According to Visa, Millennials are the fastest growing and largest population segment in the United States with more than 75 million men and women. This statistic is relevant because millennials are our tomorrow, and it is vital to capture their business. Visa further goes on to say that the majority of checking accounts (69 percent) happen prior to college. Although millennials may be familiar with a checking account, they are less familiar with CD’s, they prefer borrowing money from their parents rather than going to a bank for a loan, and their generation is less likely to have a credit card, as they prefer cash and debit cards. A statistic provided by Fortune states that a mere one in three millennials [carry] plastic. Millennials are less likely to have a credit card than debit. This fact does not bode well for our bank as the fees we earn from debit payments are significantly less than those of credit cards.
Our bank’s problem is that we are losing money with the younger generations so we need to figure out how we can appeal to said generations in order to maintain their business activity with our bank. It is a known fact that the cost of an undergraduate degree has increased exponentially within the last 30 years. In fact, according to the Education Department data, From 1990 to 2015, student debt for the typical college bachelor’s degree increased about 164 percent. As many college graduates have an astronomical amount of debt under their belts after graduating, they are more averse to opening a credit card. It is true that the older one gets, the more likely one will find the need to open a credit card. Credit cards play a significant role in our revenue, the fees that come with a credit card (i.e late payment fees, currency exchange, overdraft fees etc..) creates a great profit for our bank. Another study from Fortune found that millennials are more likely to borrow money from their parents or friends than take out a bank loan.
This is an issue for our bank because loans are the primary use for [our] funds and the principal way in which [we] earn money. With the younger generations, it is important to make sure they feel confident in our bank and partaking in our bank activities, so we must figure out a way in which we can make it easier for them to want to invest in our bank. In order to get our millennial customer base to stay active within our bank, I suggest that we offer private student loans with a low-interest rate. Currently, private student loans have an interest around 7.81%. I suggest that we could provide our loans at a rate of around 6.5%. This may sound low, but by lowering our rates we are not only attracting a larger customer base, but customers who already have a checking account with us will be more inclined to apply for a loan with us for their, or their children’s college expenses. If they hold a loan and have a checking account with us, this implies we’ve earned their trust.
As newly graduated young adults holding less debt due to our low-interest loan offering, they will be less hesitant to open a credit card through us. Eventually one must get one, to start building credit, so we are further assisting them financially while growing our market share with this group. It is a win-win situation. I have done other research geared solely towards more ways we can attract the younger generation. The number one way is to get their attention. Visa says by promoting key features such as debit cards, our business will be more likely to attract millennials. Debit cards are the reason why the younger generation are opening checking accounts. Visa also says that 78 percent of millennials say they want a payment method that is safe and secure. By highlighting the security features our bank, and bank app provides, we can attract more customers. Since our younger generation is less familiar with corporate language, I suggest we simplify it and speak the language of our youth. By doing this, we are seen as honest, and straightforward.
Our customers will ultimately feel less intimidated. In 2016, online banking exceeded in-branch account openings, and mobile banking apps boomed. Our bank needs to implement an online and mobile acquisition so we can grow as the times change. A statistic provided by Visa states that thirty-two percent [of millenials] use their bank’s mobile apps daily. And 66-percent use it a few times per week. And twenty-four percent of millennials switched their primary checking account to have better access to mobile capabilities. By helping parents of students secure lower interest education loans, we would not only benefit from the loan, but also by gaining trust from our customers. By building these relationships, there is a natural foundation on which to build future lending potential with the students themselves. Also, by showcasing the capabilities of our phone app, and marketing not only how cutting-edge it is, but how simple, fast and easy it can be for one to keep their money at our bank. Lastly, we need to be investing in resources to ensure our bank is always at the forefront of offering the latest and most secure that technology has to offer, and our bank will continue to be extremely successful.
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