eMarketer looks at the potential for marketing online financial services to 18 to 28 year-olds.
Generation Y, now between 18 and 28 years of age, is the most obvious target for online marketers if the top criterion is heavy internet use. Internet use by 18 to 29 year-olds ranges from 82 percent to 85 percent, according to the Pew Internet Project. Financial institutions may be ignoring or even turning off this segment, since their financial needs today are typically limited to checking accounts, credit cards and loans, not mortgages or brokerage accounts.
In the future, Gen Ys could be a more profitable market for financial institutions if they are persuaded to become loyal customers. At this point in their nascent financial lives, the words "free checking" and "money back on purchases" made with credit and debit cards are powerful motivators to get them to sign up. Once they do, they will most likely stay for a while. According to a survey of 750 recent college graduates by Synergistics Research, 69 percent said they kept their checking account with the same institution they used as college students. Asked if their relationship with their bank was "only temporary," 60 percent disagreed, 18 percent were neutral and just 15 percent planned to switch.
Colleges and universities are the best place to target Gen Y, based on numbers and internet use. By 2010, there will be nearly 17.5 million students enrolled in degree-granting institutions, according to the National Center for Education Statistics. And internet use on college campuses is still growing. According to comScore, internet use at university locations grew seven percent in February 2006 over February 2005, to 14.2 million users. Traffic to several finance-related sites from university locations outpaced general traffic growth trends, especially for tax sites (+19 percent). While banking online was the most popular activity, college students engaged in online trading (+8 percent) and looking for financial information or advice (also +8 percent).
Banking sites are the most popular online financial destinations for students, who conduct the most basic activities: opening accounts and checking balances. Washington Mutual's site gained 112 percent more visitors in February 2006, thanks to heavy advertising for its free checking account, featuring "Mr. Stodgy Banker." Local events in New York and Chicago included street teams offering $2 bills to people leaving automated teller machines at competing banks, according to Promo magazine. WaMu's free banking product lured 43 percent more new enrollees in Q4 2005, according to comScore.
Recent graduates are definitely in the market for financial information as they begin to pay off student loans and seek out other types of financial products such as car loans or property insurance. Of the 1,500 recent college graduates surveyed by YM2, 70 percent were "somewhat" or "very" interested in financial websites targeted to them. More than two-thirds of respondents have one to four student loans to repay, and another 43 percent plan to take more loans on in the next three to five years. At least one-third has more than $20,000 to pay off.
Online bill paying is an important part of the online financial experience for this group, and "free" would help keep their college-day loyalty firm. According to Synergistics Research, 70 percent of people ages 18 to 34 paid their bills online in 2005. Forrester Research predicts online bill payments by Gen Y consumers will soar 219 percent by 2010, to 18.2 million households.
Lisa Phillips is a senior analyst at eMarketer. This article is drawn from the recent eMarketer report "Online Banking: Remote Channels, Remote Relationships".