Banking in the Age of Millennials

Millennials recently displaced Baby Boomers as America’s largest generation. They command $1.3 trillion in annual spending, a figure that will grow rapidly in the coming years given only the first cohort of Millennials has reached their peak purchasing capacity.

The rise of these digital natives, and the strong emotional connections that they maintain with the brands they love, puts pressure on banks to offer a new generation of financial products.

To study how misaligned existing banking products are with Millennial needs, and inform banks, a team of Wharton students (myself included) partnered with Oracle to survey over 4,000 Millennials globally. We asked them about their current banking habits and perceptions, the life events most top-of-mind (e.g. finding a new job, planning a vacation, daily budgeting/shopping, etc.), their needs within said events, and what parties (banks or otherwise) they would most trust to help in meeting those needs.

We came to three conclusions for the American Millennial:

I) Low trust in banks:

We defined trust by how Millennials rank banks against a cohort of other influential parties in their ability to meet needs for key life moments. These other parties include social media platforms, non-bank payment providers (e.g., PayPal, Venmo), search engines, media outlets, retailers (e.g., Wal-Mart, Amazon), and family and friends.

Close to half of those surveyed placed traditional financial institutions among the bottom three. In a question regarding the role of banks, 73% of respondents defined banks as merely a place to store money, with less than 4% citing banks as enabling their lifestyles.

All of these characteristics point to a transactional relationship between Millennials and their banks-of-choice, with a perception of traditional financial institutions as providing little value beyond a few functional roles (i.e. like the storage of funds). This apathy should frighten banks, who could be pushed aside by companies with stronger brands that will either relegate banks to the role of a mere service provider, or replace them entirely. To avoid getting left behind banks need to redesign their experiences with an extreme focus on zero-friction solutions.

II) Mobile-first expectation:

Millennials ranked mobile as their most preferred channel for interacting with their bank. In fact, 75% of Millennials are cited to be at least somewhat reliant on mobile banking to manage their accounts, and more than one quarter completely rely on it.

This immense importance of mobile is coupled with a general sentiment that banking applications could be improved. In a recent survey conducted by SNL Financial, 53% of Millennials found their mobile banking applications lacking, with 54% of that group saying they would switch providers if the alternative offered better applications.

But this competitive risk is not limited to traditional financial institutions. Millennials ranked social networks and search engines — parties with a precedent of launching well-designed mobile experiences — among the top three most trusted parties for help with top-of-mind life events. Facebook and Snapchat, for example, recently expanded their platform to enable peer-to-peer (P2P) payments within the Messenger and Snapchat applications respectively, a financial service once exclusively offered by traditional banks and money transfer services.

III) Willingness-to-try:

A silver lining for Banks is that Millennials are more willing to try new products and services that take aim at a broader set of financial needs. From location-based customer recommendations to budgeting tools, Millennials consistently cited a higher likelihood to try a hypothetical listing of bank offerings vs. sampled non-millennials.


We built our survey to study the Millennial financial psyche, but also to provide a framework for building products and services that cater to it. At the center of this framework is a human-centered approach to design, which posits consumer needs as the most fertile ground for successfully developing new products. For Millennials and financial services, new products should be rooted in the most relevant life events and associated needs. To provide a specific example, we’ll focus on one of the most highly ranked life events for US Millennials, as well as the most commonly cited challenges (“needs”) within that life event. Specifically, we’ll focus on the life event of planning a vacation.

Case study:

For this event Millennials cited too much choice and lack of affordable options as the primary needs. The best way to bring this to life is to highlight a current-day solution that takes direct aim at the life-event and associated needs.

HotelTonight is a mobile-only on-demand hotel booking platform, where the user can book a hotel 1–6 days in advance at a discounted price. The app had 9 million downloads as of summer 2014 and has continued to experience a meteoric rise in user volume. Let’s explore how the application meets vacation-related needs:

Too much choice: The app decreases the customer’s choice burden by: 1. Limiting number of listings shown and 2. Categorizing hotels. HotelTonight shows only a “curated selection” of 15 hotels at a time, though its inventory can be in the 100s. As a different example of the company’s “focus on simplicity,” the app categorizes its listings. A hotel can be “hip,” “solid,” “luxe,” or “basic” — customers can self-select without having to research beyond the home page.

Affordability: The app’s prices are 17% less than those on other travel agency mobile apps. It does this with 1. Hotel bidding and 2. Geo-location discounts. An additional benefit to the above “curated selection” is that hotels are chosen based on price bids. This ensures the best savings for consumers. The app also pushes “geo-rate” discounts to users in proximity to the hotel. This gives savings to those users who need it most, vs. those who are planning in advance.

Bank Replication: HotelTonight succeeds because it saves customers time and money. Banks can replicate this in a few ways, when helping consumers plan vacations or beyond:

  • Limit consumer choices: It will help consumers make decisions more easily, and provides an opportunity to show consumers you understand what they like.
  • Provide information upfront: Categories like “hip,” “solid,” and “luxe” help consumers navigate HotelTonight even more quickly. Banks could provide similar shorthand and guidance.
  • Use relevant data to deliver value: Such as geo-location, when there is a clear benefit to the customer.


The takeaway here is not to launch competitive offerings to these solutions, but rather mimic the development approaches that were likely used to create them. Begin any new product development process with an exercise that provides a deeper understanding of the needs of your (desired) customer base. Use this understanding to build frictionless, mobile-first products, given 80%+ of Millennials own smartphones and 95% of those devices run one of two operating systems (allowing for fairly standard UX).

Within these experiences, we see three winning strategies for banks:

  1. Hyper-personalization: Building the emotional connections that underlying trust in a brand can be achieved by tailoring experiences at the user-level. The first step in building such an experience is developing a deeper understanding of the data available to your institutions, and along what dimensions said data could enable targeting for tailored experiences.
  2. Build-to-rebuild: Create experiences knowing you’ll begin building version 2.0 the moment version 1.0 is shipped out the door. Build light and for short-term, iterative products cycles that allow you to quickly integrate user feedback and release new and improved product in a matter of weeks, not months.
  3. Value-added integrations and partnerships: Play well with others. If you observe that the majority of your Millennial base has adopted a service, such as, say, a peer-to-peer payments application or an outstandingly designed budgeting application, do not launch a competitive offering. Rather, build bank-branded experiences that seamlessly integrates with those services, and also provides value in ways that they does not. Going where customers are, rather than trying to get them to come to you, allows you to tap external brand associations for your benefit, repositioning your institution as a lifestyle-enabler.

Veteran financial institutions are at a crossroads with the Millennial consumer. Dramatic changes in their product development approaches will be required to make it through the wave of disruption sweeping their traditionally unencumbered industries. But the situation is far from hopeless. With troves of customer data and deep pockets to fund their evolution, this game is theirs to lose.

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