Today, the significant percentage of the world population, or approximately 7.4 billion,is under the age of 30. Over the next10 years, Gen-Y should constitute the majority of ‘wealth accumulators’ in developed economies and will look for financial products to maximize their wealth. This segment is expected to have a higher disposable income than their predecessors. Banks need to begin to engage with them now to reap benefits later.
Over the past decade banks have be enforced to look for new revenue streams as new business models,technological innovations and non-traditional competition have transformed the banking landscape.A midst all this change, a new generation has come knocking on their doors. They are in the age group of 18 to 30 years – and often called Gen-Y or the millennials.
Gen-Y is so different from their predecessors that banks must understand their needs, if they want them as their customers. Banks will need to use an approach distinctly different from anything that they have been accustomed to in the past. The imperative is that as the economic power of Gen-Y expands its member swill change how financial transactions are conducted together with patterns of spending, saving and investments.
Who are Gen-Y?
Gen-Y, those born between 1980 and1992, comprise about 17 percent of the world’s population. Those between 20-30 years old constitute about 17 percent of Asia’s population,13 percent of Europe’s, 14 percent of North America’s population, and 17percent of the population in the Caribbean and Latin America.
Social media is not just Twitter, Facebook or YouTube
While banks have braced themselves to take on traditional competition in order to increase their client base,non-traditional competition has been slowly making inroads into their domain. P2P lending, also known as social lending, matches lenders seeking a rate of return for their money and borrowers who need the money for a variety of purposes.
Designing “cool” products
Banks need to understand the generational differences while designing new products for Gen-Y.Gen-Y currently use basic financial products like cards, loans much to support their lifestyle. They are not too interested in investment or retirement products unlike the Baby Boomers and Generation X. Banks need to design products that are suited to their needs, simple to understand and easy to use. Products need to be designed keeping in mind their traits,attitudes and lifestyle and should enable personalization.
Quality customer service –a critical component of Gen-Y strategy
Gen-Y was more likely to switch banks than members of any other generation. Customer service forms a critical measure in retaining their loyalty. Banks cannot afford bad customer service given how well connected the generation is and how actively they use word of mouth.Banks can offer them online personalized services like opening accounts online or on mobile and funds transfer online as they spend so much of their time online. Gen-Y is ready to pay premium for services that are available round the clock,anywhere, easy to access and quick to use. Banks have to embrace the latest technologies and improve their operations to provide a satisfactory service to their customers.
As Gen-Y is a multi-channel user,banks need to create a consistent unified experience across channels.Branch innovation is yet another imperative which banks need to consider while targeting Gen-Y. They need to provide Gen-Y with special offers that would attract them to the branch. A customer might want to get advice on loans at the branch, apply and pay premium online and check the premium details on their mobile.To achieve such a state, banks need to integrate their channels yet innovate with them separately.
What’s the take?
As banks analyze future business opportunities, Gen-Y is emerging as a key customer segment and they already constitute a significant proportion of banks’ current customers. Banks are developing a dedicated strategy to understand and meet the demands of this segment.With innovative and customized products and services, attractive pricing and special offers, these banks are engaging Gen-Y differently as compared to other respondents. Banks should have an integrated enterprise-wide intelligence with the ability to capture market feeds, to have a holistic understanding of their Gen-Y customers with Gen-Y is complex as they are well-connected through social media and mobile. Our survey revealed that banks used their social media presence as a medium to converse, get feedback from their customers and launch new products.They can leverage or partner with other retail brands that have successful presence in the Gen-Segment by co-branding or creating joint offers. Banks can make their products and services more attractive to Gen-Y through personalization of services. Each offering should be attractive enough to be on the wishlist of this generation. They rely on opinions and word of mouth of their peers and if banks fail to offer“exceptional service” they run the risk of losing their brand reputation.Our survey revealed that though many banks were providing new and innovative products and services, they lagged in product launch times.
Banks with a Gen-Y focus had shorter product launch times as compared toothers. Seamless multi-channel banking offering a superior customer experience is key for engaging Gen-Y. Innovative pricing strategies like pricing based on relationship could help banks establish incentives for Gen Y customers to continue buying more from the same brand instead of hunting for other deals.■