Gen Y: Profiting from Fickle, Mobile and Real-Time Young Adult Bankers and Payments Users

Mar 24, 2011

Gen Y: Profiting from Fickle, Mobile and Real-Time Young Adult Bankers and Payments Users


Javelin: The Information Financial Institutions Need to Understand, Attract, and Engage Gen Y Consumers

San Francisco, CA, March 24, 2011 – A new Javelin Strategy & Research report issued today —Gen Y: How to Engage and Service the New Mobile Generationis a comprehensive study of the growing Gen Y market (ages 12-32) and the personal finance behaviors of Gen Y consumers. Javelin’s forecast of Gen Y’s growing financial clout indicates Gen Y will earn more than all other generations, eclipsing Gen X (ages 30-50) within 10 years. By 2025, Gen Y will be responsible for $8.3 trillion or almost half (46%) of total personal income.

Javelin’s report examines how FIs can connect to Gen Y, opportunities and challenges in developing profitable consumer relationships, and the critical services FIs must offer to attract and retain Gen Y customers. The report delves into the profile of the Gen Y consumer and provides such details as the frequency that Gen Y consumers switch FIs and their levels of satisfaction with their current FIs, the types of personal finance products Gen Y wants and will use, and Gen Y’s preferred methods of mobile communication and interaction with financial institutions.

Gen Y is an attractive consumer group notable for being among the first to try mobile banking, personal finance management, P2P and other innovative services,” said Mark Schwanhausser, Senior Analyst, Multi-Channel Financial Services. “But financial institutions face a tough challenge about when to woo Gen Y – now, when they’re not as profitable, or later, when they might have imprinted with a rival.

Javelin found that mobile banking is a requirement for Gen Y consumers. About 28% of Gen Y consumers have used mobile banking in the past 90 days, compared with 18% of all consumers. Gen Y consumers switch banks for mobile banking, use it frequently, and value it. Javelin’s findings have critical implications for FIs and their marketing strategies as FIs race to meet Gen Y’s needs for real-time and secure data, mobile communication preferences and downloadable apps.

In addition to characterizing the Gen Y market, Javelin identified a number of factors that will have a major impact on the profitability of the Gen Y market. Javelin research shows that Gen Y consumers have a lower satisfaction rate than that of all consumers, which produces a higher switching rate and increases customer retention costs. Since Gen Y shows a strong preference for electronic and mobile interaction, FIs have an opportunity to guide Gen Y consumers toward less expensive electronic channels, such as personal finance management through online banking and online bill pay. The report presents details of cost-cutting measures FIs can implement to improve profitability from the Gen Y market.

“In light of the recent instituted and proposed regulations that cap fees, FIs need to re-examine their account profitability and pricing structures,” said Mary Monahan, Managing Partner and Research Director of Javelin Strategy & Research. “Our research shows that revenue from Gen Y customers will be disproportionately affected, because 43% of Gen Y consumers prefer to use debit cards as their primary method of payment for any type of purchase or bill payment versus 34% for all consumers. Since interchange and overdraft revenue from debit card transactions has subsidized such services as free checking and free direct deposit accounts for the past decade, FIs will need to determine– from a profitability standpoint – what to do about these free services.”

The Gen Y: How to Engage and Service the New Mobile Generation report provides detailed information about the personal finance behaviors of the Gen Y market and presents strategies that FIs can use to engage Gen Y consumers and improve account profitability in the new regulatory environment. The report, which is based on information collected from several Javelin surveys that targeted populations’ representative of the overall U.S. population in proportions of gender, age and income, provides specific recommendations on how FIs can pursue a profitable path with the Gen Y market.

Selected Key Report Findings – Gen Y: How to Engage and Service the New Mobile Generation

  • The intricacies of Gen Y’s personal finance behavior and strategies and tactics to develop relationships with Gen Y consumers.
  • The rapid rise of Gen Y incomes, and how and why FIs need to engage Gen Y consumers sooner rather than later.
  • The factors affecting the profitability of the Gen Y market: cost-cutting measures and regulatory impact.
  • The characteristics and service offerings of financial institutions that will most likely attract Gen Y comsumers  and how other FIs can compete.
  • The critical services FIs must promote to Gen Y consumers to achieve operational savings and grow the Gen Y customer base.

Contact
Mark Schwanhausser, Senior Analyst, Multi-Channel Financial Services at Javelin Strategy and Research, is available to speak about the research behind the report and discuss the key findings regarding the Gen Y market. To arrange an interview with Mark and/or view available research (available to qualified members of the media), please contact Liz Travers at (925) 225-9100 ext. 31 or etravers@javelinstrategy.com.

For more information about this or other Javelin reports, please contact Liz Travers at (925) 225-9100 ext. 31 or etravers@javelinstrategy.com or visit www.javelinstrategy.com/research.

About Javelin Strategy & Research
Javelin Strategy & Research is the leading provider of quantitative and qualitative research focused on the global financial services industry. Our extensive quantitative data and deep analyst experience enable us to forecast the direction of the financial services market and make recommendations that empower you and your business to succeed.