NEW YORK (MainStreet) — A new report indicates that Gen Y favors big banks despite a growing dissatisfaction with them.
A study conducted by Javelin Strategy and Research found that 43% of Gen Y consumers have their money in giant national banks while only 11% choose to bank with credit unions. Comparatively, 38% of non-Gen Y consumers bank with the big guns, and 16% use credit unions.
“Gen Y favors big banks because they offer the types of services they want,” Mark Schwanhausser, senior analyst for multichannel financial services at Javelin Strategy and Research, tells MainStreet. He says Gen Y consumers – defined by Javelin as those born between 1979 and 1999 – are more inclined to bank at an institution that offers both online and mobile capabilities and easily accessible ATMs, regardless of the fact that banks with these services tend to charge higher fees.
“This generation has turned its back on credit unions. They consider convenience to have greater value over lower fees,” Schwanhausser says, and “it takes a lot to rock them out of the relationship.”
But Schwanhausser does add that smaller banks and credit unions shouldn’t waive their white flags just yet. According to Javelin’s survey results, only 38% of all Gen Y consumers said they were very satisfied with their current banking relationship, a number that could easily go down in light of the recent changes some national banks have instituted in response to the Federal Reserve’s proposed limits on debit card interchange fees. For example, to recoup the estimated $30 billion in lost interchange fee revenue, national chains are testing out higher ATM fees and considering limits on what types of purchases can be made with a debit card.
Additionally, Chase recently announced it would end its debit card rewards programs for all customers.
These changes to debit and checking accounts could be potentially problematic since Javelin’s study found the debit card is Gen Y’s payment method of choice. Forty-three percent of Gen Y consumers rely on their debit cards for purchases, while only 22% prefer to use credit.
“We’re at critical time right now,” Schwanhausser says. However, he points out that smaller banks would need to make their own changes if they are to lure consumers away from the national chains.