In lender’s boardrooms up and down the country there is a dawning realisation that to stay relevant they will have to increasingly appeal to a younger, more digitally-savvy demographic. So-called ‘millennials’ hold the key to the future and have higher expectations than the more traditional customers many in the industry have become accustomed to.
In fact in some cases they are looked upon as an alien group, misunderstood, patronised and fawned over in equal measure. One thing is clear, they are a complex set of customers that can no longer be ignored.
So what is different about this almost mythical ‘millennial?’ On the whole when it comes to financial services younger people expect a slick multi-channel offering and the option to choose which channel to use, even moving between them at different stages of the loan process, as analysed in Target Group’s recent whitepaper, ‘Millennials: Attitudes to the lending market’.
Having come of age during the credit crunch many 18-34 year olds are also interested in the stability of the financial services firms they use, as well as the speed and quality of service they receive. It’s notable nonetheless that for one in five a satisfying online experience that effectively services their needs is deemed to be the most significant point of difference.
Add to this complex picture a series of new tech based solutions that have helped sow the seeds of disruption in the lending market and it’s clear that incumbent providers, especially those with less nimble legacy systems, are going to need to adapt and adapt quickly. In the past some big banks have been criticised for the lack of good quality customer service and this is likely to be a key battleground for millennial hearts and minds.
That said, new entrants will also face significant challenges. There is pressure to raise enough capital to get a new business off the ground and this may be why we have increasingly seen new financial services firms operating entirely online, such as Atom Bank or mortgage brokers Habito. These new entrants, free of cumbersome legacy technology, have the opportunity to outsource non-core functions, allowing them to focus on what they believe defines the brand. As a result they may be best placed to take advantage of the prevailing millennial mind-set if they can convince customers of their sustainability and longevity.
Striking a balance
Appealing to young people is not a simple proposition. All lenders must get the balance right between online and offline services in order to win favour with younger customers while at the same time ensuring they don’t alienate their traditional, older, customer base or those who prefer the human touch. Across the board lenders need to do more.
Presently, too many providers are geared up to service the parents of millennials rather than their children. Indeed many banks are beginning to run focus groups to understand what the new demand is likely to be and rectify this problem sooner rather than later. The time has come when millennials are inheriting or earning money and asserting themselves. If lenders are to market effectively to this age group then they will need to have the infrastructure, process and experiences that will allow them to align service and expectation appropriately.
Innovation and agility will be key to take advantage and move with the times. Digitisation will clearly be vital to that. However, embracing digital propositions should not come at the cost of losing the ability for customers to interact with an actual person. The option of face to face communication was valued by a sizeable portion of the young people we spoke to. Three in ten (30%) said they would prefer to apply for a loan in person, while a sizeable percentage (29%) of those surveyed prefer the reassurance of dealing with lenders in person, and as a result lenders can’t ignore their needs too.
Lending to millennials isn’t all about the slick digital experiences, they revere brands that appear to understand their approach and attitudes and appreciate human interaction when they need it. If this isn’t delivered in the way they expect, then they will make their voices heard, either through telling friends or family directly or via social media. Consequently, the challenge is for lenders to find the right balance, marrying the speed and efficiency of an online proposition with the ability to turn to the personal approach when necessary. Lenders cannot concentrate their efforts online at the cost of offering a satisfactory experience for those borrowers, often their traditional customer base, who prefer to conduct the process in person.
Whether we see a trend for solely digital offerings emerge within borrowing, or we see more of a hybrid approach, remains to be seen. Nevertheless, firms need to be prepared and nimble in order to entice this new breed of customer and provide an experience based on their expectations. Failure to do so may result in losing a competitive advantage and with the pace of change increasing all the time it may prove difficult to regain any lost ground.