Banking on the Millennial Experience

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October | 2014

Banking on the Millennial Experience (MX) Creating the right emotional connection for Millennials

Research Paper

!Think Blink

At Shikatani Lacroix, we design compelling at-purchase

moments that connect in the blink of an eye. Our philosophy

and strategic design approach, Think Blink, is driven by a

consumer’s motivation to make a purchase decision. Everything

we do is geared to owning the “at-purchase” moment. Our firm

has a well-earned reputation for designing integrated brand

experiences that effectively connect brands with consumers to

drive measurable results for clients. !About the author Jean-Pierre Lacroix, R.G.D., President and Founder of

Shikatani Lacroix

Jean-Pierre (JP) Lacroix provides leadership and direction to his

firm, which was founded in 1990. He has spent the last 30 years

helping organizations better connect their brands with consumers

in ways that impact the overall performance of their business. In

1990, Mr. Lacroix was the first to coin and trademark the statement

“The Blink Factor”, which today is a cornerstone principle of how

brands succeed in the marketplace. JP has authored several

papers, has been quoted in numerous branding and design articles,

and in 2001 he co-authored the book “The Business of Graphic

Design” which has sold over 10,000 copies. JP can be reached at

[email protected] and you can follow his thought leadership

webinars at: www.sldesignlounge.com. !Other Articles and Book Organizational brand coherence, 2013

Design visualization, 2013

Beyond the middle: Creating value for private label brands, 2012

Retail trends in banking, 2012

Packaging in an online world, 2011

Belonging Experiences: Designing Engaged Brands, 2010

| Banking on the MX Experience | October, 20142

mailto:[email protected]

http://www.sldesignlounge.com

Understanding Millennials !Millennials are entering an important life stage for banks, as this

segment of the population is starting to build wealth while driving

potential sales growth in financial products and services. This

segment tends to use more primary banking products than Baby

Boomers and carry a higher minimum balance in their checking

accounts. An additional reason for the increased focus on this

segment is based on the rapid growth in size versus other cohorts

such as Baby Boomers. This study will translate the many research

documents into an ideal Milennial Experience (MX) for the

banking industry through our Omni Experience Model and will

help define the role of physical branches versus online. !The Millennial population is now 7% larger than their Boomer

predecessors, with more than 79 million consumers versus

Boomers at 76 million. Although by 2030, the Millennial the

population will have declined slightly to 78 million, it will have

distanced itself quite significantly from the declining Boomer

generation, with an estimated 56 million consumers by that date.

The Millennial generation are the first cohort where social media

and online technologies form an integral part of how they interact

with society and friends, from the wisdom of communities,

crowdsourcing, and the DIY culture. Millennials also see

themselves at the centre of self-created digital networks through

the use of selfies, blogs and sharing their everyday life online, with

55% indicating they have posted a “selfie” on a social media site

(Pew Research 2014). !For the banking industry, based on a FICO 2014 study, this

segment will be less loyal to their primary banks than previous

generations and are 50% more likely to close all accounts with

their primary bank than their older cohorts, providing a significant

level of volatility in the marketplace. The key drivers for Millennials

to switch are based on the perceived high fees, ATM issues and

negative experiences as they relate to conflict resolutions, many

of which are resolved in physical branches. !


Introduction

!!The Millennial Generation !Born: After 1980 !Age of adults in 2014: 18 to 33* !Share of adult population: 27% Share non-Hispanic white: 57% !Ind 50%; Dem 27%; Rep 17% !Generation X !Born: 1965 to 1980 !Age in 2014: 34 to 49 !Share of adult population: 27% Share non-Hispanic white: 61% !Ind 39%; Dem 32%; Rep 21% !The Baby Boom Generation !Born: 1946 to 1964 Age in 2014: 50 to 68 Share of adult population: 32% Share non-Hispanic white: 72% !Ind 37%; Dem 32%; Rep 25% !The Silent Generation !Born: 1928 to 1945 !Age in 2014: 69 to 86 !Share of adult population: 12% Share non-Hispanic white: 79% !Dem 34%; Ind 32%; Rep 29% !!March 2013 Current Population Survey (IPUMS) and Pew Research surveys, January and February 2014 !

