RFi Group Insight - Asia: Banking on millennials

While the term is used to describe one particular segment, millennials often consist of a wide spectrum of demographics including students, recent joiners of the workforce, newlyweds, or new parents. In general, we define millennials as those currently around 18 to 34 years of age, with many sources citing their enormous sense of entitlement.

In recent years, banks have been paying more attention to millennials with targeted banking products and services, and for good reason too. However, many make the mistake of looking at them as a single segment even though there are nuances between the aforementioned life stages of millennials and for the purpose of this article, we will split those who are “Young (18-24)” and those who are “Matured (25-34)” to illustrate just how different they can be.

Why target millennials

There are two main reasons, the first being that the segment represents a sizeable number of consumers, especially in countries like Indonesia where millennials make up the majority of the banked population. Across Asia, RFi Group data found that around 2 in 5 of the current banked population fall under the millennial umbrella as seen in figure 1. Secondly, they are the affluent consumers of tomorrow, so it’s in the banks’ best interests to acquaint themselves early. As they surely move onto their next stage of life, and along with it their earning capacity and accumulated wealth, they will look to both their current and new banks to accommodate their increasingly complex banking needs.

The importance of timing

It is important that banks build the relationship early as the length of relationship consistently comes out as one of the top three drivers of main banks status among non-millennials (35+). Except for India and Philippines, every other surveyed country shows the importance of length of relationship as the main bank driver. Banking customers around the region are generally found to be more likely to switch main banks before they hit the stage of non-millennials (35+). Once they hit the life stage of a non-millennial, the likelihood of main bank switching drops comparatively.

Which products are key?

Well, that depends on the segment and country we look at. When we ask the matured millennials what products they are likely to take up within the next 12 months, investment products repeatedly come up across the region (figure 2). However, banks need to tailor the design and communication of the investment proposition to suit the different needs of millennials. Taking Singapore as an example, the top driver of switching main investment product provider among young millennials is knowledge of staff and reputation/ brand image (23%). Contrast this to the matured millennials who have product range (16%) as the most important driver of switching investment product provider.

When we look back at the point of main bank switching behaviour, access to better investment and wealth management pops up as a driver of switching consideration, linking back to the importance of timing. Banks need to make sure that they capture the attention of matured millennials at an early stage by offering propositions that give access to investments and wealth management addressing their need for product range.

Reaching Millennials

When deciding on how to reach out to millennials the issue of understanding the needs of the segments within millennials comes out again. Referencing the earlier example of Singapore, when looking at the uptake journey of their most recent banking product, there are differences between young millennials and matured millennials. For instance, during the initial enquiry stage, the most likely channel of communication that young millennials use is to head down to the bank branch (46%) followed by digital channels (45%).

When compared to matured millennials, digital channels come up top at 54% and the physical branch at 36%. The difference between segments at the end stage of application is also apparent, younger millennials heavily favour physical channels like bank branches (65%) compared to matured millennials at 48%. It is therefore important for banks to understand the younger segment’s need for face to face assistance to help them with any queries they have in each on-boarding stage.

To sum it all up

Millennials are sorting out their banking relations and in Asia, it tends to go unchanged for much of their lives. Coupled with the high ceiling of growth that millennials offer, the sooner that their proposition is tailored to millennials, the better. However, there need to be further discernible segments within the targeted millennials group, with many financial institutions currently breaking it down based on their needs and goals such as those who are still schooling, or those who just started their careers or looking to start a family. Millennials should not be viewed as a whole but rather dissected into groups that have their own situational goals and needs.

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