Gen Y Says 'No Thanks' to Banks
A new study from Microsoft concludes that younger Americans are losing trust in banks big time, much like their great-grandparents did during the Great Depression. How bad is the damage from the 18-29 viewpoint? Let’s take a look.
The seeds for younger consumers' mistrust in banks were sown in the past two years, a period which some economists are already calling the Great Recession.
That’s the finding (among other key trends) from Microsoft’s “Millennials” study, done in collaboration with KRC Research. The study focused on 500 Americans aged 18-29.
According to the study, 22% of millennials say that they’ll never open a bank account; 67% say they’ll never invest in stocks; and 45% say they’ll never buy insurance. And 80% of young consumers interviewed say that U.S. financial institutions don’t deserve any more bailout money.
"The financial crisis has created a deep sense of mistrust in millennials, which is keeping the next generation of wealth on the sidelines," said Colleen Healy, general manager of U.S. Financial Services at Microsoft.
Why such a breakdown in confidence over key U.S. wealth-building institutions?
Actually, history provides us with some clues. In the 1930s, studies show Americans had parallel attitudes about the economy and their own personal finances. The Great Depression fostered a tight-fisted approach to money, with Americans committed to lowering debt, increasing savings and, yes, sticking money under their mattresses rather than trusting a bank.
This generation’s millennials are adopting the same attitudes. Despite the fact that the Federal Deposit Insurance Corporation guarantees bank deposits up to $250,000, younger Americans still don’t trust banks, although smaller community banks and credit unions did fare better in the Microsoft study. While Microsoft didn’t ask the “under the mattress” question, younger Americans clearly are expressing distaste for the services and programs that banks offer.
How can banks restore confidence in millennials? For starters, financial institutions could begin communicating with millennials in the high-tech manner to which they're accustomed. That means more online chats with customer service staffers, personalized Web portals and more financial apps for cell phones, the Microsoft study concludes.
Sure, Microsoft has a big stake in seeing banks spend more money on financial software, but there’s no doubt that technology is a big issue with millennials. Banks would do well to take notice — especially given the fact that, at 80 million strong, the millennial demographic is a huge one.
It’s also a demographic that represents the future for banks, who’ll need to work overtime to gain the confidence of younger Americans.
To see the entire survey, visit Microsoft.com.
—For more ways to save, spend, invest and borrow, visit MainStreet.com.