At this point, millennial borrowers probably make up a large portion of your customer base, so it’s important to understand their spending habits and priorities. The American Institute for Certified Public Accountants (AICPA) conducted a study of millennials and found 70% believed that financial stability was the ability to pay all their bills each month. So, according to millennials, stability means striving for zero payments due at the end of the month.
If you lend to millennials for student or consumer loans, think about this definition of financial stability and the simple aspiration of just paying the bills each month. According to Investopedia’s analysis of the AICPA study, one in four millennials had late payments or interaction with a debt collector. As a group, these borrowers are often loaded down with debt and still receiving financial support from their parents.
And thanks to social media and the immediate gratification lifestyle, millennials may often be more concerned about chasing the latest technology gadgets and the same experiences and things their friends have. With all these competing priorities, consumer lenders can be the last to get paid.
What’s a lender to do?
How Millennials Bank
It should come as no surprise that this group of borrowers uses mobile banking more than any other. The Balance uncovered some interesting banking trends and found the three things millennials do most often on their mobile banking apps are:
- Schedule person to person money transfers
- Transfer funds between accounts
- Check their transaction history
Here’s what they are not doing: checking their accounts to see if they have the funds available to pay you after they’ve paid for rent, internet, utilities, and fun.
While they may like their banks, they love technology more. They will jump at the chance to switch to another bank, fintech lender, or credit union if their bank is too inconvenient or if their mobile banking app is too slow or archaic. Bottom line: millennials love mobile functionality and convenience. Are you leveraging this and making it easy for them to pay you?
Offer Payment Options
Millennial borrowers are starting to earn good money, so many are able to repay you at some point during the month. Yet, if you aren’t convenient or easily accessible, they will likely forget about you until after they’ve paid everyone else.
Many lenders think ACH is the answer, and automatic drafts out of their borrowers’ bank accounts are the best solutions for guaranteeing payments. It’s possible, however, that given their spending habits, your millennial borrowers won’t have enough cash in their accounts to clear the payments.
Why not offer payment options that fit into their daily lives and are easily accessible whenever your borrowers are ready to pay? Mobile apps and text pay are great options that put you exactly where your customers are – on their mobile phones. You can send payment reminders, balance updates, and marketing campaigns via push notifications or text messages. Your borrowers, in turn, can initiate and authorize payments and chat directly with your customer service representatives. Interactive Voice Response (IVR) enables borrowers to make payments 24/7 over the phone without ever speaking with a live agent.
Millennials value little above convenience and tech-savvy options. You can use this to your advantage to ensure you get paid and keep default rates low. Make it easy for them, and you will get paid.
If your payments system doesn’t offer options like IVR or text pay, contact REPAY to request a demo. You’ll see for yourself that these additional payment options will help you collect more easily from this fast-growing group of millennial borrowers.