Is there a generation gap in banking?

By Stephanie Butler

A generation gap in banking? That question garners a thousand different answers.

Yes. No. Maybe. Depends. 

 We have all read the headlines:

· Millennials want mobile banking.
· The baby boomers do not want mobile banking.
· There is no need for brick and mortar anymore.
· Build more brick and mortar - with a coffee shop!

What is the real story?

There is a generation gap, of a sort. Depending on whether you are a Baby Boomer, Generation X or a Millennial, you may want a different experience from your financial institution. Or you may not. It depends on the situation and time.

One thing is a fact; the average community bank customer is older than the median age in the US. And that divide is growing. Per the ICBA in their article "Mythbusting Digital Misconceptions", the average age of a community bank customer is just over 51 years old. The median age in the US is approximately 38. 

Why is this the case?

There are many reasons, some anecdotal and some documented. Moreover, not all of it is due to digital vs. non-digital options available at the local community bank.

One reason for this age gap is that community banks have traditionally been located in smaller or more rural communities. Those areas have seen an uptick in the average age of customers vs. financial institutions in larger cities. Younger age groups tend to flock more to urban areas for that first career move or to start new businesses.

Another issue is loyalty to a brand, idea, or provider. One of the core personality traits of Baby Boomers is loyalty. This includes loyalty to their financial institution. Customers of this generation tend to stay with a financial institution through thick and thin. Baby Boomers also give a lot of weight to long-term relationships and enjoy being known by the staff at the branch they use or the commercial lender they work with (58% have never switched financial institutions.)

Millennials view this differently. Eight out of ten millennials say they would switch financial institutions for better rewards. They are not necessarily as tied to the relationship as a Baby Boomer. Millennials are also more in tune with the marketing of national megabanks (82%) as opposed to community banks (51%.)

In the end, though, the discussion cannot be just focused on how to move more millennials to your financial institution. The real discussion is how to make your bank inviting to all generations: Baby Boomer, Gen X and Millennials.

What about Baby Boomers?

We all know about Baby Boomers, right? The generation born between 1946 and 1964. Baby Boomers value structure, discipline, choices, self-empowerment and community involvement, among other things. Some interested facts include:

· Entrepreneurs aged 55-64 launch 21% of all new businesses
· 71% of Baby Boomers bank online at least once a week.
· 25% of this generation is unhappy with the banking industry
· Per Charles Schwab, 60% of Boomers have less than $100,000 saved for retirement
· This is the “squeezed” generation - caring for parents and grandchildren

What can you offer this generation? Many things. Clearly, Baby Boomers need assistance with retirement including financial advice. Financial security is a huge issue and only 24% are confident they will have enough money to last through retirement. Help answer questions about retirement options, healthcare savings accounts and how to combat potential fraud.

As noted above, Baby Boomers are busy starting businesses, taking care of parents and grandchildren and living life. Give them mobile options that work for them. Most bank online via their laptop. Share the value and convenience of mobile applications and how these can be easily used. Market auto loans and home equity loan products to this demographic. They are more likely to buy a new car or renovate their home than other generations. Whatever you do, do not market to the stereotype of Golden Years, seniors gray hair and a peaceful life. Baby Boomers are busy, active people.

According to The Financial Brand, "financial services has seen no shortage of breathless enthusiasm for the millennial generation, with banks and startups clamoring to be the first to understand and serve the needs of young ‘digital natives’ and ‘the mobile-first generation.’ But what about the rest of Americans?”

Baby Boomers still control and command a huge amount of the economy through their businesses, investments, etc. It is not enough to run after the Millennials and leave a small bit for the Baby Boomers. Look to fulfil their needs with carefully tailored products, offerings and education. And remember, word of mouth remains the top influencer for a Baby Boomers purchase of a financial product.

Next time, we will look at Generation X - my generation. Where do we fit in this discussion?

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Topics: Market Trends

Stephanie Butler

Written by Stephanie Butler

As Director of Advisory Services for Baker Hill, Stephanie Butler guides the implementation and strategic consulting for new and existing Baker Hill clients.

Butler is responsible for analyzing client goals and objectives, and providing recommendations for best practices. Relying on more than 20 years of experience within the financial services industry, she successfully maintains a client base of banks and credit unions ranging from $100 million to $100 billion in asset size.

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