Millennials not only are changing the way businesses work, but also the ways that business banking works.
As the leading edge of the millennial generation nears age 35, more are starting their own business or taking over their family’s business. Bankers are scrambling to keep up with millennials’ technology requirements and their desire for relationships and explanations about the decisions that affect their businesses.
Banks also are furiously studying this generation, conducting surveys, combing others’ statistics for trends and talking with millennials one-on-one and in focus groups about what they want.
BMO Wealth Management commissioned a survey of American millennials’ opinions on a number of issues that affect them. While not strictly a survey of business customers, its results were revealing.
Fifty-one percent indicated they want personalized advice from their bankers and want that advisor to have deep knowledge and years of experience. Forty-six percent valued a high level of service and communication.
One-quarter were interested in the bank being engaged in socially responsible investing. The same percentage expected the bank to use innovative technology, but a scant 5 percent indicated a preference for a robo-advisor. Another 18 percent responded with “none of the above.”
The bank’s conclusion? Millennial business owners want convenience, simplicity, speed and transparency. All generations want to understand how the bank’s products and services can help them meet their goals, but millennials add a focus on the technological tools that can get them there, says Todd Senger, market president and group head of diversified industries for BMO Harris.
Unlike previous generations, millennials also want to know how decisions were made about their business credit and who made those decisions, Senger adds. That desire for transparency likely sprang from the financial crisis, says Kevin Fairs, managing director of private banking for BMO Harris in Minnesota and northern Wisconsin. Millennials came of age in a time when adults started questioning the banking industry, he says.
BMO Harris executives also are learning from their millennial team members.
“They are so much more efficient from a time management perspective than I ever was and my generation has been,” says Senger, a Gen-Xer. “They’re busy and they want convenience, but at the same time they want speed and they want execution. They are such a more informed consumer and/or buyer of products and services in terms of how they go about their decision process.”
Wells Fargo partnered with GfK for a study on millennial small-business owners in summer 2016. The bank found that this generation is in it for the long haul and they report seeing their business endeavors as investments in their future. They also are more likely to have a formal, written business plan (35 percent) than did their older counterparts (27 percent). Wells Fargo developed an online resource for younger business owners, including a business planning tool and a credit center to help them find credit options.
Millennials have driven banks’ push for mobile personal banking. Two other major banks have begun offering mobile banking to their business customers. In June, PNC Bank rolled out mobile banking to its business cardholders, who can now pay for corporate purchases on their smartphones or mobile devices via Apple Pay, Android Pay or Samsung Pay. U.S. Bank also offers mobile banking.
“That demographic is changing very quickly, so when they’re using it in their personal lives, they want to use it in their commercial lives,” says Kate Kelly, regional president of PNC Bank in Minneapolis. “That’s been adopted nicely.”
Fifty percent of retailers surveyed by Forrester Research had installed or planned to install near-field communication equipment to accept payments via mobile phone by the end of 2016. Another 22 percent said they planned to do so in 2017. Consumers have been slow to adopt in-person pay-by-phone, however. Payment processor Cayan reported that in-store mobile payments accounted for just 0.6 percent of 2016 Black Friday sales, although that doubled the usage in 2015.
Given their tech proclivities, millennials will probably take the lead in waving their phones at these systems rather than swiping a business debit or credit card. Paying by phone for business needs is also expected to double by 2020, partly because of the security that millennials have experienced with mobile personal banking, Kelly adds.
“Because it’s not a new technology for the millennials, it’s going to be a very quick adoption,” she predicted. “Account numbers are not being shared with the merchant. It’s convenience and it’s security that I think that this group is looking for.”
In some regions, PNC has also rolled some of its day-to-day business banking services into a mobile suite called Cash Flow Insight. Business owners can use it to see and manage cash flow, run scenarios and make projections rather than clicking through to different pages to accomplish those tasks. The bank also has begun to offer its merchant services customers a cloud-based integrated payment system with integrated software and optional add-on apps. This service, called Clover, enables retail employees to conduct transactions on tablets anywhere in the store rather than just at a cash register.
Smaller banks also are searching for the best ways to serve their millennial customers. St. Paul-based Sunrise Banks recently sent a handful of employees to San Francisco’s highly regarded Thinktopia branding agency to meet with groups of millennials. Each cohort represented a different segment of the millennial population—consumers, small-business owners and minorities. The feedback was eye-opening, says David Reiling, chairman and CEO of the bank, which has $900 million in assets.
