Payments and the Underbanked: The Importance of Reaching Millennials

Posted by Lawrence Pruss on Oct 13, 2016 9:00:00 AM

According to the Federal Deposit Insurance Corporation, approximately 27 percent of all American households are unbanked or underbanked – that’s 50 million individuals.

For purposes of this article, unbanked refers to individuals who don’t have a bank account and underbanked refers to those who supplement their bank account with alternative financial services like check cashers. Both underbanked and unbanked households are typically forced to rely on nonbank financial or high-rate lending solutions such as payday lending, tax refund, and settlement loans. They are out of the mix for traditional banks, which means little to no opportunities for payments and fees from them.

How did we get here? Why are so many people in the United States outside of traditional banking security in 2016?

While upon first glace most of us assume unbanked and poverty go hand-in-hand, approximately half of the 80 million millennials fall into this unbanked or underbanked space. One of the primary reasons behind this is distrust of the American banking system caused by the Great Recession of late 2007 to early 2009 and banking regulations implemented shortly thereafter.

The 2009 Credit CARD Act put strict limits on how credit cards are marketed and issued to younger individuals, and an inherent skepticism of large money-making institutions and Wall Street means many young adults are hesitant to pursue credit cards and other traditional banking products. In fact, more than one-third of that population have never had a credit card.

Additionally, because of their digital communication preferences and desire for fee and pricing transparency, companies that offer clear debit, prepaid, or increasing alternative financing solutions are winning over this segment. Examples include PayPal, Google, and some of the more creative credit unions with “young and free” efforts geared toward the younger generation.

Research has shown that by 2020, millennials will make up the majority of the workforce and represent a significant opportunity to provide financial products to.

How can you reach this nearly quarter of the United States population?

Establish your institution as a trusted and tech savvy brand by communicating with them.

Millennials want authentic communication, leadership, education and expertise. You can reach them through social outlets like a blog. But make sure your content authors are in their peer group, speaking their language genuinely. If you want to reach them, you need to be part of the conversation. Communication cannot be one-way.

This generation needs to feel they are being heard and involved. So, involve them. Ask for their feedback and let them rank and review your products and customer service – much the same way Amazon does. Let them help develop a product or develop their individual product. Some companies are doing this with credit cards; allowing the person to select their pricing, rewards, fees, and personalizing the card stock.

Peer reviews, whether in person or online, can affect millennial decision making. They are more willing to share their stories, both their struggles and successes, online with all of their connections to see. Reaching them on their platform is intentional and deliberate, so make sure your institution is making the most of these opportunities with your messaging content. Connecting with networking influencers, and peers that millennials trust, can also leverage your messaging. These brand ambassadors can share advice, reviews and their general sentiments with fellow millennials.

Millennials want to feel like your content was created with their interests – not their wallets – in mind. Organically introducing products and services to this generation is typically well received. Without ever being pushy, your educational content helps build strong brand-consumer relationships. People appreciate honesty, and brands with transparent campaigns win.

They also are attracted to experiences rather than things. Have you noticed how car advertisements have moved away from the car to more about the journey? This is millennial advertising. They are also more cause-focused, and all things considered equal, will pick a service provider that does something good for the world. Thus, leveraging your focus on community service in your communications with them can help your institutions stand apart from others.

Be aware that many millennials watched their parents struggle during the Great Recession and are very weary of getting overextended. So they need to feel confident that you are looking out for their best financial interests and future, not just making money off of their loyalty. Make sure you are educating them about the difference between banks and credit unions.

Changing your delivery system to include apps, online bill pay, check deposits and transfers are almost requirements to reach this generation. Mobile access is the way most millennials are logging in to things their parents use computers to do. So making your website and capabilities mobile-friendly is a necessity. In fact, make everything as mobile friendly as possible, payments included. To them, fintech means nothing because, to them, everything is tech-based.

In short, they are really not that different than the rest of us, excepts perhaps less willing to stand for the status quo. Transparency and authenticity are the overarching keys to reaching millennials no matter the tactics you feel is best for your institution. Find out what works best for your specific needs.

Lawrence Pruss
Senior Vice President and Payments Expert
Strategic Resource Management, Inc. (SRM)
5100 Poplar Ave., Suite 2500
Memphis, TN 38137
Mobile 814.934.8954
Tel 800.748.2577,

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