The prevailing preference of Gen Y consumers for digital channels and electronic everything has led to the assumption that this generation is among the easiest for a financial institution to serve. Just give them access to online banking and a decent mobile app and they will serve themselves, right?
Not exactly.
Gen Y consumers (ages 18-32) can be high maintenance when it comes to their financial management habits.
It's true that Gen Y consumers are avid users of digital banking services. According to the 2011 Fiserv Consumer Trends Survey, they rank online banking, debit cards and bank-based online bill payment as the top three most useful products for managing their finances.
However, this preference for digital services does not seem to limit their usage of physical channels like branches, ATMs and call centers. In fact, the survey showed Gen Y consumers are more likely to visit a branch, use an ATM, or call a call center than any other age segment. In addition, Gen Y consumers represent the highest percentage of high volume users - five or more uses a month - for each of these channels.
Despite their high-maintenance tendencies, Gen Y consumers cannot be ignored, as they are the future of financial services. By 2014, it is projected that 40 percent of financial transactions will be generated by a Gen Y household. And over the next 20 years, Gen Y consumers will be the primary purchasers of auto loans, first time mortgages and many other financial services.
There's no denying that Gen Y consumers represent a valuable customer segment, and there are several tactics financial institutions can employ to more effectively serve them. These tactics center on the concept of right-channeling - offering the right services through the right channels, in tandem with educating and encouraging customers to use the channel that will most effectively meet their needs.
In order to right-channel customers, the right mix of services must be in place in those channels. These include capabilities such as mobile banking, alerts and the ability to deliver real-time information across channels.
The 2011 Fiserv Consumer Trends survey showed that Gen Y consumers make up 50 percent of mobile banking users. In addition, 27 percent of Gen Y consumers reported owning a tablet device - more than any other generation - and many expressed an interest in using tablets for banking.
Gen Y consumers have grown up in the age of personalization - personalized playlists, personalized news feeds and personalized recommendations. So it is no surprise that Gen Y consumers expect personalization in financial services. Letting Gen Y consumers customize financial alerts not only gives them a sense of control, it gives a perception of personalized banking.
Across surveys and focus groups, consumers consistently express the desire for real time financial information. This is especially true among Gen Y consumers who often check their balances multiple times a day. The desire for transparency and control is very strong, and up-to-the-minute information across channels meets this need. Inefficiency is a source of frustration for these consumers and an opportunity for non-financial institution competitors. Gen Y consumers expect timely information, and winning their wallets will eventually require it.
Customers who are not aware of available services won't use them, so education is a key component of right-channeling. This customer education often begins with staff education. As noted earlier, survey results revealed that Gen Y consumers are actually more likely to call into call centers than other generations. Some of these calls are for issue resolution, but most are actually balance inquiry calls that could be replaced by an effective mobile banking or alerting service. If the customer service staff members are aware of their financial institution's offerings across channels, they can easily steer customers calling about their balance to the more efficient and cost-effective mobile channel. Knowledgeable staff can result in more knowledgeable customers -a win for the financial institution and the customer.
In a similar fashion, customers arriving at the branch to deposit checks can be made aware of remote deposit capture capabilities, or even the fact that they can deposit checks at an ATM. Financial institutions shouldn't just assume that Gen Y customers know about these options. The best practice is to tell them.
Perhaps more effectively than any other generation, Gen Y uses its resources to obtain recommendations. According to a 2011 survey conducted in conjunction with a Fiserv client, 'reading reviews from other customers' and 'recommendations from friends and neighbors' were 49 percent and 70 percent more likely to influence Gen Y consumers to try online banking than influence older generations. Community and authenticity are central values to Gen Y consumers - and this applies when engaging them in person or through virtual channels. Effective use of social media platforms like Facebook and Twitter are a way financial institutions can align with these values, but only if social media is treated as a conversation.
Financial institutions must be willing to respond to customers and provide information beyond marketing the latest services. Twitter is evolving into a customer service channel for many institutions, and at a minimum, financial institutions should monitor what customers are saying there.
Daniel Steere is director of consumer insights at Fiserv.
