Millennials are now the largest generation in the workforce in the U.S., and among the countless ways they shape new trends include ways their businesses work with financial institutions. Bottomline Technologies wanted to dive into exactly how millennial business owners drive the way companies and banks work together.
In a survey of several hundred financial decision-makers at U.S. businesses, Bottomline found a fault line between what companies demand from their banks and what their banks are willing to offer. As a consequence, banks stand to lose a whole generation of business clients.
“As a new generation of business banking decision-makers — the millennials — emerges, they bring with them a different approach and priorities about what is most important to them as business banking decision-makers and what separates business banks from each other,” said the report’s authors, General Manager of Digital Banking Norm Deluca and Chief Strategy Officer Jason Dorsey.
With a survey aimed at exploring how millennial decision-makers are shifting business demands from their banks, Bottomline discovered a blunt reality: “Businesses are not getting what they need from their business banking relationship.”
Interestingly, though, researchers found this to be true across all three generations included in the study: millennials, Generation X and Baby Boomers.
The majority of professionals surveyed across generations report either limited or no choice offered by their banks when it comes to online business banking portals. Nearly half said they aren’t using their banks for cash flow management or forecasting — equivalent to 13 million businesses in the U.S., the report stated.
The Millennial Difference
With each generation agreeing that banks could be doing better, what makes the rise of the millennial decision-maker a threat to banks? Simply put, this generation is more extreme in its dissatisfaction of banking services offered to their businesses and more willing to act on it.
Nearly three-quarters of all professionals surveyed said their relationships to their banks can be a make-or-break aspect of their companies. But that number rises to 83 percent when focused on millennials.
And while 38 percent of those surveyed said they are using more than their primary commercial bank to meet all of their financial services needs, like investing, accounts payable, payroll and other tools, that figure jumps to nearly half among millennials, Bottomline found, signaling that financial institutions are losing out on more business than usual among millennial clients by not offering more holistic banking solutions.
Millennials aren’t only more willing to go outside their primary banks for more services than their peers in other generations, they’re also more willing to ditch their banks altogether, with two-thirds reporting willingness to switch to a different FI. These professionals cited services like accounts payable and receivable solutions, business planning, cash flow forecasting, heightened banking security, performance software and other features that could motivate them to say goodbye to their banks.
“What makes this even more dramatic,” the report noted, “is that millennials are more than twice as likely to consider seriously switching for any of these reasons when compared to Baby Boomers.”
Banks Change Their Strategy
Financial institutions need to switch up their strategies to lure and keep millennial business clients.
Bottomline found that nearly two-thirds of millennials are contacted personally at least once a month by a business looking to sell their services. But an in-person meeting isn’t likely to be as convincing to millennial professionals as it is to older generations, researchers found, with just 16 percent of millennials preferring an in-person meeting to decide on a banking provider.
Of course, a willingness to switch banks could be a good thing for the winning side of that deal, though Bottomline warns that, if banks are to benefit from this trend, they need to make bank switching as seamless as possible.
A new generation of decision-makers, while they may be more demanding and fickle than other generations, isn’t a death sentence for banks.
“The bottom line is that commercial banks and credit unions and their business clients need each other and possibly more than ever before,” the report stated. “The question then becomes: Which banks will move to capitalize on their trust advantage and drive companies who are switching by delivering a compelling alternative to the market first?”