Are millennials from Mars?

mobilepaymentstoday.com

The business world is mesmerized by millennials. And it seems that every organization under the sun is trying to figure them out — even the United States Potato Board, whose website hosts an article that boldly asks, "Understanding millennials — how do potatoes fit into their lives?"

This was just one of the headlines from Charles Moldow's presentation on millennials and financial services this week at Money 20/20 in Las Vegas. Moldow is general partner at Foundation Capital, an investment firm that specializes in turning startups into thriving businesses — The Lending Club, to name but one.

Moldow's slide deck, which he titled, "Millennials: Mainstream or Martians?" included contradictory news headlines that demonstrate just how poorly this massive cohort of 83 million Americans is understood:

"You get the idea that it's kind of hard to know the truth about millennials, which is why we decided to do a little research," Moldow said.

The resulting study and report — produced by custom research firm Chadwick Martin Bailey — provides much-needed clarification about the banking habits and needs of the millennial generation.

Following are some of key observations from Moldow's talk.

1) Millennials are really ambitious

More than two-thirds of millennials aspire to live better than they do now, compared with 44 percent of other Americans.

"They want to succeed in life; they want to get ahead," Moldow said. "Education plays a really important part in their desire to move ahead. And that has some particular ramifications for millennials."

2) Millennials can't live without social media and banking apps

Millennials named Facebook (43 percent), banking/finance (30 percent) and text/messaging (29 percent) as their top three smartphone apps.

This compares with the general population, whose top three were Facebook (28 percent), news/weather (22 percent) and banking/finance (21 percent).

"If people try to tell you that millennials aren't participating in banking, they would just be wrong, according to our research," Moldow said.

3) Millennials bank with the largest FIs in the US

Three-quarters of millennials bank with the top seven banks in the country, and the top three of these (Chase, BofA and Wells Fargo) account for a 70 percent share of the demographic.

Millennials choose an FI for the same reasons as everyone else, Moldow said: convenience; price and promotional offers; sophistication of the website and mobile app; and brand.

"Millennials don't want to talk to people on the phone, while the nonmillennials would rather try to have a personal experience ... but for the most part, they pick banks for the same reason as nonmillennials.

4) Millennials use the same basic banking products as everyone else

Namely, checking, savings, credit and debit products.

5) Millennials have no interest in asset accumulation products

And for good reason: They're buried under a mountain of student debt.

Fed figures show that earnings for college-educated millennials have declined 27 percent since the Great Recession, while they're taking on six times more student debt than the same age cohort of 25 years ago.

"[I]f you're a millennial, you're carrying a large amount of student debt and your disposable income is down from what you thought it was going to be," Moldow said. "You don't have a lot of money to do things like save and buy the disposable products and services that you want, because you're getting squeezed."

Concluding his presentation, Moldow offered four takeaways:

1) Millennials are human beings who use banking products

"When you read how they eschew the banking industry, how they reject banking and banking products, that they don't like the big national banks, they don't trust them and there's no transparency as the result of the 2007 crisis ... the data just doesn't support those claims."

2) Asset accumulation business models are not low-hanging fruit

"There is low-hanging fruit, but it's more about debt [management] than it is about the wealth products."

3) Mobile account opening is the path to capture millennials

"This is a mobile-first generation; they don't really focus on online, they focus everything on mobile apps and mobile Web. And if you want to reach them with financial services, go after them in the apps world, don't go after the Web world."

4) Consider 'tip-of-the-spear' strategies to gain distribution

"We find that the millennial generation adopts things in a very light way. If you want a millennial to adopt your product, come up with a very lightweight feature or piece of functionality. Build the relationship with the millennial, build their trust and then grow out from there."