CEO L'Atelier BNP Paribas North America
The term ‘Millennial’ refers to a mindset rather than an age group
By 2020, Millennials (aka Generation Y) will represent 50% of the world’s workforce, according to multinational professional services network PWC. The generation that was born between the early 1980s and the end of the 90s will also be the largest in history in the United States and elsewhere. And all-in-all they will also be increasing wealthy. According to a 2015 report from US global payment technology solutions company First Data, Millennials in the United States will control $7 trillion in liquid assets by 2020. And by 2025 they are expected to be generating 46% of all US income.
It is generally accepted that this generation has needs and expectations that require a different approach. Nathalie Doré, CEO at L’Atelier BNP Paribas North America, points out: “The term ‘Millennial’ refers to a mindset rather than an age group. You could be 40 years old and have a Millennial mindset, or be from Generation Y and yet not think and act that way”.
Generation Y-ers are attracted by technology, are more demanding when it comes to transparency, and show less brand loyalty. These are all characteristics to which banks will have to adapt if they wish to win over and retain new customers. So what exactly are the needs of Millennials and how can the banks meet them?
The three ‘Ws’ of Generation Y
Millennials want to be able to get “what I want, when I want, where I want”. So how come they have this attitude? “This is a generation that has grown up with a wide range of choices, whereas previous generations – those who went through the War, for example – had far less choice. Given this wide choice, they can find products that really suit them and in the era of artificial intelligence and the new information and communication technologies, they now expect companies to offer them exactly what they want,” explains Nathalie Doré. And what they want is basically a personalized product or service, which is available immediately exactly where they happen to need it. “The ‘where’ comprises two dimensions: a) the physical location where they want something to be delivered for instance; and b) the virtual space in which they wish to be contacted.” This is the reason why “many brands have for instance started using Messenger because they reckon that people will be on Facebook and won’t necessarily want to leave the platform in order to contact a customer service department.”
MILLENNIALS INTERACT MORE OFTEN WITH THEIR BANK
Salesforce Research, 2015
These new expectations are now leading to a transformation of the banking world. Just as in recent years banks provided customers who were demanding more interaction with new communication channels, they are now looking to make the most of digital technology in order to meet the expectations of their customers, in particular the more technophile among them, i.e. the Millennials.
One way of meeting Millennials’ expectations more closely is to tailor products and services to their specific needs – a ‘precision banking’ approach along the lines of precision medicine.
Towards ethical and socially responsible ultra-personalization
We need to move towards ultra-personalization based on an ethical and socially responsible approach
“We must be able to respond to customers’ precise needs, in fact to anticipate those needs, exactly as medical diagnosis and treatment are matched with the patient’s profile and data,” stresses the L’Atelier BNP Paribas North America CEO.
“IBM Watson Health has improved cancer treatment by searching out profiles similar to those which were being treated so as to improve patients’ reaction to treatment, and so on. It’s very similar in banking: if we can come up with a product that’s ideally suited to the customer’s needs, that customer will be more satisfied,” she underlines.
Such ultra-personalization has its limits, however. “In many areas of insurance, it’s vital to spread the risk widely. The health field is a good example – those who remain in good health are basically helping to cover those in poor health. So if you go for ultra-individualisation, you’ll be penalizing the less healthy. We need to move towards ultra-personalization based on an ethical and socially responsible approach,” argues Nathalie Doré.
DO NOT FEEL THAT FINANCIAL PRODUCTS ARE AIMED AT THEM
If we accept Generation Y-ers’ view of things, this trend towards personalization has not yet really reached its goal. A report from BNY Mellon reveals that 59% of the Millennials interviewed say they have never come across a financial product aimed specifically at them. So if financial product marketing is to appeal to them, it will have to be more subtle and more effective. Nathalie Doré stresses: “We’ve all experienced the retargeting process on the Internet: once you’ve looked at the price of a refrigerator online you’ll be bombarded with advertising for fridges on a number of other websites. This gives us the – entirely justified – impression of being tracked and followed.”
This is a very important point since Millennials attach great importance to transparency and want to know what is being done with their data. Says Nathalie Doré: “If customers are to trust the product selection they are being offered, the product or service must match their needs, but you also need to explain that the selection is being made for their convenience, to be clear about the criteria applied, draw up guidelines for the use of the data and explain what you’re doing to ensure confidentiality.”
New standards and a change in mindset
ARE DISSATISFIED WITH THEIR OWN SKILLS DEVELOPMENT
Moreover, banks constantly need to adapt to the new standards set by the big online players. “For example, if a Facebook page is expected to take a maximum of three seconds to download, the same will be expected of banks,” points out the L’Atelier North America CEO. Quite apart from the actual technology, any bank wishing to make its mark in this brave new world will need to alter its mindset. “Before launching a new page, a new shop on Amazon, say, a company will analyse the number of searches on the subject and wait until it thinks it has enough interest before opening the shop. Banks should also be drawing on real data rather than relying on traditional market studies,” she argues. So how can a bank adopt these new ways of thinking?
She suggests that “banks need to become ‘learning companies’, i.e. companies that encourage life-long learning among their employees. The subject matter that we’re working with is changing, which is why staff ought to be following continuous learning through company programmes and not just taking part in ad hoc training programmes. This is part of the response that banks are now beginning to implement.”
