By Roy Urrico
Millennials are 56% more likely to grow their relationship with their primary financial institution over the next twelve months than Gen Xers and baby boomers. That is one finding in the Generational Trends in Digital Banking Study from Plano, Texas based Alkami Technology, Inc., a cloud-based digital banking solutions provider for credit unions and banks.
“We currently stand in the middle of what has been called the greatest intergenerational wealth transfer in history. As millennials are anticipated to be the nation’s future wealth holders, it is imperative for financial institutions to understand how this generation stands apart from baby boomers, Generation Xers (Gen X), and Generation Zers (Gen Z) when creating compelling value propositions,” the study said.
The Generational Trends in Digital Banking Study explored millennial financial trends, beliefs, preferences, and views on adding new or different personal financial providers and products. The research also captured the biggest opportunities for credit unions and community banks."
Millennials are very much up for grabs by regional and community financial institutions (CFIs). The study revealed that millennials are significantly more likely than older generations to change financial providers if another offers a better digital banking experience,” said Allison Cerra, CMO at Alkami. She added, “To capture and retain this account holder base, banks and credit unions must prioritize their digital sales and service platform and evolve to become data-informed digital bankers, given millennials are also much more likely to want a more personalized digital banking experience than any other generation.”
Study Finds Generational Concerns
Created in partnership with global research firm The Center for Generational Kinetics (CGK), the Generational Trends in Digital Banking Study surveyed 1,500 participants weighted to the 2020 U.S. census for age, gender, region, and ethnicity. The research, conducted online from January 12, 2024, to January 30, 2024, also sought to provide deeper insights as all participants had a banking account and actively participated in digital banking (check accounts, transfer funds, pay bills online, etc.). “This provides the exact perspective bank and credit union leaders must know to inform current and future strategies,” said the research.
Key findings included:
73% of millennials say the rising interest rate environment has significantly impacted their standard of living, significantly more than Gen Xers and baby boomers.
65% of millennials report they feel they are living paycheck to paycheck.
More than a quarter of millennials say that buying a home hinders wealth, as opposed to building it.
“This study provides business-critical research insights to financial institution leaders at an important moment of generational transition,” said Jason Dorsey, president of CGK. He added, “Millennials not only want, but deeply value relevant product recommendations to help them manage their finances. We hope that this study inspires regional and community financial institutions to invest their resources in alignment to best grow their relationships with millennials and benefit from the impending wealth transfer.”
Opportunities For Credit Unions
The Generational Trends in Digital Banking Study noted that while millennials navigate a difficult generational period driven by economic conditions, there are also clear and immediate opportunities for credit unions and other regional and community financial institutions to serve this group:
Thirty percent of millennials plan to grow the number of financial providers with whom they have a financial relationship over the next twelve months; this is 2.5 times more than the average of Gen Xers (14%) and baby boomers (8%).
Millennials have 14% and 28% more products with their personal financial institution than Gen Xers and baby boomers, respectively.
The national study revealed that half of millennials consider a major national bank or credit union their primary financial institution. “This is an important insight because it also shows that half of millennials consider institutions not viewed as a major national bank or credit union as their primary financial institution,” suggested the study.
Millennials not only represent a huge, immediate opportunity and long-term growth trend for financial institutions but the cohort also appears very open to open to consuming new financial products from credit unions and regional and community banks. “This creates a very exciting and strategic imperative for financial institution leaders, but what is needed to start rising to the opportunity and unlocking the excitement and potential of this transformative generation,” said the study.
Digital Banking as a Foundational Step
The Generational Trends in Digital Banking Study also revealed that the digital banking experience is the foundational step to starting, building, and retaining millennials as customers and members. That analysis showed that millennials primarily define their personal financial institution as the one “where they do most of their online or mobile banking” (cited by 46% of them as one of their top 4 reasons).
Getting millennials to stay with or move to a financial institution is also directly impacted by the digital experience. The study found that millennials are significantly more likely than older generations to change financial providers if another offered a better digital banking experience (58%).
In contrast, Alkami also conducted a 2024 FI Perceptions Research study that found regional and community financial institutions are more likely to underestimate the importance of the digital banking channel in determining primary financial institution status. The overwhelming majority of accountholders used their direct deposit account to determine their primary financial institution, the study found Sixty-nine percent selected the direct deposit account as one of the top four reasons, compared to 45% for digital banking.
The 2024 FI Perceptions Research study also found that millennials are more likely than older generations to say that the digital banking experience is “very important” (cited by 61%). In fact, millennials are significantly more likely than older generations to have been so frustrated trying to complete a digital banking task that they just gave up (48%).