Boston-based Wainwright Bank is among the financial institutions that has worked to attract younger generations of bank consumers, something many bankers say is important to their future.
They may not have much money, for the most part, but Generation X and Generation Y are the next big wave of consumers, and bankers are realizing it takes different strategies to attract those consumers than more mature and older customers.
Throw in a competitive rate environment and the need to stay on the cutting edge of technology, and bankers are finding that straddling generations of consumers is not the easiest task, since a one-size-fits-all model just isn’t going to cut it in today’s banking scene.
“It’s an issue all financial service industries are wrestling with,” said Kevin Tierney, president of Saugusbank. “We have a demographic that is very loyal. The older generation seems to be more loyal.”
While it is unlikely that an older customer who has banked in the same place for a significant period of time will pick up and switch to a new place, Generation Xers and Yers do not fit the same mold. And just because their parents banked somewhere does not make young adult consumers a sure thing for banks today.
“The Generation Xers and Yers aren’t loyal to an area or an institution. They worry about different things,” he said. “Xers and Yers are more involved in the management of their finances.”
Although it may be a ways away, younger consumers are already thinking and planning for the future and such things as retirement and overall financial security. Tierney said they will shop around for specific services, and it is an important time for bankers to think about how to best cater to the next generation of banking customers, rather than the bank’s bottom line.
“Generation Xers and Yers are looking for the services they need rather than what banks are trying to sell,” he said. “They are more likely to shop around.”
Tierney said Saugusbank attracts the younger generation with competitive pricing, technology and a strong focus on safety and security, which all appear to be must-haves for gaining their business.
“It’s meeting their needs, and there is not a one-size-fits-all for this generation,” he noted. He added that finding the exact formula to draw in the younger bankers is like searching after “the Holy Grail in retail banking today.”
‘A Huge Message’
“The biggest challenge for bankers is to build out a straddling strategy,” said Jim Jones, president and founder of First Wellesley Consulting, a management advisory firm that specializes in the financial service industry.
According to Jones, there are several factors to consider when trying to attract the next generation of bank customers. A leading element is technology, he said, noting that seven out of 10 local bankers say the younger generation prefers electronic banking.
However, Jones added that some bankers are aggressively marketing to the new generations and investing in technology such as Web site redesigns, while others are taking more of a wait-and-see approach.
“These are not money-making accounts,” said Chris Bramley, president of TD Banknorth Massachusetts – a division of Portland, Maine-based TD Banknorth Inc. – on the subject of younger consumers. But bankers still see the bigger value of attracting those consumers, he added, since one day their names will be tied to larger accounts and their need for products and services will grow.
However, Banknorth does actively recruit the young savers and spenders in its area. With several colleges in Worcester and Springfield – communities within the bank’s footprint area – there is an opportunity to capture the younger pool of consumers. The bank sometimes will set up a stand to open new accounts at some of the colleges and also has placed ATMs on a few of the campuses, making the bank a convenient option for the students.
“The idea is that some of them will stay in the area,” Bramley said. “We are more about building long-term relationships with all generations.”
Banknorth has developed a marketing and training packet known as “Turning Point,” which lays out products and services that are appropriate for the different stages of a banking consumer’s life.
“We try to listen to them and listen to where they are in their life,” Bramley said.
While several bankers are wondering just how to attract a new generation of consumers, Boston-based Wainwright Bank has aligned its mission with what it believes matches the values of many younger people. Wainwright calls itself a socially progressive bank, with its deposits primarily going toward loans for nonprofits and organizations that have a social cause element to them. Although it wasn’t necessarily the bank’s plan to attract a younger crowd with such services, that’s exactly what has happened, according to Steven F. Young, senior vice president of consumer banking.
“We have been able to attract a younger audience that is all jazzed up about that,” said Young.
A few years ago, the bank offered a credit card where 1 percent of sales made with the card went to local gay and lesbian organizations. Young said that attracted a lot of attention from the younger generation of consumers.
“It sent a huge message about who we are,” he said. “Our demographic is probably a little younger than other banks. The older people obviously have more money, but that’s about to change. We just have a different strategy, a different angle.”
Jim Braind, senior vice president and director of marketing for Natick-based Middlesex Savings Bank, said his bank has considered reaching out to the younger consumers.
“We’ve actually been giving it a fair amount of thought lately,” he noted. “The younger group tends to be more online, as you would expect.”
Braind said the key to serving the more mature segment of the bank’s customers is stability. On average, Middlesex branch managers have been with the bank 15 years, he said.
“It’s old-fashioned relationship building,” he said.
Middlesex is well known throughout its geographic footprint, he said. The bank will host events and work to get its name and its staff out in the public eye. However, when it comes to reeling in the 20-something crowd, the bank knows exactly where its weakness lies, he added.
According to Braind, having physical branches in predominately suburban areas presents a challenge when young adults go off to college or opt for a more urban lifestyle. Braid said not having a Boston branch makes it harder to keep and attract the younger generation of consumers. However, he said that doesn’t mean they are gone for good.
“We need to grab them when they come back,” he said.
After college, or when the younger generations of consumers give up the city life, they may likely turn to a community where the bank has a strong presence.
“We want to be the best at home, and we don’t want to spread ourselves too thin,” he said.
Rana Murphy, senior vice president and East Coast regional manager at Citizens Bank, said it is harder to attract older customers if they already have a relationship with other banks. However, the younger crowd is drawn to convenience, technology and competitive rates, she said.
While it might seem simple enough, Murphy added, it is important for banks to stay on top of all those areas. The Massachusetts banking scene is competitive enough, and it’s no secret that attracting Generation X and Generation Y consumers is important for a bank’s future, assuming it can retain them once they become customers, she said.
Murphy said Citizens is well laid out, with 262 branches spread throughout the state. And although she said she doesn’t think Citizens has had much trouble attracting younger customers, she cited things the bank has done that might have helped in getting their attention, such as being the first in New England to offer the MasterCard Tap N Go PayPass, which works like an ATM card without the necessary swiping or signature.
“You have to be on top of technology,” she said. “They are a generation that doesn’t want to waste time or money.”
