The millennials are more digitally savvy. Accordingly, for any financial institution to effectively bank this segment of the market, they must consider how well they design and deliver products and services in this competitive environment, writes Obinna Chima
Digital innovation in financial services is placing a premium on efficiency and opening up competition that will continue to drive disruption across banking business segments globally.
According to analysts, banks that consistently assert digital leadership would thrive and prosper, while laggard banks that lack the vision or resources to develop competitive digital strategies would be disrupted.
In fact, analysts at Moody’s Investors Service pointed out that banks of the future would cater to high and rapidly evolving customer expectations by harnessing key enabling technologies, leveraging increasingly mature and dependable digital distribution channels, and applying these tools across multiple businesses and product segments.
This becomes very important for any financial institution that wants to meet the banking appetite of the millennials.
Millennials are the largest generation in world history. They now represent a mainstream banking demographic with ever-increasing ﬁnancial power. Having grown up in an App society, their expectations are changing the game for almost every industry on the planet and banking is no exception.
According to Global Banking Consumer Survey and Report by Oracle Financial Services titled: “The Millennial Migration: How Banks Can Remain Relevant in their Decision-making Ecosystem,” in the United States alone, the millennials command over $1.3 trillion in direct annual spending, which shows how important this segment of the market is for any financial institution that wants to retain its market share.
This is even more important for banks in Nigeria with a population of 198 million out of which 60 per cent are of its workforce are at the age of 30. This clearly presents quite interesting opportunities for digital banking in the country.
The report categorised millennials as four sub-sets: Young millennials aged 18-21; Middle Millennials, aged 22-25; Mature Millennials, aged 26-30; and Grey Millennials, aged between 31 and 45 years old.
The Oracle report showed that mostmillennials maintain a transactional relationship with their banks, regarding them as primarily a safe place to store money. This it stated was most prevalent amongst the young millennials as 91 per cent of them did not view banks as a lifestyle-enabling institution
“Millennials also trust their banks on matters regarding personal ﬁnances if such advice were provided.
“These observations reﬂect the potential for banks to evolve into a bigger player in millennials’ lives. They can capitalise on the high level of trust that millennials currently have in them for providing personal ﬁnancial advice, and design customised products and services that would enable millennials to make their decisions easily and seamlessly without leaving their digital ecosystem,” it noted.
Furthermore, the report pointed out that with banks maintaining a high level of trust in holding funds and managing personal ﬁnances, this trust could be built upon through the design of products and services that integrate seamlessly with millennials’ lives
In particular, it stated that the maturemillennials are more likely to use mobile wallet and mobile money, while youngmillennials prefer peer-to-peer payment platforms and alternative payment providers.
“Together, young and mature millennials being increasingly open to non-traditional modes of payment and maintaining substantial buying power represents a large ﬁnancial opportunity for banks to offer and monetise new payment products and services for these groups.
“Globally, 68 per cent of millennials chose mobile or desktop as their most frequent channel of interaction with their banks.
“Corresponding with millennials’ high dependence on mobile are their equally high expectations for their digital experiences. “With most of their interactions going digital, the future of digital banking belongs to banks who develop banking applications with amobile-first mindset,” it added.
Strategy for Nigerian Banks
With banks’ aggressive drive towards financial inclusion, experts have stressed the need for the financial institutions to develop strategies that would ensure they capture this segment of the population that are unbanked.
To the Managing Director, Fidelity Bank Plc, Mr. Nnamdi Okonkwo, for any financial institution to provide financial services for this class of people, “you need to understand their buyer needs; you must understand their customer’s preferences; you must understand what is important to them.
“More importantly, a lot of youths actually live on the social media. So if we’re going to engage them, you have to understand what they actually need.”
To the Senior Fellow, Information Systems at the Lagos Business School, Dr. Yinka David West, the millennials are a customer segment that grew up as digital natives.
Therefore, in order to sufficiently deploy the appropriate digital financial services, banks need to understand their behavioural dynamics using diverse design thinking or human-centered design (HCD) approaches, she said.
“The development of banking products will need to be highly customised and engaging such that it addresses the customer segment.
“So, banks must understand the profiles and behavioral dynamics of this segment of the market in order to meet their banking needs,” she added.
Also, the Chief Information Officer, Diamond Bank Plc, Mr. Lanre Bamisebi, noted that catching up with the millennials require banks to deploy services using platform that are not restrictive to mobile devices, such that the greater populace of the countrywould easily have access to theirservices.
Also, he urged banks to create platforms that would allow customers carry out transactions without creating bank accounts.
Bamisebi also said financial institutions should also consider the following if they were not yet in their services:
Set up direct debits for transfers, bulk payment and other services; update and cancel existing mandates automatically.
In addition, he suggested that bank desirous of banking the millennials must retrieve historical transaction details by date or number of records to be used as mini- statements.
“Get lists of ATM machines for any bank. Search for ATMs within a geographic location; get attributes of specific ATMs
Get a list of card products, features, and variants; block and unblock cards for different channels.
“Find available billers, billing services and categories, retrieve rich details of specific biller transaction; design single and bulk transfers from one bank account to another; amongst others.”
Also, the promoter of the Open Banking initiative in Nigeria, Mr. Adedeji Olowe said: “These days millennials have talked to themselves and they all agreed that banking should be different from what it used.
“They just believe banking should be like everything they are used to. Why do I have to go a bank? Why can’t I open an account on my phone? Today, to open an account with some banks, they still want you to go to the banking hall, which is not what this segment of the market wants.”
Similarly, Moody’s analyst, Fadi Abdel Massih stressed that customers will gravitate to providers that best meet their demands for convenience, personalisation and affordability, with privacy and data security a growing competitive differentiator.
According to Massih, amid the shifts in technology and consumer demand, competition will stiffen among banks, big technology companies and small fintechs.
“In the face of these threats, successful incumbent banks will be those that, either on their own or in collaboration with others, pursue aggressive digital transformation to become more efficient and responsive to evolving customer demands.
“Disintermediation of the customer relationship would be a threat to this business model if it ends up reducing banks’ pricing power by transforming them into providers of a ‘back-office’ balance sheet for customer-facing apps/businesses.”
He further said digitisation would offer efficiency enhancement opportunities for incumbent banks through the optimisation of branch networks, data collection, analysis and reporting process but not without high initial investment.
On his part, a marketing communication expert, Mr. Nduneche Ezurike, urged banks to put their millennial employees in very strategic roles.
“They should be put in position(s) to interface with their peers. The process of engaging millennials should be more of collaborating to co-create. So, the banks must segment them as a strategic segment of the market,” he added.
The foregoing clearly revealed that the millennials expect a better ability to multi-task, to save time and money. They want mobile products and experiences that enable them to do things by just few clicks.
Therefore, banks can need to examine where and how millennials are making their ﬁnancial decisions. By looking at data, such as spending patterns, and launching surveying effort to identify the most relevant moments in a customer’s life, banks gain valuable insight on where to focus their new product development efforts.