Do Millennials Really Want to Eliminate Banks?

NEW YORK (MainStreet) — While more Millennials are banking online, a majority still prefer to go inside a branch to make deposits and other tasks.

Branches are still key for many consumers with 53% of Millennials saying they still visit a branch because they feel it is more secure and seek in-person service, according to a recent TD Bank survey that also indicated Millenials are not entering a bank simply to use an ATM alone. The nationwide survey polled more than 2,000 Millennials (ages 18-34) about their banking behaviors and preferences.

"The results of our study prove that financial education is not only a key component of financial success, but also that millennials want more support with their personal finances," said Nandita Bakhshi, executive vice president of retail distribution and product of TD Bank, based in Cherry Hill, N.J. "Millennials need to feel empowered to reach out to their bank and have their questions answered so they become more confident about their financial futures."

The survey also found that 52% of Millennial respondents said they use in branch banking about the same amount as they did last year and 54% turn to branches to find out financial information compared to getting answers from friends, family or family advisors.

"The branch visits plus the increased mobile banking activity shows that they appreciate a bank that can offer them the tools they need to succeed, whether this is in a branch, online or through a mobile app," Bakhshi said.

Surveys by AlixPartners Mobile Financial Service and Fiserv are mirroring the trend found that a majority of Millennials are still using their branches. A study conducted during the fourth quarter of 2013 by AlixPartners, a New York-based business advisory firm, found that 80% of 18 to 34 year olds still visit branches.

Jason Fischbach, 24, who works at public relations agency in New York, goes into a branch to deposit money, because he does not trust the technology to be accurate yet.

"Generally I'll go to an ATM to withdraw cash but use a teller to make a deposit," he said. "Since life's so mobile, I never take the time to go get a deposit slip and often the easiest way to make the deposit is to just hand the teller my debit card and have them do the legwork. I still do most of my account work and view my accounts online, but I also visit the branch."

Gen Y consumers are more likely to need services that cannot currently be met from digital offerings, according to a Fiserv August 2013 survey of 10,000 respondents.

Millennials used ATMs and branches more than the other generations. Each month Millennials used branches and ATMs twice a month compared to 1.7 times a month each for Generation X, Baby Boomers and seniors, said Fiserv, a Brookfield, Wis. financial services technology provider.

The survey also found that 65% of Millennials deposited a check inside a branch compared to 65% of Gen X and Baby Boomers each and 64% of seniors, while 48% of Millennials went inside a branch to deposit cash compared to 37% of Gen X, 31% of baby boomers and 18% of seniors. Millennials also entered a branch 7% of the time to obtain financial advice and 6% of the time to sign paperwork for a loan or to obtain cash.

As Millennials get older, they will remain "very tech savvy," said Daniel Steere, director of project management for Fiserv.

"They will always be digital first in the areas where they are comfortable," he said. "If consumers knew what their bank can do, they would use more digital channels."

Although using branches is less popular, it is not phasing out, said Sean McDonald, president of Your Full Potential, a Bloomfield, N.J. consulting and strategic planning service company for credit unions.

"Despite the fact that mobile and online usage is high among Millennials, they still want the backup of a brick-and-mortar branch," he said. "For some transactions like loan closings and account disputes, they like the fact that they can go into a branch for personalized service."

Customers should be to conduct the majority of their banking online, said Chris Nichols, chief strategy officer of CenterState Bank of Florida.

"When you see the statistics that a majority of customers still prefer the branch, keep in mind that the banking industry still requires a branch for a great many services," he said. "This is a short coming of our industry."

Banks should allow customers to open accounts, manage their cash and solve their problems online, which will decrease the number of times they have to go to a branch, Nichols said.

"The smartphone is the next evolution of the branch," he said. "Millennials want to be interactive if it adds value."

Over the next five years, banks will learn how to be "more intimate with their customers so that it is even better than going into a branch," Nichols said.

"Some activities such as depositing coins are good branding opportunities, but come at a high cost for the bank," he said. "Other activities like sending large wires are shortcomings on the part of the bank and come at a high cost for the customer. Personally, if I have to go into a branch, it is a failure on my bank's part as they could not service my needs online, mobile or at least through a call center."

Technology used at banks should be updated so that customers receive more alerts for low balances or when a paycheck is automatically deposited, Nichols said.

"These are high value activities that are examples of how technology can be better than a branch," he said. "We love customers to come into our branches. However, branches are expensive and as the number of checks and cash usage decline, traffic is going to be reduced and our incremental costs go up to the point that it is expensive to service some customers. We still want a network of branches, just larger ones that cover a wider service area."

--Written by Ellen Chang for MainStreet

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