In the next four years, millennials will become the customer segment with the greatest personal income, growing to an aggregate $8.3 USD trillion by 2025. At that time, millennials will represent 75 percent of the workforce and 46 percent of total US income1.
This growing segment of people aged 19-35 will increase their use of cards and related technologies as they grow older—and their expectations around how card programs should work for them differs from previous generations' expectations.
Aggregate income by generation
Four reasons why issuers shouldn’t miss this opportunity:
Millennials use cards more than other segments.
They’re more likely to apply for credit.
Spending will increase as they age.
They’re open to new and emerging payment products.
The opportunity: Why target millennials?
Share of spend by payment method2
Visa’s proprietary Payment Panel data indicates that millennials use cards for 57 percent of their spending2, and with increasing wages and reduced debt, they’re an attractive target for debit and credit card marketing.
They’re willing to migrate cash and other transactions to card products, when designed for their needs. Millennials are also more likely to revolve and pay fees3.
Percent of millennials who revolve and pay fees3
You need to understand the motivations and behaviors of this generation to capture their interest, because millennials are more fickle than other consumers. They are five times more likely to close primary bank accounts4 because:
Account fees are too high
Negative experiences with bank representatives
Too few ATM locations exist
Millennials use a range of card products, including debit cards for money management, and credit cards for rewards. To maximize your millennial segment strategy, you should consider offering and positioning both of these products to meet their needs.
Click on the tabs below to learn more about millennials, payments and VCA solutions.
Millennial features + benefits
Stand out from the competition by offering product features, benefits and services that appeal to millennials. We've analyzed insights from Visa sources and third-party surveys to help you understand the features and benefits they expect from payment products.
Payment product adoption
By the age of 28, a majority of millennials have multiple cards in their wallets, and a key reason is to avoid carrying cash. Visa data indicates the ages at which millennials adopt various payment products and financial services.
Payment product adoption timeline5
Millennial product packages
The needs of millennials vary depending on their ages and life stages, as their needs change over time. Your product portfolio should offer a variety of products to meet their needs as they mature.
Prepaid products (i.e., teen cards) to younger millennials starting in their mid-teens
Prepaid cards and DDA accounts with debit cards in their late teens
Credit cards to those in their early to mid-20s, as students head off to college and enter the work force
Companion prepaid cards for older millennials
Mobile person-to-person (P2P) payment capabilities to transfer funds
Card features + benefits
When choosing a new credit card, millennials generally look for the same primary card features as other age segments6:
Low fees and fee waivers
Balance transfer offers
Desired primary card features7
However, millennials differ in their needs related to budgeting and building credit. Visa research indicates that despite a desire to do so, many millennials lack the information they need to build credit. Without this information, millennials may avoid or delay credit card use, which contributes to this group having the lowest average credit score of any age group and more than 50 points below the national average7.
Younger millennials avoid credit because they have an aversion to debt. By offering credit building education and tools, such as free FICO scores, issuers can support millennial customers in building credit and becoming comfortable using credit.
Millennials use personal financial management (PFM) tools more often than other age segments. They're budget-oriented and use personal financial management tools. Forty percent of consumers who use finance apps or visit mobile finance websites in a typical month are millennials8. By offering budgeting apps and tools, you can provide a valuable service while creating a better relationship with your customers.
Appealing to millennials
Establish your institution as a partner in helping customers build and use credit wisely by providing credit-building and budgeting apps and tools. Budgeting capabilities should be included in mobile apps to reach millennials through their desired channel. As an example, you can:
Provide credit education and credit-building benefits for millennial accounts
Use a multichannel approach to deliver content, with focus on web and social channels
Develop "bite-sized" and engaging content that can be included in acquisition and account management communications
Consider offering customers a full financial picture beyond accounts held with your institution
Specific features and benefits to offer
Make products more appealing to millennials by incorporating the following features and benefits:
Budgeting tools and solutions
Virtual account numbers
Person-to-Person (P2P) payments
Mobile check deposit
Security education and alerts
Virtual account numbers
Person-to-Person (P2P) payments
Rewards cards (ideally cash-back rewards)
Credit education with FICO Scores
Custom benefits and offers with relevant merchant category codes (MCCs) and merchants
Emerging payment products, trends and credit risk
Millennials are early adopters of emerging products and payment methods are more likely to use emerging payment methods like mobile wallets, mobile payments and P2P payments.
In fact, more than 50 percent of millennials are very likely to use nontraditional payment companies like Apple Pay in the future9. By investing in and promoting these new technologies, issuers can ensure their products become and remain the most frequently used among millennial customers.
