How Community Banks Can Get Millennials to Go Local

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Millennials are the future of banking. That isn't up for debate—it's a matter of generational inevitability. The approximately 80 million Americans between the ages 19 and 37 represent the fastest-growing segment of banking customers.

What is a matter of speculation is how community banks will respond to the growing influence of this younger generation and its unique demands. Community banks will have to attract Generation Y if they are to continue their tradition of serving local communities. While Main Street banking might seem incongruous with stereotypes about this younger generation's indifference to personal finance, new research shows there is ample opportunity for community banks and millennials to do business.

A majority of millennials (54%) would prefer to work with locally owned and operated community banks, according to a July 2014 survey of 1,008 Americans in a study commissioned by the Independent Community Bankers of America and The Center for Generational Kinetics. Millennials were also the generation most likely to say that that developing a relationship with their financial institution is important (64%). These results suggest that the door is open for community banks to pursue younger generations by emphasizing the personal touch they offer.

Community banks can connect with millennials by building on the younger generation's general preference for all things local. Millennials in the survey said they trust local brands and businesses more than big, recognized brands. And they were more likely than other generations to say they are interested in learning more about locally owned and operated banks. Like independent coffee shops and farmers markets, community banks' area ties give them an advantage that bigger banks can't replicate.

Meanwhile, community banks' commitment to serving small businesses aligns perfectly with the millennial generation's entrepreneurialism. Community banks make nearly 60% of all small business loans under $1 million; millennials are by far the generation most interested in learning about how to start and run a successful small business, according to the study. In fact, 41% of millennials said they are very interested in starting up their own business, more than double the percentage of baby boomers. And nearly a quarter already earn at least part of their income from businesses they own or have a stake in.

Clearly, there are many possibilities for collaboration between community banks and millennials. Now is the time for community bankers to tap into these opportunities.

The study recommends three strategies for community bankers. For one, it encourages community banks to establish "entrepreneur advisory boards" that engage with local small business owners, including millennials. The study also recommends that community banks make the most of their individualized service by introducing new millennial customers to bank employees, inviting them to attend special events and asking them how they prefer to be contacted, including via text message. Finally, it encourages community banks to adapt to millennials' communication style by using videos, photos and bullet points-not blocks of texts and hard-copy brochures-to tell their bank's story.

The most important thing community banks must do is determine how to meet the day-to-day banking needs of these customers. That means serving customers who need advice about how to run their businesses but who aren't going to be fixtures at bank branches. It means accommodating customers who have little interest in ATMs because they carry no cash and who swipe their payment cards or wave their smartphones for a cup of coffee. It means understanding that young customers want to do their banking while they wait in line, not wait in line to do their banking.

Community banks have served local communities for many generations, and there are plenty of opportunities to serve the next one. It is up to community bankers to ensure the industry is ready for this new, mobile and entrepreneurial spirit that millennials bring in record numbers.

Rebeca Romero-Rainey is chairman and chief executive of Centinel Bank in Taos, N.M., and vice chairman of the Independent Community Bankers of America.

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