{"id":12137,"date":"2019-12-05T09:00:08","date_gmt":"2019-12-05T17:00:08","guid":{"rendered":"https:\/\/canary.kcprod.info/blog\/?p=12137"},"modified":"2025-03-20T15:15:57","modified_gmt":"2025-03-20T22:15:57","slug":"millennials-and-bank-branches-a-bad-match","status":"publish","type":"post","link":"https:\/\/canary.kcprod.info/blog\/millennials-and-bank-branches-a-bad-match\/","title":{"rendered":"Millennials and Bank Branches: A Bad Match"},"content":{"rendered":"\n

Consumer banks are about to experience an unprecedented upheaval as more and more young people\u2014a critical demographic on which they depend for growth\u2014become disenchanted with the status quo. This creates an opportunity for new entrants to reimagine what banking will look like.\u00a0<\/p>\n\n\n\n

The number of people who use consumer banking services basically grows with the general population. In order to maintain their customer bases, banks need to constantly replace their lost older customers with kids. That\u2019s why they focus an inordinate amount of effort convincing college students to use their services. But they\u2019re getting it wrong.<\/p>\n\n\n\n

Millennials don\u2019t want their parents\u2019 bank<\/strong><\/h2>\n\n\n\n

Today\u2019s banks were designed by baby boomers for baby boomers and they have a very specific set of preferences that young people don\u2019t share. Boomers like \u201chigh-touch\u201d services and want to sit down with a banker to go through all of the paperwork they\u2019ve diligently printed out. At the very least, they need a phone number to call 24\/7. While banks have been able to control their costs by building more functionality into ATMs, they still need enormous customer service departments to satisfy baby boomer expectations.<\/p>\n\n\n\n

In contrast, a millennial\u2019s first instinct when they have a question is to turn to Google or text a well-informed friend. Making a phone call is a last resort and major point of frustration. Requiring a visit to an office or retail location means it likely won\u2019t get done. Case in point, I\u2019ve now heard several anecdotes from our millennial employees about how they or their friends haven\u2019t cashed a number of year-old checks because to them, visiting a bank branch is a huge pain. Millennials quite literally avoid branches at all costs.\u00a0<\/p>\n\n\n\n

Branches cost you<\/em> money<\/strong><\/h2>\n\n\n\n

Banks have a huge amount of money tied up in operating branches. For example, Wells Fargo has roughly 5,400 retail branches spread across the U.S. The cost of maintaining these branches is huge, averaging between $200,000 and $400,000 per branch per year. Someone needs to pay for those branches whether or not they are used\u2014and it\u2019s customers. If you take the national average of approximately 1,500 customers served per branch, that works out to approximately $200 per customer per year.\u00a0<\/p>\n\n\n\n

Let that sink in. Customers are effectively paying $200 each year through lower interest rates paid on deposits, higher interest rates charged on loans and additional fees for capabilities they don\u2019t value. It\u2019s no wonder millennials don\u2019t like banks. And attempting to turn a bank branch into a lounge, caf\u00e9 or co-working space is not going to make a difference.\u00a0<\/p>\n\n\n\n

Why don\u2019t banks just roll out more digital solutions if they need younger clients? Unfortunately, building software is not a core competence of the banking industry. In aggregate the global banking industry spends more than $261 billion on IT. That\u2019s greater than the revenues<\/em> of Google and Facebook put together. But what do they have to show for it?\u00a0<\/p>\n\n\n\n

Bank branches are the new cable TV<\/strong><\/h2>\n\n\n\n

Most people don\u2019t know banks have a large issue brewing with younger customers because banks often quote the large numbers of millennials they serve. But they only serve those millennials because a compelling alternative didn\u2019t exist when they went to college. Unlike baby boomers, millennials have shown they are happy to switch banks if a better alternative exists. In fact, according to Gallup, millennials are switching banks at a rate 2.5 times higher than their parents.<\/p>\n\n\n\n

What happened to cable is a great analogy for banks. Millennials grew up watching television on cable TV networks. But that didn\u2019t make them loyal. They were the first to cut the cable cord even when streaming was only offered on computers and mobile phones. In other words, they put up with certain tradeoffs to watch on the platforms they prefer. Young people will likely be the first to leave banks once a viable alternative emerges.<\/p>\n\n\n\n

A new kind of banking service<\/strong><\/h2>\n\n\n\n

This climate creates the perfect environment for native mobile banking services to serve millennials with great success. But just moving existing banking services to mobile will not be enough to convince people to make the switch. These native mobile banking services will\u00a0 need to offer something the banks currently don\u2019t or can\u2019t.\u00a0<\/p>\n\n\n\n

For example, a number of new challenger banks have succeeded in attracting the previously unbanked and people living paycheck to paycheck by offering access to their direct deposited paychecks two days sooner. It\u2019s easy for a new bank to forgo the money they would have earned on those two days of float if they design a new business model to address it from the beginning. They can make up that lost money by earning interchange fees on debit card transactions \u2014 fees that customers don\u2019t see or incur, and traditional banks can\u2019t charge due to regulatory challenges.\u00a0<\/p>\n\n\n\n

The next group likely to be served by new tech enabled banks are a group I refer to as \u201cmillennials who save.\u201d There have been many articles written about how millennials are a lost generation that have no hope of succeeding financially. But that ignores almost 20 million millennials who have great jobs and are thriving. Having grown up digitally native, this group uses the Internet to find ways to get more out of the money they earn\u2014whether through premium travel reward points on credit cards or higher interest on their cash savings balances.\u00a0<\/p>\n\n\n\n

Wealthfront has found great success with millennials who save by leveraging its huge investment in automation to pass along its savings to its clients\u2014in other words offering more<\/em>. Whether it\u2019s higher interest on their idle cash or lower fees on their investment accounts, Wealthfront has struck a nerve with this group and attracted deposits at an unprecedented rate.\u00a0<\/p>\n\n\n\n

At Wealthfront, we are working towards a future where it will be possible for clients to direct deposit their paychecks, have their bills paid automatically and then have the remaining money routed to the most appropriate type of account depending on their particular situation or goals. This will enable millennials who save to put their financial lives on autopilot with the confidence that everything will be optimized, something no banker in a branch is capable of doing.<\/p>\n","protected":false},"excerpt":{"rendered":"

Consumer banks are about to experience an unprecedented upheaval as more and more young people\u2014a critical demographic on which they depend for growth\u2014become disenchanted with the status quo. This creates an opportunity for new entrants to reimagine what banking will look like.\u00a0 The number of people who use consumer banking services basically grows with the […]<\/p>\n","protected":false},"author":4,"featured_media":12149,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"inline_featured_image":false,"footnotes":""},"categories":[1315,2390],"tags":[2374,2401],"coauthors":[99],"class_list":["post-12137","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industry-insights","category-saving","tag-banks","tag-millennials"],"acf":[],"yoast_head":"\nMillennials and Bank Branches: A Bad Match | Wealthfront<\/title>\n<meta name=\"description\" content=\"Consumer banks are about to experience an unprecedented upheaval as more and more young people \u2014 a critical demographic on which they depend for growth \u2014 become disenchanted with the status quo.\" 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