The New Emerging Bank Consumer Segment
In a few years from now, we’ll look back on the period of 2012-2017 in the banking industry as the era of Millennial Mania.
For at least five years now, credit unions have been obsessed with lowering the average age of their member base and attracting the new “breed” of consumers—Millennials—with their supposedly new and unique banking needs.
The oldest Millennials are already in their mid- to late-30s. They’re already the mainstream generation from a banking consumer perspective. They’re not emerging anymore.
Who will be the next emerging set of banking consumers? The so-called Gen Z consumers currently in their teens? (Side note: Can somebody please come up with a better name for subsequent generations than just picking the next letter in the alphabet?)
Here’s a thought: Maybe the new emerging bank consumers will be Baby Boomers.
Boomers’ Financial Challenges
A woman we know (a younger Boomer in her mid-50s) told us about her efforts to help her parents (in their mid-80s) manage their finances. Fortunately for her parents, their challenge isn’t having enough money—it’s managing what they do have.
She’s had to unwind insurance policies with ridiculous levels of coverage, investment accounts socking her parents with inactivity fees, and merchant credit card accounts with compounding late fees because some bills did not get paid.
Calling around to the various providers is practically a full-time job. And it isn’t made any easier by the fact that she isn’t the account holder. And it’s all made even harder by her parents’ resistance to her efforts to help.
This isn’t a problem of financial illiteracy. We’re talking about a couple of people who are very intelligent and successful. But we are talking about a couple of aging people.
Technically speaking, a lot of what she’s dealing with isn’t fraudulent behavior on the part of financial institutions and other financial providers—it’s borderline illegal, solidly unethical, and most definitely not in the best interest of her parents.
Boomers’ New and Emerging Banking Needs
The proliferation and adoption of digital tools by Baby Boomers—even though lower than younger generations—is going to facilitate fraudulent and unethical behavior among predatory financial providers over the next 20 years.
It’s a numbers game. According to the Pew Research Center, from 2011 through 2030, roughly 10,000 Baby Boomers turn 65 every day. That’s a lot of people in their 80s starting in 2026, and going through 2045.
Saving for and having enough money in retirement will certainly be a need—but that’s not a new need. Dealing with escalating healthcare costs will certainly be a need, but again, not a new one.
Baby Boomers will become the new emerging segment of banking consumers because of their need for new digital banking services that:
- Guard against unethical and fraudulent behavior;
- Provide permissioned account access to family and trusted advisors;
- Link to and integrate with estate planning wishes (that haven’t typically been digitized; and
- Help improve the management of healthcare costs.
The healthcare part of the equation is not new news. But according to Gallup, the percentage of consumers that say that healthcare costs are the most pressing concern jumped from 10% in 2013 to 17%—and now exceeds the percentage who say that having too much or not earning enough money is their most pressing concern.
There’s a good news/bad news story here for FIs:
Good: FIs with a high average member age already have boomers as members.
Bad: FIs don’t have the products and services to meet boomers’ future needs.
Good: Nobody in the industry has these products.
Bad: FIs don’t have new product development capabilities to develop the services.
Good: Forward-thinking FIs have time to develop, test, and deploy new services.
The oldest boomers are just in their early 70s—the challenges listed earlier are more prevalent among consumers in the late 70s and early 80s. And with the youngest boomers in their mid-50s, this means that the lifecycle for these new products and services could run for the next 30 years.
Director of Research