Millennials like Tommy Oakes are moving away from the bigger banks their parents used and moving toward smaller, community banks, data by Accenture Plc shows.
Oakes, a 24-year-old sales associate at Denver-based e-commerce business Pay Simple, chose to place his into an account with USAA Federal Savings Bank after graduating college, Bloomberg News reports. The choice came down to price.
“They have no monthly fees,” he said. “They reimburse your ATM fees, and I can also bundle insurance and investments with them.”
Community banks made a 5% increase in account holders ages 18-34 last year and credit unions recorded a 3% gain, while national and large regional banks lost 16% of the clients in that same age range last year.
One main reason for the change is bigger banks tend to charge for retail services and have increased fees for account maintenance, ATM withdrawls and overdrafts.
“Traditionally, big banks have been able to dominate with physical presence, having extensive branch networks, name recognition and being able to spend a lot on advertising,” said Richard Barrington, a senior financial analyst at MoneyRates. But the popularity of banking via the Internet has leveled the playing field. For some banks, “what were once advantages have now become liabilities.”
The Accenture study also found that Millennials are more likely to change to their primary bank than other age groups. In the 12-month period ending on Jan. 26, 18% of Millennials surveyed switched their banks.
To attract younger customers, community banks will eat the costs of offering services like free checking in exchange for potentially servicing that same customer for other services down the line like a mortgage or retirement needs, Karin Bonding, a recently retired finance professor from the McIntire School of Commerce at the University of Virginia, told Bloomberg.
