Millennials Have Had Their Time
Who else is tired of hearing about the immense steps financial institutions need to go through to attract the coveted millennial?
Admittedly, the future is bleak: In a survey of 10,000 people born between 1981 and 2000 conducted by Viacom subsidiary Scratch as part of its Millennial Disruption Index project, financial institutions were not only found to be among the most unlikable brands with this demographic, one-third of the respondents believed they would not need a bank at all in the future. A recent report by the Center for Generational Kinetics brings more bad news, reporting that some five million millennials don't even have a checking account, citing distrust in banks as the main reason.
So, what's a credit union or community bank to do?
Perhaps look toward greener pastures … understanding that while the future potential of millennials is meaningful, their more immediate payoff is quite elusive. Balancing your marketing efforts with a healthy dose of long-term nurturing among younger segments combined with a focus on the more short-term wins is key.
Enter two emerging and untouched small business segments worthy of a credit union's or community bank's attention: Women Business Enterprises and Minority Business Enterprises. Businesses certified as WBE or MBE are loud and proud of this designation as both a point of differentiation and a way to empower their gender or heritage.
Major companies are recognizing this underserved segment, like Wal-Mart's “Empowering Women Together” program, which encourages the purchase of products from small WBEs around the world. The end benefit is the program empowers these women to create new jobs and improve the lives of their families and communities.
Community banks and credit unions should also take heed of the opportunities these segments provide. Here's why:
They’re at the forefront of the economic recovery and among the fastest growing small business segments.
- Women entrepreneurs are growing at a rate five times the national average over the last nine years, with an estimated 11 million women-owned companies nationwide, responsible for more than $1.6 trillion in revenue. This giant leap (45% in the last decade) still leaves women lagging behind their male counterparts in key financial categories, according to a gender-based survey of 25,000 small businesses in 2016.
- MBEs have grown 2.5 times faster than the general business population since 2012. Earlier this year, New York City certified its 5,000th MBE, with a goal of 9,000 by 2019. Yet only approximately 10% of city contracts have gone to certified MBEs in the five boroughs, and legislation has recently been proposed to even out that ratio. The story is the same across the country: In Minnesota, state contracts going to minority-owned firms have risen 6.9% in the last 10 years, topping $138 million in fiscal year 2016; similar contracts going to women-owned firms increased 1.3% in the same time period, to $53.6 million.
- Women now make up 40% of new entrepreneurs in the United States – the highest percentage since 1996. Yet, they still express difficulties in the funding process. In fact, just 4% of conventional small-business loans go to women-owned businesses, according to a U.S. Senate Committee on Small Business and Entrepreneurship report. Responding to these challenges, local governments have created programs such as the Contract Financing Loan Fund in New York City, which allows minority- and women-owned businesses (M/WBEs) to apply for low-interest contract financing loans of up to $500,000, with the interest rate on the loan capped at 3% (the federal Small Business Association's rates, considered among the most competitive, are typically between 6% and 9%).
- Studies show a similar funding gap for minority-owned businesses. Traditionally, most minority businesses are funded through family, which can be limiting to their expansion.
- Programs including the 8(a) Business Development Program, created by the Small Business Administration to help disadvantaged businesses compete in the marketplace, is having some impact, but opportunities still abound to help these businesses that are challenged to secure funding.
MBEs’ and WBEs’ raisons d’etre align with the missions of credit unions and community banks.
- They state strong connections to family and community as factors in their business.
- They share the same “shop local” mindset and prefer sole proprietor sourcing to big box experiences.
- Their business model demands the level of personal attention and local decision-making that are hallmarks of community-focused financial institutions.
Where do you start your outreach? Every state publishes a directory of certified WBEs and MBEs. You can search by business size, industry or location, and all business contact information is provided. Your initial outreach could be to better understand their specific financing needs as a means to perhaps modify or develop programs geared to them. The immediate return for doing so may be far more lucrative than focusing your efforts (yet again) on those elusive millennials.
Eva LaMere is President at Austin & Williams. She can be contacted at 631-231-6600, Ext. 190 or firstname.lastname@example.org.