With so much focus on traditional and mobile credit card processing products, banks may be missing the boat on one population that’s quickly becoming more relevant in the financial fold: Millennials.
The problem with millennials, of course, is that all banks know they need to start catering to their needs. After all, this is the population that’s now seeking mortgages, loans, credit card loyalty programs, and other new opportunities for banks to seize upon. But it comes with a catch. Millennials are digital-first thinkers and they expect their financial institutions to be just as tech-savvy as they are. Otherwise, banks risk losing customers to startups and companies that embrace the latest trends in the payments market — driven in large part by the rise of the app economy, P2P payment apps, etc.
So how can a bank focus on managing its standard and mobile credit card processing needs, all while evolving to keep up with the latest marketplace trends? Embrace the fastest growing customer base that’s getting deeper into the financial ecosystem as they earn bigger and bigger paychecks.
According to the Millennial Disruption Index, 33 percent of Millennials believe they don’t need a bank. In five year’s time, 68 percent of that same group predicts the way people access money will be drastically different. The index also found that a majority of millennials don’t see a difference between banks, which shows how easy it would be to lose a customer.
Building relationships in the past with customers used to be much more tied in with your credit card processing efforts and actual products offered. Customers wanted a new account so they went to their bank to see what products were offered. Those days are long gone. Now, with the power of the internet at their fingertips on multiple types of devices, millennials are looking for experiences over products, and they want organizations who customize services to fit their needs.
First, banks need to think about how they can generate new revenue streams beyond their core legacy products and credit card processing offerings. Today’s diverse financial ecosystem calls for banks to think outside the box and move toward where and how millennials are choosing to use their money.
That means getting on board with mobile payments and mobile credit card processing, integrating with digital payment networks and working with payment facilitators to onboard APIs that allow you to constantly upgrade your solutions. Being tech-savvy also means having more forward-thinking ways to authenticate a payment, including biometrics technology that give the consumer reassurance that your products are secure and are putting their needs first.
Not only are millennials drawn toward tech for all of their financial needs (mobile banking, sending payments to friends, investing, etc.), they are more aware than ever of the risks that exist within the payments ecosystem. They are also inherently less trusting that banks may looking out for the best interests, and they are more likely than other generations to compare products before deciding which route is best for them.
With services like PayPal and Venmo, which allow for real-time P2P payment services without having to interact with a bank, more and more millennials are turning toward these networks to facilitate their payments. While big banks like Chase, Bank of America, Citibank, and BMO Harris have recently embraced the concept of P2P payments that can be initiated within an app, or via email, they are still playing catch up to the digital payment networks that have created business models around appealing to younger generations.
As for how this impacts both standard and mobile credit card processing? While many of the digital payment networks are linked to bank accounts, the actual facilitation of the payment process is increasingly being handled by third-parties that millennials are turning toward more and more for their everyday money spending and sending needs. That’s a huge chunk of profit banks are missing out on by not being ahead of the digital payments curve.
In managing their arsenal of standard and mobile credit card processing tools, banks also need to embrace trends that millennials are drawn to, such a chatbots to initiate conversations online, or via an app, to answer basic customer service questions. The quickest way to lose a customer is being unavailable to quickly solve their problem at the time it’s occurring.
The only way to catch up? Jump on the bandwagon and offer products and services that align with the latest trends disrupting the payments and financial services ecosystems. Data from Juniper Research shows that the value of P2P mobile payments is expected to hit $540 billion by the year’s end, which is a 40 percent increase from 2016. Even more noteworthy, the value of P2P transfers for all digital channels is expected to be $200 million more than last year.
The competition for millennial dollars is becoming increasingly steep and if banks don’t comply with the demand of millennials and tech disruption, they risk losing out on their biggest advantage: their credit card processing infrastructure that’s paved way for the massive banking businesses in the market today. The millennial audience is ripe for banks to tap into — but it’s up to banks to innovate faster and adapt to today’s top tech trends to do so.
Anna Lothson is a content contributor for Payline Data. She previously wrote for PYMNTS.com, as a Sr. Content Producer, where she focused on financial services and payments innovation, fraud and security, emerging payments, and FinTech news, research and thought-leadership content across the payments industry.