Financial Institutions Need Analytics To Tap Opportunities With Generation X, Y, Millenials and Faster Growing Minorities
NEEDHAM, MA, June 3, 2008 – As inevitable demographic shifts unfold in the U.S., financial service institutions must become equipped to identify and target their next generation of customers. New research from TowerGroup finds that this ability will become a market mandate for financial services institutions in order to drive growth in the years to come – even as they navigate their way out of today’s crisis.
TowerGroup notes that institutions are compelled to invest in and embrace sophisticated data analytics tools to segment the domestic market population more cleverly than before, developing customized product offerings based on the needs of a highly-varied set of audiences.
Looking Beyond the Boomers
The coming wave of baby boomer retirees continues to make headlines. Yet many financial services institutions have yet to forge effective strategies for targeting younger customers in Generations X, Y and the Millennials who will ultimately replace baby boomer business. At the same time, the opportunity to serve the financial needs of U.S.-based Hispanic, Asian, and other immigrant or minority groups is growing fast. TowerGroup issues a call to action for financial services institutions to seize the organic growth opportunities presented by underserved segments of the US population represented by younger, ethnic, and immigrant demographics.
While these unbanked or underserved populations may not have been considered or targeted in the past, financial institutions must now dig deeper to understand the drivers motivating the financial decisions of these prospects – from how they behave, shop and travel to how they use technology as part of their daily lives. A comprehensive marketing effort targeting previously unaddressed demographic segments must incorporate the following:
- Generation X (born 1965 to 1977) and Y / ‘Millennials’ (born 1978 to 2004): While millennials are not as wealthy as the boomers and generate lower investment fees, they also offer institutions the opportunity to leverage economies of scale, lower ‘onboarding’ costs, and increased use of self-service channels.
- Minority and immigrant populations in the United States: Hispanics (or Latinos) are the largest U.S. minority group and represent a critical and growing customer base for financial institutions, while households identifying themselves as Asian outpace the US average in income level and home value. Asian American households report a 301igher median income than the US Total. Furthermore, their homes are valued at over twice as much as the total US median home values. These are just two examples of myriad opportunities to serve minority and immigrant populations.
- The role of integrated mobile devices, the Internet, and technology: Any decision to capture the attention of younger demographics, especially Millennials, must involve mobile communications services and social networking environments.
- Remittances to emerging economies: The World Bank estimates that migrant workers sent $240 billion (USD) home to developing countries such as Mexico, India, and the Philippines in 2007. Financial institutions have the opportunity to tap into the revenue stream represented by this remittance business and alternative payment channels.
Dramatic shifts in the demographic landscape are reshaping the current and future customer base for banks and other financial services institutions – raising questions regarding which institutions are best positioned to serve new sets of customer expectations and needs.
The TowerGroup report, titled “Marketing to Evolving Demographics: The Keys to Organic Growth in a Mature Industry,” is authored by Inci Kaya, a quantitative analyst in the Financial Services Strategies and IT Investments research practice.
About TowerGroup: TowerGroup is the leading research and advisory services firm focused exclusively on the financial services industry. A respected source for trusted information and advice, TowerGroup brings many of the world�s leading financial institutions, technology companies, and professional services firms a deeper understanding of the business and technology issues impacting their organizations. Headquartered near Boston in Needham, Massachusetts, and with offices in North America and Europe, TowerGroup serves a global client base. Visit www.towergroup.com for more information.