Why Starbucks Could Become Your New Favorite Bank

Amid the emerging flood of research on the financial practices and whims of Millennials, one consistent finding stands out: this group craves information and advice that it can trust. It’s not clear that banks, with the most at stake, will ever get it right.

Well, duh, you might say. We all crave advice we can trust. But not like Millennials. They represent a full swing of the pendulum. Consider our oldest generation, those now 70-plus. Many sacrificed mightily in The Depression and World War II. But they were rewarded with lifetime job security and generous health and pension benefits. They have always had faith in our institutions, from government and religion to private enterprise.

Boomers questioned the establishment. We fought for civil rights and casual Fridays. Yet we generally trusted our financial institutions to guide us to long-term security. That may be why we weren’t paying attention when the switch to defined-contribution plans from defined-benefits plans went awry. Suddenly, an entire generation is woefully under saved and ill prepared for retirement.

Generation X, the first reared by TV and exposed to 24-hour cable news, saw this misplaced faith and developed a more skeptical worldview. How many times can you watch a greedy Wall Street type or crooked politician do a perp walk on CNN before you lose faith in those holding the puppet strings? But rather than rebel, this comparatively small generation withdrew and has simply made the best of things.

Enter Millennials and a whole new attitude. They have come of age amid rampant underemployment and runaway college debt. They have seen their parents lose their nest egg or home, or both, in the Great Recession. They blame banks more than government or individual error. They are ultra-wary of fees and pricing, and skeptical of anything they hear from a financial institution.

Millennials would rather go to the dentist than a bank. A third of them envision a bankless future and a third are ready to switch banks in the next 90 days. With such little faith in financial institutions, three in four Millennials turn first to peers for financial guidance. Their reasoning: at least with peers, if they are misled it will be an honest mistake.

All this poses unusual challenges for banks that want to stay relevant as Millennials grow into better jobs and begin to gather assets. Already, this generation shows openness to banking and investing start-ups like Square, Betterment, Robinhood, and Wealthfront, which tout transparency and low fees.

But the game is far from over. In The Millennial Shift: Financial Services and the Digital Generation, market research firm Corporate Insight notes that one way banks can capture this generation’s attention is by shifting the bank branch focus from transactions to education and guidance. According to the report:

Millennials are saving more now than boomers did at their age. They know they must manage their own financial future and want someone to guide them in a way that makes sense to them. Online and mobile tools and social media appeal to them. But so would a bank branch that had more of a Starbucks feel and where the staff was as ethnically and gender diverse as this most diverse of generations. It’s not enough for a bank to just offer guidance; it must be sincere, inexpensive, accessible, and above all trustworthy.