Report on millennials holds bad news, good news for traditional FIs
A new report from Packaged Facts suggests a clear trend among millennials away from having checking and savings accounts at traditional financial institutions even while using these providers for other products and services.
The analysis, captured in “Unbanked and Underbanked Consumers in the U.S., 4th Edition,” challenges the time-honored banking model that views checking and savings accounts as a foundation for broader, deeper customer relationships.
The report found that a different type of “unbanked” young adult consumer is emerging — one who does not own traditional accounts because he or she has more, not fewer, options and might not view these products as relevant today.
However, these consumers have not necessarily rejected traditional banks altogether.
According to the report, the number of 18–34-year-olds who had used a traditional FI in the past year for services other than checking or savings grew from 20 percent in 2008 to 38 percent in 2015. These services might range from major loans to prepaid cards, money orders or coin-counting.
The report says the idea that millennials are abandoning banks may be significantly overblown. By one measure — i.e., checking and savings accounts — traditional FIs are losing out on younger checking and savings accountholders, but by a much broader measure, use is actually growing:
The question is whether this use translates into big-ticket revenue in the form of major loans or investment vehicles and steady, incremental revenue in the form of credit cards and prepaid cards — or merely an occasional piggyback on branch convenience for lesser products or services.