Millennials — defined in the context of this article as those born between about 1981 and 1997 — are more than 75 million strong, making them the largest and most influential generation in the US.
The sheer generational size and, in turn, long-term spending power of the millennials make them an attractive target audience for a spectrum of industries and marketers.
According to Sarbjit Nahal, Head of Thematic Investing Strategy at Bank of America Merrill Lynch, millennials “are the most important group in terms of the workforce, and by 2018 they’re going to overtake the boomers. By 2025, we’re looking at over $8 trillion worth of annual net income.”
Financial Institutions (FIs), like stakeholders in many other industries, have struggled to connect with millennials. But it is imperative that they do so — and soon.
The TSYS Portfolio Profitability Model predicts that the current generational shift, as aging baby boomers earn and spend less and millennials earn and spend more, will create huge opportunities over the next decade for FIs who are prepared for this shift.
Studies have shown that millennials aren’t very impressed with the current financial industry. A recent survey from the Millennial Disruption Index found that 71% of millennials “would rather go to the dentist than listen to what banks are saying.”
And 33% “believe that [in five years] they won’t need a bank.” Traditional FIs must take note of these long-term trends and cater their services and marketing to this valuable generation — or risk being left behind by digital-oriented providers (FI and non-FI) that leverage advanced digital and mobile technologies.
Proper use of analytics and building an advanced digital engagement strategy can help payment card issuers stay competitive and strengthen their portfolio over the long term.
A new report from TSYS, Addressing the Generational Shift Among Cardholders: Strategies for FIs to Successfully Engage Millennials, looks at key insights that can help issuers capture long-term portfolio growth from millennials, who will represent the lion’s share of tomorrow’s payment transactions.
It also explores ways marketers at FIs can more effectively leverage analytics and deploy best practices for enhancing cardholder experiences through digital engagement. While the report is US-focused many of the insights can be broadly applied to other markets within North America and Europe.
This report will highlight the TSYS Portfolio Profitability Model, which divides customer segments into three core classifications based on their profitability for FIs: Future Profits, Peak Profits and Legacy Profits. It then delves into key insights about millennials and the strategic implications of each classification.
The report concludes by providing three strategies for how FIs can better engage millennials:
- Implement the use of data and analytics
- Design an advanced digital engagement strategy
- Build and develop a compelling rewards strategy.