While Generation Y'ers are willing to pay big bucks for an iPad, they won’t pay a premium for financial services, Missy Zakett, the vice president of enterprise banking for Western Union Global Consumers Financial Services, told a panel audience at NACHA Payments on Tuesday. But that doesn’t mean that banks can write them off as irrelevant for their business, Zakett was quick to point out. That’s because those Generation Y'ers who are struggling with college debt now are set to take off financially in the near future, she explained. Generation Y’s income is set to surpass that of Generation X in 10 years, making them the highest earning generation in the U.S., according to data from Western Union.
And even though Gen Y'ers aren’t willing to pay a lot for financial services, they are very brand loyal, Zakett added. “If you can snag them now they will be loyal for a long time after they turn that corner financially and start earning,” she said.
In order to attract these young customers, banks have to appeal to the behaviors that set Generation Y'ers apart, Zakett advised. Gen Y'ers are always in touch with their smartphone, for example, as 90% of them check their smartphone as part of their morning routine, and 60% of them admit to “compulsively” checking their phone for emails and texts, according to Western Union’s research. They are also very engaged on social networks: 87% of them have created a profile on a social network. And Generation Y will be the most educated generation in history, with 75% of Gen Y'ers in college, planning to go to college, or graduated with a degree.
The mobile device will be the cornerstone of building a banking relationship with Generation Y'ers, Philip Lu, Zackett’s co-panelist and the vice president of Wells Fargo’s Knowledge Management Center for Market Research and Management, said during the discussion. Banks will have to develop a mobile strategy as that will be the channel Gen Y'ers are most engaged on. On the payments side that will mean giving Gen Y customers many different options for paying with the smartphone such as making payments by text, through the browser and the mobile app, and at the point of sale, Lu suggested. It will also mean that banks need to tailor the mobile user experience they provide to the characteristics of the mobile device, whether that’s a tablet or smartphone, he added. Banks also need to make it easy to opt-in to all of these services to meet the high expectations of convenience that Generation Y'ers have grown up with. Lastly banks have to move away from a siloed approach to their solutions and products offered on the mobile device and eventually integrate them into wallet-based solutions, Lu advised.
Well-educated Gen Y'ers also want to learn more about their finance and are interested in using PFM tools, Lu added. And banks need to tap into different social media networks to connect with Gen Y customers, he told the audience. “You have to focus on how your brand enables life experiences, and you have to enable them [Gen Y'ers] to share those life experiences with their friends on social media,” Lu explained.