- Millennials are struggling to save money and manage credit amid the coronavirus pandemic.
- Banks that provide digital tools tailored to address those challenges could boost the value of the customer segment.
- Insider Intelligence publishes hundreds of research reports, charts, and forecasts on the Banking industry with the Banking Briefing. You can learn more about subscribing here.
The coronavirus crisis is having an outsize effect on millennial consumers when it comes to saving money, according to a TD Bank survey of 1,000 US consumers: Of the 60% of respondents who said they currently are not saving, more than half (54%) were millennials. And that isn't for lack of desire to save, as when millennial respondents were asked what they would do if they had an extra $1,000 right now, 46% said they would put the extra money into savings.
But millennials' financial problems don't stop at saving, with many struggling with credit usage during the pandemic as well. Approximately 17% of millennial respondents said that their credit scores have fallen since the onset of the crisis, well above the 4% of Gen X and 3% of baby boomer respondents who reported declining scores.
Additionally, 16% of millennials admitted not knowing their credit limit, almost half use more than 30% of their credit limit, and a third (34%) revolve a balance each month, suggesting that the pandemic has pushed them to the point where they are even struggling with the basic machinations of smart credit upkeep.
Banks can better serve millennial customers and increase their loyalty by providing digital features tailored to their unique challenges. Here are two tools that could help the segment rein in spending and build good savings habits—making them more valuable customers in the process:
- Spending analytics. Capabilities like visualizing customers' spending patterns and highlighting recurring charges, the way that Bank of America's Erica virtual assistant does, could prove invaluable for the 26% of millennial respondents to TD's survey who admitted to hitting a negative balance in their checking or savings accounts. If those insights could also include recommendations of strategies for budgeting, they could be even more useful, as 48% of millennials do not keep a budget, though 24% of those respondents plan to start one in the coming year.
- Automated savings. An automated savings feature like the one offered by Acorns, which rounds up the change on purchases and stores it in a savings account, could kickstart savings among the millennial consumers who currently aren't setting aside meaningful chunks of their paychecks or unemployment checks. This could nudge them toward building good savings habits, without putting too much additional financial strain on them amid the pandemic. Seeing incremental growth of their savings may help millennial customers may feel more invested in their relationship with their bank, boosting loyalty.
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