There are an estimated 80 million millennials – those much sought after consumers aged 18-34 – in the U.S. In relation to the payments industry, they are thought to display some erosion of trust in traditional financial institutions, while being more than willing to engage with new payments models, including person-to-person payment platforms such as Venmo, Square Cash and others. Last year, consumers transferred $379 billion through online and mobile, according to research firm Javelin Strategy.
There are plenty of articles and research about what makes millennials tick, but the Payments Innovation Alliance gathered a half dozen of them during its Members Meeting in San Francisco last week – and simply asked them.
In a highly interactive session facilitated by Jane Wallace, a principal for Wallace Consulting, the group of diverse millennials in various stages of their lives – some were college students; others were employed, but living with roommates; another was engaged and thinking about eventually purchasing a house – were eager to share their thoughts, habits and preferences when it comes to making payments.
Here are some interesting nuggets:
- Do they carry cash? – Yes, but rarely. When they do, they may carry between $20 and $60. They view cash as too risky. “If I lose a credit card, I can cancel it. If I lose my phone, I can wipe it. If I get robbed, the cash is gone,” said one millennial.
- Do they ever write checks? – Yes, but rarely. One panelist used to pay her rent via check before the rental company switched to online payments; one still gets paid by check; a third has a checking account, but has never written a check in his life.
- What matters to them when considering opening an account at a financial institution? – How easy it is to access their parents banking account; how many fees the financial institution charges, how much and for what.
- If a financial institution offered an app with the same functionality of Venmo would they still use Venmo? – Yes, because of Venmo’s social aspect. Also, financial institutions would likely charge a fee, while Venmo is free.
Given that the Alliance Meeting highlighted the role of fintech in payments innovation, much of the discussion focused on new payments models – especially Venmo, which is a money transfer app that lets users make and share payments with friends. According to research, Venmo processed $7.5 billion in transactions in 2015, and $1 billion in January 2016 alone.
One of the millennial panelists said he prefers Square Cash to Venmo because he knows that Square Cash takes money directly out of his bank account, while Venmo uses a third party. Why does that matter? Real time is always preferable, he said. “I don’t like being in that weird, gray area when I’m waiting for the [money] transfer to happen,” he added.
What are the major takeaways from the live focus group?
- For millennials, cash and checks are outdated; they prefer mobile payments – but the app must be free and should have a social sharing aspect.
- Financial institutions still serve a purpose, but they aren’t fulfilling it. Millennials view financial institutions as their trusted, go-to resource to attain financial knowledge – when they reach that stage in their lives.
How can financial institutions connect with millennials? A good start would be to provide needed financial information – general advice, not bank-specific information – in quick bursts of easily digestible information such as videos, infographics and webinars on the bank website. “Financial institutions are outdated,” said one millennial. “Everything requires a written form.”
“A really good customer service number would also help,” said another millennial panelist, who added that she prefers to talk to her bank on the phone versus in-person or via online chat.
As they grow older and their financial habits mature, the millennials said they expect their financial institutions will have a role in their lives. “I will bank at a financial institution that has a good reputation,” she said. “Venmo is too new. I will trust them with a transaction of $20 or less. But when I need to make a car payment, I will do that through my bank.”
Check out #AllianceSF tweets from the February Members Meeting via Storify.