Gen Y Consumers and the Key to Long-Term ProfitabilitySabrina Tharani |
When talking about Gen Y consumers today, several significant themes are likely to emerge – like the 2008 and 2012 presidential elections, the rise and influence of social media and the inexplicable obsession with all things vampire. But there is one topic at the crux of all conversations – one that defined the tone of a generation. I’m talking about the Great Recession and slow economic recovery, which has impacted this specific group of rising consumers more than any other.
Meanwhile, recent banking regulations – including modifications to Regulation E, the Durbin Amendment and the Credit CARD Act of 2009 – have curtailed many of banks’ traditional sources of revenue from Gen Y consumers.
The combination of these forces has caused banks to confront their relationships with young consumers, and reassess their youth strategies to ensure lucrative, long-term profitability.
Why is Gen Y so critical to future banking strategy? For one, 18-34 year olds represent a third of the nation’s 240 million adults. According to the report, “A Tale of Two Gen Ys,” by Javelin Strategy & Reserach, Gen Y has greater earning potential than any other age group over the next 15 years, and will account for nearly half of the nation’s personal income (46 percent) by 2025. But, growing up in a culture of austerity, unprecedented student loan debt, and high un- and underemployment has shaped a vastly different approach to personal finance than previous generations.
The recession caused a dichotomy in Gen Y consumers’ attitudes regarding financial responsibility, management and risk tolerance – a divide mostly driven by age. Those aged 18-24 have a laissez-faire mentality about money, and do not actively manage their personal accounts, while their older counterparts aged 25-34 are hyper-cautious about finance and extremely risk averse when it comes to investing. Bank strategy must dually focus on both of these Gen Y groups of consumers and their different banking needs. Some potential outlets to consider are:
Source: Javelin Strategy & Research
Topics: Payments Strategy