They’re coming, millennial customers. Actually, they’re already here, and the largest generation in history — there are more millennials than there ever were baby boomers — have strong ideas about how they want to borrow money, pay it back, and talk about it.
It would behoove auto lenders to learn those things, because if 18-to-34 year-olds aren’t your most important demographic now, just wait.
A recent survey by the Fair Isaac Corporation indicates that millennials, when borrowing money, are decidedly more adventurous than older borrowers. Compared to those over 50, for example, millennials are 10 times more likely to consider a peer-to-peer loan from an alternative lending service, such as Funding Circle or Lending Club. This level of comfort with alternative lenders means millennials will explore a wider array of borrowing options than previous generations, and could open the door for new entrants in the auto lending space.
It should be noted, however, that the percentage of millennials willing to borrow from a P2P lender is just 23%, but that number is growing rapidly. A look at the venture capital flooding into these lenders tells the story.
When it comes time to pay loans, millennials also blaze their own trail. More than half of 18-to-34 year-olds — 52% — already use or would be willing to use a nontraditional payment company, such as PayPal or Venmo (which is owned by PayPal/eBay). Further, 32% of millennials use — or plan to use in the next 12 months — mobile payment systems such as Apple Pay and Google Wallet.
The implication for auto lenders is clear: making it possible for customers to pay in their preferred way will make customers happier and more likely to pay expeditiously.
Millennials are also particular when it comes to communication. According to the Fair Isaac data, millennials want to communicate by the following methods, in order:
- Text message or SMS
- Website form
- Mobile app
Understanding customer preferences and engaging them the way they want to be engaged can deeply influence the way the borrower views the relationship. It is worthwhile understanding your customers and wherever possible, allowing them to interact with you the way they would prefer. Not doing so opens the door to competitors and upstarts who know your customers better than you do.