This is also a way to ensure that Generation Y-ers stay involved and engaged with what they are doing. In a 2016 survey by Deloitte, 71% of Millennials who said they were likely to leave their current company within two years reported being dissatisfied with the way their leadership skills were being developed. Millennials are seeking continual improvement and progress, and two thirds of them expect their employers to provide them with this opportunity, according to Salt Lake City, US-based training company Bridge. This need can be explained by the fact that they have grown up in a period of rapid technological and cultural change.
Shifting to open services and a platform-based strategy
Another way for a bank to prosper while still appealing to Millennials is to open up to third-party services. Nathalie Doré insists that “opening up to the outside is always beneficial for a company. What nearly all bankrupt companies have in common is that they’re completely closed off, and prove unable to adapt when new players and new consumption patterns arrive on the scene.” Harnessing the surrounding ecosystem therefore seems like a good solution. This was the message delivered by BNP Paribas Group CEO Jean-Laurent Bonnafé in an interview with leading French economic journal Les Echos, in which he stressed that “banks cannot have all the good ideas to themselves.”
Consequently, foresees Nathalie Doré: “Open banking will be carried out in conjunction with startups, plus other players such as research firms and other kinds of companies. ‘Open banking’ means working with startups that can provide a vital service and incorporating that service into your product and service range, or alternatively working with an academic institute which is working on a useful research topic and supporting it with a view to growing its business.” The ‘open banking’ approach has a number of advantages, one of which is attracting talented people to your cause. Being able to work in an innovation-rich environment is an extra motivation for most Millennials and a working environment which does not provide this is one reason why they often change jobs.
Aside from company R&D departments, innovative ideas are of course mainly to be found within startups and there are a number of ways in which banks can secure their collaboration, including investing in the startup, taking a stake in the business or full acquisition. Alternatively, explains Doré, “a bank might wish to work in partnership with a startup which has developed something new that’s likely to be profitable and is ready to go, as this will save the bank a considerable amount of time. Meanwhile, the startup will become one of the bank’s suppliers, which will boost its business. This win-win model can lead to a long-term partnership.”
In North America today, according to a 2016 report from CB Insights and KPMG International, a quarter of all contracts signed with FinTech companies involve a large company taking a stake.
It is therefore highly likely that banks could draw on a range of diverse collaborative approaches so as to turn themselves into platforms offering products and services. “Banks will certainly be able to develop products and services themselves and will also be able to serve as aggregators for other products produced by FinTech companies. They will increasingly open up to the outside world by taking an API approach,” predicts Nathalie Doré. “Banks will therefore have a range of offerings that can be constructed and tailored to each individual customer. Taking the ‘smart home’ as an example, instead of having an app for each connected object – one to turn out the lights, one to turn on the television, one to order a coffee, another to set the alarm system, and so on – you should be able to control everything with your voice. It’s the same for banking. More and more FinTech companies are appearing and it will be just too complicated to use a different one for each service, so customers will surely prefer to have an overall platform that can aggregate all the products and services on offer.”
This development should please Millennials as it means they can have the best of both worlds. Although they are attracted to FinTech companies, Generation Y-ers still continue to open accounts with traditional banks.
However, there is no doubt that most of them are big fans of digital services. Some 82% of the Millennials surveyed agree that it is beneficial or highly beneficial for banks to be able to offer banking services via a mobile device. This group are also leading users of digital wallets.
Source : “What millennials expect from their bank”, Salesforce Research, 2015
The trust factor remains decisive
So what will persuade Millennials to stay with their bank? As L'Atelier BNP Paribas CEO Louis Treussard underlined in an article earlier this year, the trust which banks enjoy among the public is key. Nathalie Doré points out: “We’ve seen this with online sales for example. It’s much easier when it comes to arranging a loan on the Internet because the customer is asking someone to lend him or her money. So online lending has taken off very fast and very successfully. On the other hand, when it comes to online savings offerings, where the customer is being asked to place his or her money with a bank that s/he doesn’t know very well or has never set foot inside, that’s more difficult.” However, in order to retain this ‘trust capital’ banks will need to ensure transparency – “allowing the customer to lift up the bonnet if s/he wants, to see how such-and-such a fee has been arrived at, or why the bank has been pushing such-and-such a product.” And to make everything fully accessible, “it’s in the bank’s best interests to use clear and simple language and also provide some financial education to help the customer understand the benefits of financial products and of attaining a high level of ‘financial well-being’.”
Last, but by no means least, if a bank wishes to satisfy GenY customers, it would do well to pay more attention to the social impact of a given product. This is a wave currently being surfed by, among others, CNote, a FinTech firm that won the startup contest at the recent SXSW event for its approach to savings & investments: all savings placed via CNote are invested in socially-beneficial projects. In fact, Millennials tend to have a highly-developed social conscience. A 2014 report by the MSL public relations Group revealed that 83% of GenY-ers polled stated the opinion that companies should play a more active role in solving the planet’s problems and 79% of the respondents wished it were easier to know ‘which companies were doing good in the world’. Basically, the Millennial generation are quite simply pushing banks to become more efficient, more transparent and more attentive to opinions – in other words, better.