly in the percentage of users who have an intense brand relationship. But that sentiment isn’t necessarily standard across the banking industry.

Give customers what they want

While tech companies have, as Natarelli puts it, “leapfrogged” traditional business models, what really speaks to Millennials is the frictionless customer experience tech companies are adept at providing.

There’s no reason why traditional banks can’t strive for the same level of experience. In MBLM’s Brand Intimacy reports, “fulfillment” and “enhancement” are factors that impact satisfaction and loyalty. Fulfillment relates to delivering superior service and meeting customers’ expectations, while enhancement reflects how smart and capable a company is in the eyes of consumers. Both fintech and financial services firms can build both fulfillment and enhancement by offering on-demand customer service delivered seamlessly across multiple channels.

Another strategy is to follow in the footsteps of Google and, as Suggett puts it, “simplify.” Google’s customer service page makes use of icons and drop-down menus to pare down the process of reaching an agent. “I trust a system that can get the job done quickly the first time,” Olsten says.

In the end, pursuing a streamlined, authentic, omnichannel customer experience is the only way to reliably connect with Millennial consumers right now – and to build their loyalty into the future.