Confession: I’m not much older than Gen Y. I like to think of myself as a “young” Gen Xer. After all, we agree on a lot of things. We love our tech, but we’re a little skeptical when it comes to things like online privacy, machine learning, AI, and the latest social “it” app. We spend a lot of time researching, breaking things down into smaller pieces to better process everything. And we both agree…adulting is hard. The fight is real. See? Were not this different!
And as the greatest generation in US history hits its prime working and spending years, its impact on the economy will be enormous. That’s why they hold the keys to growing your business.
Also known as Generation Y, or the Lost Generation, Millennials are a well-studied (and often stereotypical) group, representing nearly a quarter of the world’s populationto 1.8 billion. This demographic group (born between 1980 and 1994) has come of age at the dawn of a new millennium, in a world flooded with technology. They had to face many economic hardships during their journey to adulthood. From crippling student debt to an ill-timed housing bubble, the challenges have caused them to delay major life events like buying their first home, getting married and starting a family. But without these responsibilities, millennials can afford to become business owners sooner, and they’re entering the market like never before.
In fact, millennials are the fastest growing segment of small business owners. Having created businesses earlier than all other generationsat the (young!) average age of 27, they continue to become business owners at a steady pace.
They are also the most diverse.For instance:
A millennial entrepreneur is 77% more likely to be African American than a baby boomer small business owner.
A quarter of millennial small business owners are Hispanic, compared to just 11% of Hispanic baby boomer entrepreneurs.
Women make up 28% of millennial small business owners, 12% above the national average.
As competition for small business loans becomes more intense day by day, it is important to understand how this key demographic is different to ensure that you are not left out when they need financial services. Not only are fintech lenders like Rocket and Kabbage knocking on their door, but PayPal, Square, and Amazon are aggressively courting these smaller companies with multiple integrated services, including credit.
This generation has witnessed amazing levels of technological change. As a result, they are generally seen as more progressive, creative, and visionary than previous generations (Ouch!). It may also explain why millennials in business are particularly drawn to fintech disruptors and sleek neobanks looking to build digital-only relationships across multiple financial products.
Traditional approaches such as relying on higher rates or running comprehensive marketing campaigns for acquisition and retention will have limited success with this audience. Millennials have integrated technology into their daily habits. It is imperative not only to target them with the right messages, at the right time and on the right channel, but also to offer them the digital experiences to which they are accustomed.
Some millennial behaviors and preferences you should keep in mind:
Millennials spend an average of 7.2 hours online each day. (eMarketer)
71% of millennials regularly shop online through mobile devices. (AdWeek)
On average, millennials watch online videos 2.4 hours a day. (Wibbitz)
Millennials spend an average of two hours and 38 minutes a day on social media. (World Economic Forum)
83% of millennials find online content helpful in making purchasing decisions. (Share)
40% of millennials refer to online reviews and testimonials before making a purchase from a brand. (Millennial Marketing)
So be sure to show up when they search. Help them easily find what they’re looking for on your website and apply when they’re ready. Invest in social media and online review platforms. Word-of-mouth can generate significant growth with this audience. In fact, more than a quarter of merchants say they follow recommendations from other business owners when choosing their suppliers.
Show me the data!
While millennials were less than two years old when my generation’s beloved movie Jerry Maguire came out, today’s bankers most likely remember Tom Cruise repeatedly shouting “Show me the silver !” in Cuba Gooding Jr. Today, it’s about showing (and using!) the data you have. However, while 65% of community banks and credit unions say data is a key force,many admit to losing business because they don’t turn it into information for customers and members of SMEs. Cloud-based data, analytics, and tools can enable personalized offers with personalized, targeted, and accurate acquisition strategies that help expand the pool of potential borrowers.
From there, a modern vibe and experience is essential. Can an instant digitalized qualification be delivered so they don’t look elsewhere? Can they pick up where they left off on another channel?
The trust factor
Small business owners, in general, are an emotional bunch. Their business is their life, and emotions often trump rational thought. That’s why millennials in business put a lot of heart into decision-making, and they research to gather everything information before committing. Millennials are looking for providers they can trust above all else. They to have totrust yourself before committing.They believe in fairness, honesty and conscience. They are proud, have high integrity and respond positively to full transparency.
When it comes to millennials and finance, your communications need to be clear. So avoid jargon. Part of Millennials’ disengagement from the financial services industry is that there is a decrease in general financial understanding. Community lenders can help reduce feelings of unease by keeping every interaction as transparent as possible. You will need to be completely open about all elements of the loan process and clear about what a millennial business owner is signing up for before doing so. Keep them updated on the progress of the loan in a way that’s convenient for them (hint: online).
Small business is big business
The race to attract and retain SMEs is on! As higher interest rates improve margins, borrowing costs will increase. This could impact a company’s purchasing and investment decisions, dampening demand. But with more millennials opening businesses than any previous generation, it makes sense to focus your efforts on attracting this key group of small business borrowers! Millennials in business represent a substantial opportunity for institutions that can abandon traditional processes and attract them through digital engagement. Community banks and credit unions should accelerate their transition to lending technologynot only to protect their NIMs, but also to keep up with the speed and ease of use standards set by fintechs.
Do it well and the rewards can be significant. Because, as they say, “small businesses become big businesses” – and they are essential for growth your Company.