The study clearly identifies that more than 68% of Millennials have

a national bank for their primary financial institution, followed by

credit unions at 15% and regional banks at 9%. This is supported

by a J.D. Powers 2014 banking tracking study which identified Gen

Y and Gen X Affluent and Emerging Affluent cohorts experience

significantly more pricing and fee-related problems driving the

highest incidence of bank switching within all banking cohorts to

more than 45%. Although the study identified banks continue to

improve in minimizing problems down to 14% from 26% for the big

banks, this remains a major issue driving the switching behaviour

of Millennials. !!Statistics on Millennials

In addition to demonstrating significant differences in how they

choose to stay connected, Millennials will challenge banks as they

demonstrate quite different values and behaviour from their

predecessors, based on the recent blog “74 Of The Most

Interesting Facts About The Millennial Generation” by Dan

Schawbel and a more recent Pew Research Center 2014 study,

namely:

• Just 26% of this generation is married. When they were the age that Millennials are now, 36% of Generation X, 48% of Baby Boomers and 65% of the members of the Silent Generation were married. (U.S. Census)

• 89% of Millennials would prefer to choose when and where they work rather than being placed in a 9-to-5 position. [Odesk]

• Average tenure for Millennials is 2 years, compared to 5 years for Gen X and 7 years for Baby Boomers. [Pay Scale / Millennial Branding]

• The average member of Gen Y carries $45,000 in debt.

• By next year, Millennials will account for 36% of the U.S. workforce and by 2025, they will account for 75% of the global workplace. [U.S. Bureau of Labor Statistics / The Business and Professional Women's Foundation]

• By 2015, their annual spending is expected to be $2.45 trillion and by 2018, they will eclipse Boomers in spending power at $3.39 trillion. [Oracle] !


“The Millennial generation is forging a distinctive path into adulthood. Now ranging in age from 18 to 33, they are relatively unattached to organized politics and religion, linked by social media, burdened by debt, distrustful of people, in no rush to marry— and optimistic about the future. ” !-PewResearch Center Study, March 2014

A three-year study from Scratch (Millennial Disruption Index), an

in-house unit of Viacom further supports the FICOM and JP

Powers studies on the impact Millennials will have on banking,

namely:

• 53% don’t think their bank offers anything different than other

banks

• 1 in 3 say they are switching banks in the next 90 days

• 71% would rather go to the dentist than listen to what their

banks are saying

• 33% believe they won’t need a bank at all in the future

• Nearly half are looking for tech start-ups to overhaul banking

• 73% would be more excited about a new offering from Google,

Amazon, Apple, Paypal or Square than from their own bank !!Leveraging the ideal Millennial Experience Model (MX) !The key questions for banks is how will this impact their

conventional bricks and mortar channel of distribution and where

best to create an ideal Millennial Experience (MX). To help put

into context all of the available information on Millennials on

how this impacts building a stronger banking experience, we

have leveraged our unique Omni Experience Model. This will

effectively align how Millennial needs and priorities match

those of a financial institution as part of a coherent and

integrated Millennial Experience (MX). !To provide financial institutions with a link between the wide

range of statistics and potential actionable foresight, we have

based our analysis around how consumers build affinity with

brands based on 35 years of mapping and managing

transformational experience for both financial institutions and

retailers.


“Banking is widely viewed as simply a transactional activity, but people are seeking advice and relationships that improve their financial well-being.” !- Robert Mulhall, Managing Director,

Accenture Distribution and Marketing

Services

Creating Meaningful MX Alignment !!!