Anchor Bank is using a food truck to connect with millennial customers.
Millennials want banks to provide financial education for their business and personal lives, Reiling says. Like previous generations, they want to have relationships with their bankers, but on their own schedules, which may not coincide with bankers’ hours. They also want to get the most out of those relationships.
“The biggest takeaway from that is, if you’re going to provide advice, it almost needs to be on demand,” Reiling says.
Other bankers have found the same to be true in their day-to-day dealings. Fairs found he had to communicate electronically on Hong Kong time with a millennial member of a Midwestern business-owning family who now lives overseas. Sometimes, bankers need to set boundaries with millennial clients to preserve their own quality of life.
“In their working style—anywhere, anytime—there can be a mismatch,” says Arleen Sullivan, director of community banking at Anchor Bank in St. Paul.
One of Anchor’s business bankers had to explain to a millennial client that she needed family time while on vacation with her seven-year-old. The banker directed the client to another banker while she was away, and the client was “very understanding,” Sullivan adds.
Anchor is also responding to millennial customers’ desire to have fun. The bank issued a private-label beer and rolled out a food truck last spring. Anchor dispatches the truck to bring morning doughnuts or lunchtime hot dogs to customers’ worksites.
“It’s not a fancy food truck, but it’s really a fun way of connecting,” Sullivan says. “We have a millennial marketing director, and I would say that really helps us understand. We have recognized that it’s important to really understand all of our customers, whatever demographic they’re in, so we can meet them where they are.”
In addition to their continually evolving tech services, banks also are focused on millennial customers’ desire for the institutions to be socially responsible enterprises.
Bremer Bank is 92 percent owned by the Otto Bremer Trust, a nonprofit set up in the 1940s by founder Otto Bremer to serve the communities in which the bank does business. The trust makes charitable grants and public interest-related investments, according to bank president and CEO Jeanne Crain.
The $12 billion business-to-business bank needs to better convey that story to millennials, says Crain, who took over as CEO a year ago. Bremer focuses on commercial and agriculture banking in Minnesota, North Dakota and Wisconsin, and annually provides “a significant portion” of its profits to the Otto Bremer Trust for making grants, Crain says.
“Our success drives their ability to do their work,” she says. “It goes right back into the community, and that’s the connection.”
"We have to be more entrepreneurial. We have to keep changing." David Reiling, chairman and CEO, Sunrise Banks
Sunrise Banks’ Reiling has been recognized as a social entrepreneur who has led his family-owned bank’s initiatives to engage with and financially empower low-income and traditionally underserved Minnesotans, particularly the Hmong and Somali communities. Sunrise used federal New Market tax credits to provide loans for construction of the Midway YMCA in St. Paul, to convert a Minneapolis school building for commercial use, and to develop a mixed-use building in North Minneapolis.
Sunrise also won a $2.2 million combination loan/grant from Wells Fargo to nationally scale a program that offers employee loans through employers as an alternative to payday lenders. The bank also encourages depositors to designate their money for its Impact Deposit Fund, which lends to affordable-housing developers, small businesses, nonprofits and community services.
So when Sunrise employees went to San Francisco to talk to millennials, Reiling thought the focus groups would be thrilled to hear about Sunrise’s initiatives
“They were more sensitive about ATM fees than they were social conscience-driven,” he says. “They were looking to get the most out of that relationship.”
Perhaps millennials aren’t that different from older generations. Bremer’s bankers have learned that building relationships with multiple generations is at the core, according to Crain.
“Some needs are transactional, but we’re piloting and orienting our business to put more of the transactional capabilities into the hands of our millennial customers. We are working to put more of the digital solutions into our customers’ hands to let them choose, let them have choices, let them have options,” she says. “I think this group is still hungry for advice and that goes well beyond what technology offers.”
That need for financial education and the desire for advice may prove fruitful for banks, Reiling says.
“We may not see it in the near future, but financial institutions have been in the business of giving advice for a long time,” he says. “How they give that advice and the value of it is potentially a product or service that could be given away for free or it could generate some revenue for an institution.
“Banking is definitely changing,” Reiling notes. “We have to be more entrepreneurial. We have to keep changing.”
Nancy Crotti is a St. Paul-based writer and editor.