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Tuesday, July 21, 2015

The rapid growth of digital channels in the last ten years has been one of the strongest and most significant trends in the industry which is revolutionizing how retail financial services companies operate. Underpinning this of course is the growing access to the Internet, and the proliferation of mobile phones.

It is hard to find a bank which does not offer online banking. Within the next couple of years, it will be hard to find a bank which does not offer mobile banking. 
From a marketing perspective, digital channels present new opportunities and new challenges. Interaction with customers might be more frequent but how can the bank effectively sell? What level of engagement will customers be comfortable with? How do you reflect the different use of social media by different demographic groups in your approach?

Digital channels are also producing significantly more data which can be used to profile customers, understand their needs, and target them in smaller and smaller segments with the appropriate offers. All of this is achievable but can be difficult to implement when there are other systems and investment priorities. These are five effective ways banks can target this millenial groups who are the early adopters and who are forming the largest generation in the history of any nation. A number that will increase substantially as they enter their prime earning years and inherit wealth from their Baby Boomer parents. 

While this represents a potentially huge opportunity for financial services firms, Millennials also pose a clear challenge to the industry’s traditional marketing strategies and business models. Millennials take a skeptical view of financial institutions, one shaped by the financial crisis and subsequent economic malaise. They have different preferences from their Boomer parents, particularly when it comes to financial products, technology and the way they interact with companies. 

Marketing to and serving this young generation represents a major challenge for financial services firms, but one they cannot afford to ignore given the sheer size and future economic muscle of this group.

To help financial services marketers, product managers and strategists better understand Millennials and identify effective tactics for serving this demographic.

Millennials and mobile devices go hand in hand, so financial services firms must make mobile innovation a priority if they want to win and retain Generation Y customers. Over the past two decades, financial institutions have shifted the way they serve consumers from a branch/telephone-centric model to a PC/website-centric model. We are now witnessing the beginning of another significant shift, where mobile will become the primary means of interaction between consumers and financial services firms. Millennials are a key reason for this change. Those institutions that master mobile finance stand to gain a meaningful competitive advantage when it comes to the Millennial market.

Millennials are driving the shift from a PC-centric world to a mobile-first world. Millennials are early technology adopters. They cite their use of technology as the distinguishing trait of their generation, more so than any other behavioral attribute.Their strong preference for mobile is the defining characteristic of this generation’s technology habits. Not only do a higher percentage of Millennials own smartphones than any other generation but 18% are mobile-only Internet users versus 5% of Generation X and 3% of Baby Boomers.

The mobile customer experience will become the critical competitive battleground for financial services firms. Millennials don’t just use their mobile device for social networking, shopping and entertainment. They also use it to manage their financial lives. 

The Millennials’ preference for mobile means firms must rethink their advertising. As Millennials choose mobile devices over PCs and televisions, financial services marketers will need to prioritize the mobile channel when planning where and how they advertise to Generation Y. Fortunately, mobile advertising offers certain key benefits relative to traditional broadcast, print and even online outreach. For one, Millennials are rarely separated from their smartphones. Further, messages can be personalized and targeted by taking advantage of a device’s many built-in sensors, such as geolocation functionality.

These two attributes should allow firms to craft more timely and meaningful advertisements, as well as collect data about the habits and preferences of their target audience and the effectiveness of their ads. 

New client acquisition will also move to the mobile device. Millennials don’t just expect mobile account management; they also want the ability to begin a relationship with a firm via the mobile channel. Millennials truly are the “Mobile-First” generation. Financial services firms must deliver an excellent mobile experience if they want to compete for Generation Y customers. At the most basic level, this means supporting both Android and iOS devices and offering cutting edge resources for both existing and prospective clients.

Customers expect a seamless experience whether they are engaging through online or mobile devices, and expectations are being set by best practice competitors across industries. Banks need to invest in the digital experience and the knowledge of their front line staff so that they become advocates for the new capabilities. All customer touchpoints should reinforce that the Bank is helping customers make the right choice based on their needs.

Banks will need to be present where their customers are...and customers are spending more time on Content, Community and Commerce that is being delivered through digital channels. The challenge for marketers is to engage them in ways that are relevant to the customer and to the medium. The underlying bytes of data that get generated in this process, will be structured as well as unstructured, and will form the next frontier for analytical marketing.

However, the banks that will effectively compete in the growing world of Digital natives must avoid the following five costly mistakes most banks often make:

• Erecting channel silos
• Underfunding the banks website
• Lack of KPIs and measurement
• Not sharing data within organization
• Not leveraging new digital tools

The Digital Bank that will be relevant tomorrow must have in mind that the expectations of this generation are quite different to older generations and they are much more impatient. Developing effective digital strategies and tactics to capture this growing demographic group is more than ever crucial for the Bank that must win.

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