!!!!!An ideal MX must align with both Millennial needs and

priorities with those of the financial institution in order to

deliver an ideal omni experience that will be sustainable and

meet the needs of both banks and consumers. As noted in the

above diagram, the model takes into account both needs and

priorities, namely: !• Millennial Needs: The key drivers of the category, leveraging

the ideal Millennial path to purchase and buying needs. For

Millennials, although the online experience is critical for how

they want to interact with banks, 26% prefer mobile apps,

compared to 12% for Gen X and 3% for Boomers. However,

Millenials still prefer to use a bank’s website over mobile

apps. The FICO study also identified that although access for a

mobile app for banking was very important, only 21% were

aware that their current bank offered a mobile platform,

providing an opportunity for banks to better promote their

online and app platforms. !


Customer needs

Customer priorities

Company needs

Company prioritiesCompany position and identity

Company context and environment

Customer brand

experience factors

Company brand

experience factors

Branded'Experience'matches'customer'hidden'needs Branded'Experience'matches'company'growth'needs

Branded'engagement'and'support'matches'brand'valueCustomer'brand'engagement'supports'desired'behavior

Experience

• Mobile app usage clearly translates into loyalty for

Millennials. Banks should build and enhance mobile

application functionality and learn how to effectively

communicate that functionality to users. Physical branches,

although declining in value, still remain an important factor in

building relationships. Based on a recent TD Bank study,

Millennials reported that they are still visiting bank branches

as frequently as they did last year, mostly to deposit or

withdraw money. Those who do their banking in a branch

feel it is more secure and enjoy the in-person service. The various studies identify the following needs that help

build an ideal MX, namely:

• Receive real-time analytics of their spending, including

safe-to-spend forecasts

• Receive recommendations on products or services that

they might need

• Seamless experience across channels and platforms

• Able to bank on their time

• Gain advice as they do not feel financial prepared

• Willing to trade financial return for greater social impact

• Desire to connect and contribute to their community

• Transparency and authenticity

• Instant issue debit cards and prepaid cards !• Millennial Priorities: Millennial priorities are the key

foundation for creating a strong brand experience and reflect

the emotive and cognitive unmet need states of this

segment. Since this segment is paying off education loans

and starting to earn wages, their priorities around banks are

therefore centred on:

• A seamless and simpler access to their accounts, bill pay,

e-statements and person to person money transfers,

while eliminating reliance on paper transactions

• Personal, proactive and personalized advise on

budgeting and setting financial goals

• The ability to bank with a financial institution that reflects

their self-image and values in the community

• Positive banking experience with lower fee cost! | Banking on the MX Experience | October, 20147

"Millennials need to feel empowered to reach out to their bank and have their questions answered so they become more confident about their financial futures.” !- Nandita Bakhshi, Executive Vice President, Retail Distribution and Product, TD Bank

• MX Factors: Identifies the ideal Millennial branded experience

which builds on their priorities and needs. The factors consist

of a set of specific criteria to ensure the overall brand

experience meets the expectations and needs of customers.

For Millennials, the MX factor can be summed up in the

following statement:!Seamless and coherent personal experience where they have access on their terms for timely advice and proactive services that reflect their values and lifestyle needs.!!

• Financial Institution Needs: On the opposite side of the

experience model, it’s necessary to identify the needs of

banks or brand in order for it to prosper and grow in the

marketplace. For the purpose of our research, we have

identified needs that align with some of the challenges of the

industry, namely:

• Increase relevancy amongst Millennials of both banks and their branch network

• Identify efficiencies which would drive lower margin and cost services to online experiences while incurring higher customer engagement

• Overcome negative perceptions of financial institutions

• Provide a cost effective approach to delivering personalized services

• Improve conflict resolution scores as this is one of the key drivers for brand switching !

!!!!


• Financial Institution Priorities: Priorities, or strategic

imperatives, are the critical strategies to overcome the

challenges and capitalize on the opportunities. For the

banking industry to drive growth amongst Millennial cohorts,

the priorities would consist of the following:

• Adapt the current delivery system and channel strategy

to appeal to Millennials (ATM, Mobile, Online, Branches)

• Provide more transparency and authenticity (greater

disclosure of loan terms and community involvement)

• Create efficiencies within the system while driving 1:1

interactions to drive higher margin transactions and sales

• Position banks as the trusted and reliable platform to

access funds and investments!

