Rob Manning,Group Strategy Director and US Vice President,Jacob Bailey
Five years after the 2008 financial crash, the Bank of England sought to kick start industry-wide innovation by introducing simplified entry conditions. New challenger brands with exotic names like Atom, Starling and Tandem emerged to entice consumers who were now unhappy handing their purse strings to traditional banks that had let them down.
As many of these new market entrants have matured, becoming fully-licenced banks, they have been hailed as an antidote to their fusty FTSE peers. Their core fan base is tech-savvy millennials who are drawn to brands that get the new consumer landscape, can provide tailored services and make ease of use, whether that’s payment through Twitter or online expenditure tracking, their core mission.
Is it any surprise that young people are making the switch? Traditional banks can’t even speak their language. We only need to glance at the Financial Times’ now infamous tweet, implying millennials were simply too lazy to save £800 a month towards retirement, to see why young people are getting turned off. This is one of just many face palm moments.
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However, embarrassing fumblings with social media aside, the problem many traditional banks face is often about perception. In reality, all bank brands can earn their right to millennial money if they took the time to understand how this consumer group operates.
In Millennials and Money: The Unfiltered Journey, a study by Facebook, only one in ten of the 21-34 year olds surveyeds aid they trusted banking institutions. Having grown up in a landscape marred by crises and inflated banker bonuses, alongside freer access to information about businesses,young people have become privy to the culture of smoke and mirrors perpetuated by old school banks.
This awareness is something challenger banks have cottoned onto. In seeking to remedy ailing trust via easy-to-use digital services, they also discovered that these digital natives not only understand the value exchange but are willing to share their personal information if it means receiving a better service. What this means is millennials don’t just judge value against a bank’s product offering. Why else would Monzo have customers queuing down the street for a pre-paid card, something that is already offered by a multitude of other more established banks? By focusing on lifestyle enhancement, rather than purely the product itself, Monzo drew attention to the added benefits.
This attitude filters right throughout the digital bank’s communications strategy. Founded by millennials, Monzo is fluent in the needs of its peer group. During a service outage that lasted a full day in March this year, for instance, the brand exemplified how a human approach to customer interactions can overcome a crisis situation. With a series of informative and honest messages sent out via the brand’s app and across social media, the brand keptits customers clearly informed of its progress in getting things fixed. In contrast to this, when Barclay’s suffered a similar service outage, it merely sent a solitary tweet to its 20,000 followers.Understandably, its customers were less than impressed.
Whether food, beauty or fashion, many other sectors are not just realising but responding to the millennial mentality: people want transparency. They want to know the calories in their sandwich, the ingredients in their shampoo, and the factory in which their clothes are made. Brands often offer this information freely (take Unilever, which has just voluntarily begun releasing the exact ingredients in its products). However, for banks, to win back the trust of this hugely influential age group, it is paramount.
Banks need to create meaning. Just as MasterCard repositioned itself as a technology company, banks should reassess what they stand for, the role they can play in people’s lives and the tools they have to achieve it. For example, they have practically unparalleled access to people’s data, but aren’t using it in smart ways to tailor and personalise services. If a Lloyds customer was an avid cinema-goer, the bank should be providing rewards that fuel their passion. If a young couple came to NatWest for a mortgage, then couldn’t the bank be pre-empting the patter of tiny feet and preparing them for this next big moment?
One of the most effective ways to understand millennial customers is to directly collaborate with them. Tandem involved its target consumers from the very early development stages. In exchange for a £75 share in the company, the bank channelled the feedback and insight of over 11,000 consumers into the invention and implementation of its brand,dubbing each partaking member a“co-founder”. Having 11,000 co-founders might seem outlandish to some, yet it’s helped Tandem build a bank that people truly require. By channelling its customer feedback back into the brand, it can constantly make tweaks to ensure the customer journey suits its target market. Brands should look to involve customers in the brand DNA, solidifying their relationship with ongoing opportunities for involvement.
If bank brands are going to find their way into the pockets of millennials, they need to take stock. Young people today want engagement, advice, longevity and, above all, real value. It’s time to start thinking beyond transactions, instead becoming long-term lifestyle solutions.