OBSERVATIONS FROM THE FINTECH SNARK TANK
A March 2014 article in Fast Company titled Sorry Banks, Millennials Hate You included the following:
When Scratch polled 10,000 millennials to find out which industry was most prime for disruption, the results were clear: Not only did banks make up four of their top 10 most hated brands, but millennials increasingly viewed these financial institutions as irrelevant."
Not to be outdone, a few months later The Atlantic jumped on the bank-bashing bandwagon with its own article, titled Millennials Really Don't Like Big Banks. That's Going to Disrupt the Financial Services World.
Millennials must have gone through some serious changes over the past five years.
If they haven't, then why are 56% of Millennials giving megabanks (the four largest US banks) their checking account business? If they hate the big banks so much, why did JD Power report that Millennials' satisfaction with big banks is now virtually equal to that of mid-size and regional banks?
The "Millennials hate banks" meme is a myth.
In fact, there's a big opportunity brewing for banks--and the megabanks, in particular--with Millennials: Providing non-financial products and services like cell phone damage protection and identity theft protection.
Service Ownership by Millennials
Among Millennials, roughly two-thirds six in 10 have cell phone damage protection and roadside assistance, with a majority of them paying directly for those services. In addition, about half currently get prescription discounts and identity theft protection, again with a majority paying out of their pockets for those services.
| Millennials' Access to Subscription Services | ||||
| Percentage of Millennials that... | ||||
| Don't have the service but would like to | Have the service, and pay for it directly | Have the service, but don't pay for it directly | Don't have or want the service | |
| Identity theft protection | 31% | 20% | 29% | 21% |
| Personal/family data storage | 29% | 20% | 19% | 31% |
| Child identity theft protection | 27% | 15% | 16% | 42% |
| Rx, vision, hearing discounts | 26% | 31% | 25% | 18% |
| Travel/trip insurance | 26% | 18% | 19% | 37% |
| Roadside assistance | 19% | 40% | 26% | 15% |
| Cell phone damage protection | 18% | 42% | 20% | 19% |
| Source: Cornerstone Advisors | ||||
Across the seven services, however, between 18% and 31% don't have the service, but would like to.
That's an opportunity for someone--as are the Millennials who currently pay for those services and might be open to considering a different (and less expensive) provider.
Is there an opportunity here for banks?
Millennials Would Consider Financial Institutions for Non-Financial Services
The answer is definitely yes--although they're not the only potential provider that Millennials would consider.
When asked who they would purchase a bundle of subscription services from, nearly half of Millennials said they would purchase it from Amazon (big surprise, eh?). But 36% said they would purchase those services from their bank--slightly more than the percentage who would purchase them from Apple or PayPal, and significantly more than the percentage who would buy them from Facebook or Venmo.
The opportunity isn't equally spread among financial institutions, however.
Among Millennials who bank with one of the megabanks, four in 10 said they would purchase the subscription services from their bank. That percentage declines to 28%, however, among Millennials who consider a large regional bank or a credit union their primary bank. And among those banking with a community bank, just one in five would purchase the services from their bank.
Non-Financial Products: A Great Opportunity for Revenue Growth for Banks
Banks and credit unions not only miss opportunities to expand their sources of revenue by not offering non-financial services, they potentially lose interchange revenue when consumers purchase these services using another issuer's debit or credit card.
Banks and credit unions are concerned about staying (or becoming) relevant to young consumers. Offering non-financial products--bundled with or without checking accounts--in a step in that direction.