• Company Brand Experience Factors: Similar to the customer

side of the equation, these factors identify the criteria

required for the brand experience to succeed from an

organizational and company perspective. The MX needs to

match the company growth requirements while also

matching the engagement to the organizational brand value. For the Millennials, the bank’s brand experience factors can

be summed up in the following: !Seamless and coherent efficient experience where the bank derives the greatest amount of affinity and revenue from Millennials, while creating significant differentiation from other FIs and disruptive financial offerings!

• Ideal MX: The alignment of the company and Millennial brand

experience is created through joining the factors for the

given cohort and the company branded experiences. These

experiences are filtered through a lens which leverages a

company’s context, environment, position and identity.

Ultimately, the ideal omni experience identifies the value the

physical experience delivers to both the consumer and the

organization.


For the purpose of our model, we have grouped the banking

industry as a combined identity, understanding that national,

regional, and community banks would have different

business and branding dynamics. In order to make the value

proposition actionable, tactics are grouped around our three

levers of engagement: message, structure and process.!Message: Overall, the ideal MX platform will need to speak to

the specific needs of Millennials to minimize switching and

increase brand advocacy, namely:!• Understand that although Millennials have been

categorized as one group, they represent two distinct

segments, namely: those between the ages of 18 to 24

who are starting out; and those that are 25 to 34 who are

starting a career, a family and building equity

• Mirror their aspirational needs to contribute to society

and their community

• Share their values in being empowered and

knowledgeable to make the right decisions

• Messaging needs to reinforce transparency with all costs

clearly identified

• Personal customer interaction and attention, specifically

to fee waivers, overdrafts and authorization

• Proactive analytics to avoid potential conflict issues such

as authorizations and overdrafts

• Coherent and seamless across the various online, mobile

and physical platforms, while leveraging offers and

messages that appeal to their specific needs

• Provide insights and knowledge to allow Millennials to

feel confident in their financial decisions

• Communicate more effectively on mobile app capabilities

!


Structure: Creating an inclusive community experience that

supports their priorities for feeling confident in their decisions,

while receiving personalized services as part of offline and

online channels.

• Marketing needs to fully leverage social media, television

ads and word-of-mouth recommendations as these are

preferred communication channels

• Develop an integrated and easy to use mobile (including

texting) and online banking experience

• Target key offerings and services around life events such

as changing jobs, getting married, moving, buying a

home or car, or starting a small business

• Create more intimate and convenient branch experiences

that provide access to the latest in technology and more

personal/private banking experiences

• Locate branches within Millennials’ communities,

primarily urban in focus

• Multi-tier channel strategy with a greater number of

easily accessible self-serve ATMs, video ATMS and drive-

thru, in addition to smaller, more convenient branches

!Process: Creating a seamless and coherent experience that

allows for a tiered level of engagement and convenient access

to knowledge.

• Increase branch service, specifically reducing wait times

to 4 minutes or less and being offered additional

assistance

• Provide a higher degree of personalized service, such as

being greeted and recognized upon entering, knowing

the customer by name and being thanked for banking

• Paperless and digital banking transaction experience to

reduce the number of required visits to a branch for loan

approvals, opening new accounts and bill payment

• Stronger use of Universal Bankers to manage all parts of

the Millennial financial requirements


• A higher degree of privacy throughout the branch

experience

• Proactive and analytically-based approval systems that

speeds up service while reducing the complexity of

opening an account and loan and credit card approvals

• Stronger service system and culture for conflict

resolutions

!Conclusion Millennials provide banks with a continued growth opportunity

as this cohort tend to use primary banking products more than

Boomers and carry a higher minimum balance in their checking

accounts. They also tend to become advocates for institutions

that treat them with respect and understand their needs in

reducing their financial stress and confusion. This segment is also

open to allowing banks to migrate lower margin transactions to

mobile and online platforms and value physical branches as a

place to build relationships and resolve issues. Creating an

ultimate MX coherent strategy will allow banks to build a strong

affinity with the future wealth generators who will easily

outnumber the current Boomer generation over time.


Banking on the Millennial Experience

Design

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