Building Back Trust


Financial institutions woo wary millennial customers by sharing their values and providing a personal touch.

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It may come as no surprise that millennials are skeptical of financial institutions. Hefty student loans mean that many adults between the ages of 24 and 39 have come into large amounts of debt, even before they join the workforce.

Millennial activists were primary drivers of the Occupy Wall Street demonstrations in the wake of the 2008 financial crisis. As working people struggled, millennials saw large financial institutions receive government bailouts and few penalties for reckless behavior.

Recently, young people made a newsworthy splash in the financial world with the digital-trading app Robinhood. By trading shares with one another, Robinhood users were able to drive up stock prices for video game retailer GameStop, a company that suffered substantial losses due to COVID-19 restrictions.

Wall Street hedge funds began buying shorts against the video game store, making stock prices fall and bankruptcy a foregone conclusion. The shorting of GameStop stock was seen by young people, who grew up shopping at the retailer, as yet another unfair manipulation of the market.

A campaign to save GameStop began on Reddit, a popular online forum. By buying and trading GameStop stocks on Robinhood, users increased the price of the retailer’s stock by 14,300%.

Users frequently cited what they considered unfair practices of financial institutions toward GameStop as reason to continue the disruption. “I think what this shows is that millennials trust people they meet on the internet more than the average financial institution,” says David Greenberg, chief marketing officer at Portland marketing automation platform Act-On.

Greenberg’s company works with banks, credit unions and other financial startups to maximize user engagement and attract new customers.

As the millennial generation begins to buy homes, start families and plan for retirement, their wariness toward financial institutions could present an opportunity. By educating members, creating a personalized online experience and demonstrating a commitment to community service, small and medium-size banks have begun serving the unique needs of millennial customers.

Financial institutions that are able to distinguish themselves from the competition could reap large rewards as the generation grows wealthier.

According to the Millennial Disruption Index, a large survey of millennials commissioned by Viacom Media, more than half of respondents said their bank was no different than any other bank, and they would be open to switching banks in the next 30 days.

One-third of respondents said they would prefer not to use banks at all and rely instead on Google, Amazon or PayPal as their financial institution. When asked to rank their least favorite companies, the four largest banks in the country all made the top 10 list.

Additionally, millennials simply dislike going to the bank. A surprising 71% of respondents said they would prefer a trip to the dentist’s office over a trip to the bank.

In some ways, smaller financial institutions have never faced more competition to attract customers. The advent of mobile banking means community banks have to compete with companies from out of state. But a report by Gallup found millennials are largely disengaged from their financial institutions.

“I do believe this skepticism will bring benefits,” says Scott Bell, chief experience officer at Unitus Community Credit Union, which has branches in Portland and Salem. “The financial industry has traditionally moved slowly and lagged behind other industries in innovating and transforming how we do business. With today’s discerning consumers, that simply won’t cut it.”

Millennials largely favor mobile, app-based banking — a trend that national banks adopted more quickly than smaller institutions. But smaller banks and credit unions have caught up technologically.

Millennials have also demonstrated a willingness, even an eagerness, to change banks. When offered better perks or better service, young people were more than twice as likely to switch banks than older generations, according to a Gallup report.

Despite their distrust of financial institutions, there is evidence to suggest millennials need more help from their bank than previous generations. A 2020 report from George Washington University found that only 16% of this generation were able to pass a financial-literacy test.

According to business management consultancy Deloitte, six in 10 millennials report having little or no confidence in their financial-planning ability, and 35% report actively needing help with their finances.

But according to the Gallup report, a mere 14% of millennials reported their financial institution was helping them with their financial health.

While young customers prefer to handle business online and through apps, when it comes to banking, they tend to value having someone to explain details and walk them through decisions.

Millennials possess $497 billion in outstanding student loan debt, and juggling finances can be a confusing process riddled with anxiety. For help, they need access to an adviser.

“Although our millennial clients are frequent users of our mobile and online banking apps, we see a simultaneous trend that they want to be able to know and call their banker, not just converse via online application,” says Jenny Bennett, senior vice president of marketing and business development at Eugene-based Summit Bank.

To help customers improve financial knowledge, Unitus Community Credit Union developed financial-literacy courses and posted them on the company website as well as on YouTube. Subjects range from setting up a college fund to savings and investment opportunities.

Another source of competition is neobanks. These new banking startups have no physical offices but offer more advanced perks. Neobanks provide the most up-to-date technology options, which include the ability to pay others instantly through its apps, much like paying with Venmo.

While many of these neobanks are owned and operated by larger institutions, neobanks take on new names and branding to create distance from the parent company.

For example, Marcus, a neobank owned and operated by Goldman Sachs, has received $97 billion in deposits, despite only being in operation for a couple of months. Unitus and other banks have also launched virtual branches, employing banking teams that operate entirely online and allow customers to have face-to-face interactions over their mobile device.

But for all the perks of neobanks, smaller institutions still compete for millennial attention by demonstrating a commitment to improving the world around them.

Given the amount of time millennial customers spend online, they are more likely to research a company’s societal impact before becoming a customer. Unlike previous generations, young people frequently rate a company’s societal impact just as highly, or higher, than making sure they are getting the best deal.

“Marketing in the financial service industry has in a lot of ways become reputation management,” says Greenberg. “Everyone is trying to reinvent themselves right now.”

Steven Stapp, chief executive officer at Unitus Community Credit Union, says COVID-19 has given financial institutions the opportunity to support customers. Banks and credit unions throughout the state, including Unitus and Oregonians Credit Union, have offered temporary no-penalty, skip-payment options on loans.

“Millennials are leading a socially conscious movement that demands more from the companies they support,” says Bell. “They want to do business with companies that share their values.”

Unitus allows members to donate directly to charitable organizations through its app. Other financial institutions choose to showcase a commitment to ethics through their workers. Employees at Summit Bank have three paid volunteer days each year to give back to their communities.

Alongside technology and commitment to social issues, financial institutions must also navigate how to engage with millennials using proper online etiquette.

Millennials are the most marketed-to generation in history and a 2014 study by investment holding company Aimia found that they were much more likely to share data and personal information online. But they also expect marketing to be more targeted and more considerate of their time.

Small to medium-size banks have had to change the way they market to attract a more online-savvy customer base. “Say you have someone visiting the car-loans page; two hours later, they receive a communication about some promotion involving car loans,” says Greenberg. “That’s very different from getting the corporate newsletter every week that has every single deal on it.”

In an era in which customers are bombarded with online updates, banks seek to attract millennials by obtaining informed consent about when and how they prefer to be contacted. “It’s a permission-based world,” says Greenberg. “If you don’t ask for permission before you send me something, it is going to be seen as a breach of privacy.”

Whether or not millennial skepticism toward financial institutions is justified, banks have a vested interest in regaining this generation’s confidence. Not only are millennials the largest generation in the U.S., according to a 2015 study by Deloitte, nearly $24 trillion of wealth and assets will be transferred to the generation in the U.S. over the next decade.

Millennial investors will seek to put their money in the institutions that have given them the most reason to trust.

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