SAN JOSE, Calif. (8/5/14)--Millennials are less loyal to their primary financial institutions (PFIs) than other consumers, but the younger generation is also very likely to recommend their financial institution to friends if they have a positive experience, according to a new survey from Fair Isaac Corp.
The survey showed that millennials are five times more likely than those over age 50 to close all accounts with their PFI, if provoked. And high fees are a main provocation. Millennials also are three times more likely to open a new account with another financial services provider.
Because of their increased openness to switching financial institutions, those financial institutions have an opportunity to target this segment more than others for new member/customer acquisition, Fair Isaac said.
About 56% of surveyed millennials have recommended their financial institution in the past, and a positive service experience is a clear driver for them to recommend their credit union or bank to others.
Building loyalty with the millennial segment creates multiple wins, Fair Isaac said. Not only do they develop into loyal members and customers, they are also more likely to promote their financial institution's products and services.
About 15% of millennials use a credit union, and about 9% have a regional bank as a primary financial institution. Another 68% of millennials have a national bank for their primary provider.
One-third of surveyed millennials cited excessive service fees--real or perceived--as the single main reason they switched. This was closely followed by a negative experience with a financial services rep and ATM-related issues, such as too few or inconveniently located machines or exorbitant fees.
Negative digital experiences with both online and mobile had a much bigger negative impact on millennials than on other age groups. To build loyalty among millennials, financial institutions should use analytics to make fee waiver decisions that take into account the complete set of products member/customer has with the financial institution and the long-term attrition risk, Fair Isaac said.
While e-mail and direct mail are still the highest areas of preference for millennials to get marketing information, social media, television ads and word-of-mouth recommendations are often two or three times higher as preferences than other generational groups.
Millennials are significantly more likely to transact with their financial services providers through mobile apps than other age groups--26% prefer mobile apps, compared with 12% for GenX and 3% for Boomers. But they still prefer to use a financial institution's website over mobile apps. They also use the desktop computer at similar rates to a smartphone.
Because millennials use a broad set of channels and devices, financial institutions need to keep communications and member/customer experiences consistent and well-orchestrated, Fair Isaac said.
Mobile app usage clearly translates into loyalty for millennials, the survey said. Financial institutions should build and enhance mobile application functionality and learn how to communicate that functionality to users effectively, Fair Isaac said.
Millennials also want more communication with their financial institutions through texting, according to the survey. Developing more text communication with millennials is a loyalty-building opportunity, Fair Isaac said.