Leveraging Trusted Advisor Role Depends On Data

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According to a three-year study by Scratch, Millennials consider financial institutions to be the most hated and irrelevant brands on our planet. As dramatic as it sounds, this finding is unremarkable, at least as concerns this generation’s emotional position on financial institutions.  In 25 years of being in the FinTech industry, I have never heard people say they loved their bank or wanted to send flowers to their credit union. Most of us don’t even like the act of banking no matter how convenient it gets.   For most of us, it is simply a necessary yet mundane chore we have to do. 

The good news for FIs is that, when it comes to money, love does not determine where we keep our cash and other financial assets.  That decision is about trust.  We may not love our FIs but we trust them because they keep our money safer than it would be at Google, Apple, Amazon and PayPal.  This trust sans love relationship has its foundation anchored firmly in the regulatory oversight the government exercises over our banks and credit unions.

While the fact that Millennials hate FIs is not particularly earthshattering news, the description of banks and credit unions as irrelevant is worth noting.  Over time, many FIs have become increasingly a commodity provider for a large segment of our society whether they are Millennials, Gen Xers or Baby Boomers.  This is because FIs have lost control of the data they need to build a meaningful (and profitable) relationship with us. 

A March 2014 BAI Executive Report “Engaging and Retaining Mass Affluent Customers” highlights this point.  The mass affluent demographic represents a target market of 13 million households in the US with total incomes of $100,000 or more.  There are four primary groups in that market:  young professionals, mature professionals, pre-retirees, and retirees.

For most FIs, the key to increasing the mass affluent customer base lies in attracting the young professional segment.  This segment has two very unique characteristics:  they are heavy digital device users and many are Millennials and Gen X. To attract this group with any level of success, a bank or credit union must be able to analyze the financial footprint of these individuals (transactions, accounts, budgets, etc.) while at the same time offering them a full-featured digital banking experience they can access from any of their many devices.

Both of these services are very difficult do achieve.  The data that yields the information required is not only scattered across the person’s relationships outside the FI but also across disparate systems inside the FI, including the digital banking channels where multiple solutions are used to deliver discrete services.  Within these digital channels, customers form their opinion about the FI based on their user experience.  When the experience is fragmented, generic or difficult, the opportunity to retain the desired demographic segments is largely lost.

The young professional segment will seek non-traditional providers for many of their financial services needs from simple payments to mortgages to financial management.  Even if they do maintain relationships with one or two FIs, it will likely be for the purpose of depositing paychecks and paying bills.  The value added services they need as they mature from young professionals to mature professional to pre-retirees come from other sources leaving the traditional retail banks or credit unions serving primarily as an accounting system for their day-to-day living.