How Millennials Choose Financial Products: A Guide for Lenders
Lenders are on a constant lookout for new demographics and audiences to convert into customers. And millennials aren’t just tech-savvy kids anymore. These are the people born between 1981 and 1996. So now they are somewhere between 22 and 38 years old and most of them are already operating on the lending market.
According to the National Association of Realtors, in 2018 people between the ages of 19 and 27 made ⅓ of all the home purchases. In the US alone millennials are already on the brink of surpassing boomers as the largest population at 71 million and this same trend holds worldwide. And while they value many of the same things in lenders as previous generations, this demographic is quite different in many ways. So it’s well worth adjusting one’s acquisition strategy to meet their specific needs.
What millennials look for in a lender
Millennial love for technology and hate for queues
Millennials are the first generation to have been using the internet for the bigger part of their lives. So for them, it’s not a given that some things still need to be done offline. After all, why should there be such things with the extent to which technology has evolved? And stats serve to that, as recent research by the Federal Reserve indicates that even in 2016, 67% of millennials were choosing mobile banking for their financial needs over brick-and-mortar bank branches. Now, to put that in perspective, in 2016, the iPhone of the year was 7. We’re at XR now. And FinTech has made an even bigger leap than Apple in terms of technology in these years.
It would be fair to say that people like to utilize technological advancements no matter their age. But millennials are the first ones to whom mastering a new banking app comes easier than actually driving to a bank even once. And staying online isn’t just a matter of objective convenience to them. Millennials actually don’t have much of a choice but to switch to alternative lenders, since the traditional financial world is slow to adjust to the new reality. The big banks only approved 26% of the small business loans in 2018. Which leaves a lot of dough on the table. And alternative lenders will be happy to take with their digital-only experience, smooth interfaces, and fast processing.
Having entered the workforce during of after the crisis of 2008, many of the millennials may not have the credit history and formal reliability of the baby boomers. But that’s not because they are any worse or work any less hard. That’s because the rules of the game changed. And the old loan decisioning rules don’t always apply.
Millennials are looking for a lasting and stable relationship with a brand. Studies show that among Gen X, Baby Boomers, and Millennials, the latest are most likely (58%) to stick with the brand. So if your lending operation is the one to give them their first chance, chances are they will stick with you in the future. But you’re not running a charity and have to take care of risks by issuing loans only to people who are going to pay you back.
Well, luckily, financial technology is making huge strides to help you approve more loans and still stay safe. TurnKey Lender uses advanced self-learning AI algorithms to evaluate borrowers based on a proprietary scorecard. And even when the borrower doesn’t have the credit history of a baby boomer, there are plenty of factors to determine whether they will repay the loan. Previously, this analysis would need to have been done by a loan officer and processing would take days. In addition, as we’ve established before, the algorithms of old school banks lead to rejection 3 times out of 4. Now, risk evaluation and loan processing take minutes. And getting their loan processed and approved this fast with decent interest allowed for by automation is exactly what buys millennial loyalty in the long run.
Going digital is inevitable. Because the competitors are already successfully doing it, because it leads to huge savings, and because online is where your users expect to work with you in 2019. As lenders were in a fierce competition among themselves, lending automation software providers were having a race of their own. And for lending businesses, it resulted in nothing but benefits.
To have bank-grade software they don’t need million dollar investments anymore. An intelligent platform that automates everything from loan origination to servicing and from collection to reporting comes with a reasonable price tag. And the functional and security needs aren’t the only ones addressed. When a lender needs to create their own proprietary automation platform from scratch, UX and UI design is the last thing on their mind with all the risk mitigation and functional modules they need to develop.
But software companies for whom it’s their product, can and will make sure that the user flows are smooth and interfaces are crispy-clean. And I don’t mean to brag, but TurnKey Lender’s team doesn’t take it when any competitor’s design is better by any criteria than ours. So other than creating the most intelligent and wholesome solutions, ours are also the easiest to use and the prettiest.
The platform you use to automate your lending needs doesn’t only need to be easy to use for your staff and not only should it look good, but most importantly it should not fail your users. They should be able to access your online front office from anywhere, apply for a loan or repay you using any medium they see fit and the should have a great time doing so.
Another way to look at reliability is how easily you’ll be able to provide first-time and repeat loans to your users. Of course, you got to stay cautious and protect your money, but millennials are really used to companies making fast decisions. And it doesn’t matter if we’re talking consumer loans or small business loans. Oftentimes, when a person turns to a lender, they need money quick. And even if not, you want to seal the deal faster to make sure they don’t go to a competing organization. So the speed and quality of origination are keys here.
Proactive support and education
For most millennials, loans still aren’t just another financial instrument. It’s dept, and they don’t like debt. But from experience, it’s the same as with taxes, we fear what we don’t understand. So providing your new potential customers with proactive support, explaining to them how your platform works and what rules they would need to stick to can make a real difference for your business.
To minimize the required human resources, you may want to add a chat software on your website which would engage users automatically, providing them with the content from your knowledge base. But make sure that in this content you don’t sound like a lawyer. Keep it human, try to explain complex terms with simple words to make sure you don’t intimidate them but rather make them feel like you’re actually there to help.
Some tools to educate and support your users would be a chat and a knowledge base I mentioned before and a blog addressing common problems and questions without being too salesy.
Consistency and honesty
No matter the generation, people just like it when the business is done fairly, without hidden fees, unexpected changes in terms, and legal traps. It’s just that millennials are the first ones out there who have so much choice. As lending space entry barrier for business lowers, the competition rises. So the integrity and honesty of a lender have significantly risen in value.
Other factors lenders should consider working with millennials
Less stable jobs
Of course, there are still factories and people working for the same firm their whole lives, but the thing is that millennials are much more liberal in the way they view jobs. As of 2018, in the US alone, 56.7 million people were working as freelancers and 51% of freelancers say no amount of money would make them take a traditional job. And that’s the shift lenders need to account for.
There is no steady paycheck coming in each week for a freelancer which doesn’t make them any less hardworking or productive. It just means that the rules of getting a loan should reflect this new reality. And the lenders who understand that and bet on these people will reap the benefits.
Skepticism to traditional lenders
Traditional lenders haven’t adjusted yet. They approve too few loans and operate too slowly using outdated algorithms. This makes up for a unique opportunity gap for alternative lenders who are ready to adjust to serve the new biggest working generation in the world.
Why TurnKey Lender if you want to target millennials
Lenders who want to come out on top of this fight for the millennial market have to simplify their processes, go online, manage to offer good interest rates, use reliable software, and have intuitive and modern interfaces. And if you’re one of those lenders, TurnKey Lender’s team has been making the most intelligent, easy-to-use and secure platform on the market for you.
We’ve made sure that a wide array of troubles and work old-school banks have to go through every day is put on autopilot in your business. And while you’ll be focused on business development and marketing, your lending operation will run smoothly thanks to TurnKey Lender.
You get to issue more of the right loans faster, provide your users and employees with a well-designed platform and have all of your data processed within an all-in-one intuitive system. What’s better, TurnKey Lender offers a free trial for you to start working for free and see for yourself, how we can help your business.