Emerging Payment Methods Usage14
Mobile P2P is particularly popular: More than half (53 percent) of older millennials made a P2P transfer in 2014, compared to 33 percent of all mobile device owners10. Consumers who use P2P prefer to use their primary bank, making issuers well-positioning to compete against non-FI P2P offerings11.
Emerging product takeaways
Incorporate key millennial insights into your product strategy to maximize acquisition, usage and retention among millennial customers.
Millennials adopt and use payment products beginning with prepaid and debit cards, then transition to credit in their 20s
Offer a range of card products to millennials, including prepaid, debit and credit
Target products by age and life stage
Similar to other age segments, millennials choose new credit cards based on fees, rates and introductory offers
Ensure product set offers competitive rates, fees and rewards to attract millennials
Millennials differ from other segments in that they’re concerned with overspending, getting into debt, and understanding how to build credit
Invest in tools for budgeting
Offer financial education to help with credit building
Millennials are more likely than other generations to use emerging payment methods
Invest in emerging, high-growth products, such as P2P payments
Develop and promote mobile apps and wallets
Ensure these services offer competitive functionality and customer experience
While millennials care about establishing good credit, most have yet to do so. The average credit score among millennials is 6287. You’ll need to develop innovative solutions to extend credit to the right customers and employ multiple strategies for underwriting.
Emerging trends in underwriting
When underwriting credit products, consider some of the emerging approaches used by Earnest, SoFi, Fair Issac and TransUnion:
1. Fair Issac and TransUnion test scores using new data12
They review cable and cell phone bills
Developed with Equifax, “FICO Score XD” also relies on LexisNexis for public data
TransUnion assigns scores to thin files, now reaching 95 percent of adults using “CreditVision Link”
Testing with an auto loan lender resulted in 24 percent more loan approvals using the new score
2. Earnest doesn’t monitor a minimum FICO score, but instead, reviews account balances and monthly cash flow, including product features, to reduce risk8. It also offers AutoPay in exchange for a lower fixed rate.
3. SoFi considers University, major, employment and income9.
Make the credit evaluation process more transparent
Earnest’s “Eligibility Guide” outlines credit decision criteria, including employment, savings and on-time payments. They communicate in a simple and straightforward manner. This approach demystifies credit scoring, making it easier to understand. This may also result in a higher likelihood of approval, as prospects self-select based on the stated criteria.
Use emerging trends to your advantage by testing new approaches and data sources.
Underwriting and customer experience
Consider partnering with credit bureaus to use new credit scoring methods and test impact on approval rates, charge-offs and overall profitability
Increase transparency in the credit application and approval process, and offer guidance on how to improve credit scores and approvals
Develop account management strategies to monitor credit behavior and extend offers of credit and/or increased lines aligned with increased creditworthiness
Tools and solutions
How we can help you gain millennial business
Visa Consulting & Analytics can help you improve the performance and profitability of your card portfolios by offering multiple solutions to support the development and execution of your millennial segment strategy.
We offer the following engagements to address the millennial segment:
Portfolio analysis and benchmarking using VisaNet data
VIMS is a full-service campaign execution engine that allows you to quickly and easily execute credit acquisition, credit and debit activation and credit spend stimulation programs. Learn more about VIMS or contact your Visa Account Executive for information.
1 U.S. Census 2011, Consumer Expenditure Survey 2011.
2 Visa Payment Panel Study was commissioned by Visa and conducted by independent global research company, TNS, using their proprietary panel of households, most recently surveyed in Q3 2014-Q2 2015.
3 Phoenix Marketing International, 2015.
4 Fair Issac: Millennials and Retail Banking, Forging Lasting Banking Relationships with Millennials, FICO 2014.
5 Global Payment Tracker 2013, Visa Payment Panel Study, Q2 2012–Q1 2013.
6 “Payment Choices and Revolver Activity,” Cardbeat U.S. Edition, Volume 21, Issue 7, Auriemma Consulting Group
8 Merkle Marketing Insights, Nov 2015.
9 Fair Isaac Corporation, Options and Opportunities, “Forging Lasting Banking Relationships with Millennials,” 2014. Question: How likely are you to consider the following types of companies for banking related needs in the next 12 months? Base: 18-24 (n=76), 25-34 (n=143), 50+ (n=503).
10 Source: Javelin, Mobile P2P Payments in 2015: The Growth and Adoption of Mobile Money transfers, 2015.
11 Mercator, "Opportunity of P to P payments," Customer Monitor Survey series, Financial institutions and channels, 2014, Question 56b.
12 The New York Times, “New Credit Score systems could open lending to more consumers,” 10/9/15.
13 Earnest.com website.
14 Source: Forrester Research, “Consumer Technographics,” North American Retail Online Benchmark Recontact Survey, 2015.