Digital transformation and a wider array of business products and services will be key to serving this ascending membership segment.
2011. It was the year when baby boomers began to retire, initiating a tidal wave of activity destined to crest in the year 2030. That is when all boomers will reach retirement age, according to Pew Research Center.
The mass exodus of baby boomers from the workforce over the next decade will leave holes in American business leadership, carving out ample opportunity for the millennial generation to take control.
For credit unions, this migration represents both opportunity and challenge as millennial leaders favor local financial institutions but embrace digital efficiency.
Millennials on the Rise
Forbes reports that by 2025, long before the last baby boomer reaches retirement age, millennials will account for 75% of the workforce. And contrary to popular belief among older generations, over half are aspiring to the role of CEO, according to an American Express survey.
The chief executive officer by millennial definition, however, will not be like any CEO before it. According to the American Express survey, 75% of millennials say the business of the future will openly collaborate with new partners as leaders seek support from all levels.
Where this attitude originates is hard to pinpoint, but there are two interesting data points that could shape the future of work under millennial reign. First, many millennials consider their current work and life loads a major factor in their mental health. Forty-four percent of respondents to The Deloitte Global Millennial Survey 2020 said they are stressed most of the time or all of the time.
Second, millennials lack confidence when it comes to leadership roles. Only 27% of men and 21% of women feel they have the skills necessary to excel at leadership positions, according to a 2016 Deloitte survey.
When combined, these two trends paint a time-starved future executive who values teamwork and advice in making daily decisions. Simultaneously, the Deloitte 2020 survey found interest in remote work has escalated in the wake of the COVID-19 pandemic, with 67% of millennials saying remote work offers a better work/life balance, and 64% desiring the option to work from home more frequently.
The trends also indicate the direction in which credit unions should begin evolving commercial product and service offerings to attract and retain millennial-led businesses in the years to come. Efficient and virtual will be the buzzwords of the future, as millennials seek to do everything from making business deposits to handling the payments process and receiving financial guidance through digital channels.
Meeting the Banking Needs of the Millennial Business Leader
According to a 2018 Aite Group report, 86% of millennial business owners select their commercial financial institution on the strength of its online capabilities. For 80%, mobile is key.
As a result, credit unions will need to undergo not only a deep digital transformation, but an evolution in the depth and breadth of current offerings, providing more products and services directly targeted to the way millennials think, act, feel and conduct business.
We can see this in action already by looking at Monotto, a millennial-led and millennial-driven company based in Atlanta. Monotto uses artificial intelligence to help millennials save without any additional effort by monitoring a user’s spending habits and then automatically moving money from checking accounts into savings.
Monotto embodies one of the key tenets of the millennial culture—automation—and automation will continue to serve the millennial leadership in the years to come. Data-driven automated financial advice, for instance, can shore up leadership confidence and help business leaders make important financial decisions.
Automation will also reduce hours spent behind a desk or on the phone, transforming organizations and providing a better work/life balance, a need that 22% of millennials feel goes unmet according to The Deloitte Global Millennial Survey 2019. Greater advancements in analytics and real-time service are already improving the credit decisioning process, reducing the time it takes to process a loan from days to mere hours.
Millennials are ready to embrace a range of automated commercial banking solutions as long as it speaks efficiency, leaving room for more inter-office cooperation, creativity and innovation.
How Credit Unions Must Evolve to Meet Young Business Leader Needs
According to Aite, millennials are keen to partner with their financial institutions when it comes to the financial operations of their business. And, a greater number of those millennial business owners are willing to pay for the specific business products and services they need. This might include working one-on-one with an advisor from the credit union to build out a holistic, long-term financial plan either when starting the business or looking for new growth avenues. But such services must be accompanied by self-serve digital business banking offerings like merchant services or setting up small business savings accounts.
The challenge for the future credit union will be providing the depth of offerings necessary to drive the businesses of the future. As a result, working with technology vendors that can help make the shift toward open banking—allowing the use of open application programming interfaces, or APIs, that enable third-party developers to create applications and services around a financial institution—will competitively position credit unions to deliver on demands for an increasing array of novel products for business members without the expansive technology budgets and talent resources of larger financial institutions. Credit unions can then quickly and easily flip the digital switch on a full range of individual products and services, meeting the needs of millennial leaders even as they rapidly change.
Raul Ponce is lead product manager, digital banking at CUES Supplier member Finastra, New York.