That long-anticipated moment is here: millennials are now the largest generation in the United States. They have represented the largest segment in the workforce since 2016, but as report after report has shown, the one area they lag in is credit card ownership.
Until now. According to TransUnion, the number of new credit card accounts opened by millennials jumped from 5.5 million in the first half of 2013 to 9.3 million in the same period of 2018.
Why the shift?
First, a little background on why millennials had a slower entry to credit than their Generation X counterparts. According to Paul Siegfried, senior vice president at credit bureau TransUnion, it largely occurred because of The Credit Card Accountability Responsibility and Disclosure Act.
Under the law, issuers cannot offer credit cards to anyone younger than 21 unless they have a qualified co-signer or proof of income. The law also restricts how issuers can market on college campuses: no more free pizza or T-shirts as enticements to open a credit account.
The total number of new college credit card accounts opened fell 17 percent in the year after the law went into effect, according to Federal Reserve data, says Transunion.
Because of the limitations to available credit, millennials sought out other ways to get the credit they needed. Millennials opened more than twice as many personal loans as Generation X did at the same age, according to the TransUnion study. They became selective. In recent years, millennials have opened up their wallets to accept plastic, but not as wide as credit card issuers would hope. They carry fewer cards and put more research into choosing one, says Kevin Morrison, a senior analyst and author of the Transunion report.
The opportunity for credit card providers
This is an important shift – and growth opportunity – for credit card providers, especially as the millennial generation ages into peak income potential and responsibilities (e.g., home ownership, providing for family).
Here are some suggestions to get millennials on board with the opportunities that credit cards offer:
- Customize products and rewards: a Harris Poll said rewards are one of the most important factors when selecting a card. For this often-altruistic generation, “rewards” could also be applied toward a chosen charitable cause.
- Provide unique experiences: Concert tickets can be a big splurge for young people; the kind of exclusive access offered by many credit cards is an even bigger luxury. For instance, American Express recently partnered with Coachella — the popular music and arts festival that takes place over two weekends in April in Indio, California — to offer eligible cardholders perks like access to an Uber priority lane and a complimentary Ferris wheel ride. Those who have The Platinum Card® from American Express get access to makeup and hair services and complimentary food and beverages. AmEx has been gaining the attention of millennials with these kinds of offerings. NerdWallet recently reported that millennials opened 36% of AmEx’s new accounts last year.
- Deliver a seamless omnichannel experience: According to BAI, the Bank Administration Institute, millennials have more interactions with banks per month than other groups – 20 percent more than Gen X and 63 percent more than boomers. Millennials prefer to research their questions online, but if they need to move to chat or a phone call, but don’t have patience for having to repeatedly explain an issue. Touchpoints can be integrated, allowing cardholders to configure their account settings and alerts, and employ predictive analytics to anticipate needs across all channels.
- Provide consultative customer service: While 59 percent of millennials believe that they are knowledgeable about banking products, 26 percent are interested in advice on credit cards, according to a TD Bank survey. And though this generation is known for being digital-first, when they pick up the phone they expect to speak to a knowledgeable contact center representative. It’s key that agents have comprehensive training and regularly updated knowledgebases on all your company’s credit card products, how they work, and what every line on the bill represents so they can communicate that information clearly to the customer.
Millennials represent a huge opportunity for credit card providers. Contact VXI to learn more about how you can build a better CX to help acquire and retain relationships with this emerging segment.