Millennials, countless surveys will tell you, are not fans of big banks. They are smart, price-sensitive consumers who are far more likely than older customers to switch lenders if they find a better deal. They are also a huge, irresistible demographic for the financial industry, which is why banks do everything possible to ensure these digitally native customers stay loyal once they've pinched their noses and opened an account. That means sophisticated social media, nimble mobile banking platforms, and in a bid to gain some fintech street cred, an end-to-end car-buying service accessed via smartphone (or, if you're old-school, computer).
This latest offering from Chase, the U.S. consumer and commercial banking arm of JPMorganChase & Co., is in partnership with digital car-buying service TrueCar. Called Chase Auto Direct, it layers auto financing onto online car shopping: Approved borrowers that applied via smartphone or computer are routed to a network of Chase-affiliated dealerships that have the car they want, and walk in to find their paperwork ready. Chase Auto Direct is available for Chase customers in 30 states and will roll out to all 50 states next year).
"The reality is that customers are shopping for everything online, even cars," said Bruce Jackson, head of retail lending at Chase Auto Finance. "By pairing online financing with the car buying experience, we can deliver pre-approved customers to our dealers, and dramatically simplify the car buying process.")
Millennials have started to buy cars, but they're more deliberate and frugal than their elders, said Steve Szakaly, chief economist at the National Automobile Dealer's Association (the average new car buyer is 52 years old and makes about $80,000). More millennials will break down eventually, he said. Perhaps when they discover a diaper box doesn't fit on the back of a bike, for example. While the soup-to-nuts car buying idea isn't new, the scale may be. USAA has an online car-buying service that works with TrueCar, letting its members choose and finance a vehicle with the option of getting insurance, too. Unlike USAA, Chase serves about 14,000 dealerships in the U.S. through its indirect auto lending business—meaning it lends to the dealer, who then lends to you, tacking on a few basis points to the interest rate).
Chase's dealer network may take issue with being cut out, but the bank stresses the service will be a big lead generator—and sellers are paid a fee for closing deals. "Customer financing at their dealerships will continue to be popular, and that won't change anytime soon," said Jackson. "But we want to be ready for where customers might be down the road.")
A majority of the checking customers Chase picked up last year—57 percent—were millennials. And as everyone knows, they live on their phones. Almost 80 percent of Chase's millennial audience use its mobile banking app, versus 38 percent of those age 36 and up, said Patricia Wexler, a bank spokesperson. With this in mind, last year Chase paired with OnDeck Capital to offer an online lending platform for small-business clients that it said would shorten approval and funding time to about one day versus one month or more. The bank is also dominating another traditional fintech space, generating over $13 billion in person-to-person payment through its QuickPay fund transfer option during the first six months of 2016, up 40 percent year over year, Wexler said).
A car-buying smartphone option may go a long way to keep millennial consumers engaged with Chase—deepening the relationship and making it more likely they will consider it their primary bank. Historically, the more accounts someone has with a financial institution, the more likely they are to stay with them. In bank-speak, they're "sticky."