Banks are succeeding at using the Internet to hold young consumers as customers when they graduate from college and start careers, research indicates.
The Boston market research firm Celent LLC reported last week that 60% of college students have decided to keep their current banking relationship after graduating - up from 48% in 2003 - and that the Internet played a large role in their decisions.
Ilieva Ageenko, the e-commerce director of emerging applications at Wachovia Corp. in Charlotte, said, "This generation needs immediate access to their information," and the Web and mobile channels provide it. "They have been born and raised in the era of constant communication."
Wachovia opens about 200,000 college-student checking accounts each August; nearly all sign up for online banking; and 90% use it. By comparison, just 37% of overall Wachovia customer households are even signed up for online banking.
The company did its own study last year among college students, Ms. Ageenko said, and its findings largely match what Celent found.
"For Wachovia and other financial institutions, there is this opportunity to really capitalize even more on investments in the Internet," she said.
In some cases, the young generation's appetite for immediate access was greater than Wachovia was able to satisfy, even by extending its services to mobile phones. For example, Wachovia can give daily balance updates by text message, but its younger customers wanted intraday updates as well.
"They wanted to know how much money they had in their accounts" at any given time, Ms. Ageenko said.
Jim Smith, the executive vice president for the Internet services group at Wells Fargo & Co., said a key to success is recognizing that the Web is not just a communication channel but a community.
Younger customers "are looking to their virtual social network," he said, much as a branch customer may look to next-door neighbors.
That said, younger customers have extremely high expectations for their banks online, much higher than their expectations for other channels, he said.
Online, "the opportunity to get it wrong is much greater, and that scares off a lot of companies," Mr. Smith said. "When you get it right, that network that could present obstacles to you is actually your best sales force."
Online communications must be informal yet accurate, and most of all they must be fast, he said. Staci Schiller, a marketing program manager at Wells, said being active online "plays into retention. … It's all about figuring out who your customer is and communicating with them in the way they want to be communicated with."
Ms. Schiller, who writes for Wells' student loan blog, said banks must do more to gain credibility with younger customers.
"You actually have to go out and become a part of the blogging community," she said. Wells links to other blogs when it considers them better sources of information for its customers, she said.
Younger customers, especially, "have grown up with this technology," she said, "and they've never really known life without things like an e-mail address or the World Wide Web. They're really all about that instant communication and instant gratification, and I think that's why this medium works so well with this audience."
Thirty-six percent of respondents in the Celent survey said the Web is their top choice for communicating with their financial institutions, up from 29% in 2003 and more than any other channel.
For getting product information, the Web was an overwhelming first choice, at 71%, up from 65% in 2003.
In both cases, conventional telephone communication lost ground. For interaction, it dropped to 23% from 31%. For getting product information, it dropped to 2% from 5%.
Ashley Evans, a research associate at Celent and an author of its report, said today's college students 18 to 25 years old are more eager to learn about complex financial products than earlier generations were at that age.
Since many young adults have student loans, they begin thinking early about which investments or other complex financial products can help them build up enough money for repayment, she said.
Another factor for students is the increasing publicity about the "negative consequences" of mishandling debt, Ms. Evans said.
"The banks are doing a lot of things the students want to see," she said. "They're increasing online options, increasing mobile options."
