Banking on young love

By PAULA OLIVER

Visiting the bank hasn't always been fun for young people.

Stories abound of young customers having to beg to borrow money from the icy bank managers of old.

But now the youth market is a hot commodity.

The big banks are clambering over one another to sign up young customers, and it doesn't seem to matter that their targets are frequently racked with student debt and stubborn overdrafts.

The latest move in the battle to attract youthful account-holders has come from a bank that knows it is usually associated with an older age bracket.

The Bank of New Zealand, a low scorer in market share among tertiary students, has shifted its focus to try to snare under-30s business from its competitors.

New ads, a new account and an alliance with a student card company are part of the push.

The targeting of under-30s is one of its biggest projects, second only to its aggressive moves in the home loan market.

Lures for young people typically include fee-free accounts, help to save for a first house, giveaways, and a skew toward technology-focused products.

But this new-found interest in the young has a profit motive.

Twenty-somethings with no money can become middle-agers with pots of cash.

Bank research on the behaviour of young people throws up another reason they have become such a desirable target.

The most likely time for them to switch banks is when they're between 18 and 30.

During those years they pass a series of milestones - leaving school, moving out of home, getting a job or taking up tertiary study, graduating, buying a house, having a child. Many are now doing those things later in life.

A bank wants to cater for each of those milestones and retain the customer for the later, more profitable years.

"People are looking for a good deal at that time to meet the event that's occurring," says Andrew Whitechurch, BNZ's general manager of business development and strategy. "There's a high number of people who will switch based on the offering that's there at that time."

Whitechurch says he felt the student market was being reasonably well looked after, but there was a gap in offerings for professional under-30s.

"Children under 18 are pretty well served. Students probably to a slightly lesser extent. But 60 per cent of people between 18 and 30 are not students. They're in the workforce and there's nothing targeted at them." .

Other banks might disagree, but BNZ used a team of 20-somethings to design an account.

The result is tailored for people who make a lot of electronic transactions but don't like high banking costs.

It will be available next month - only to people under 30.

The student market is similarly competitive.

Banks set up stall at university orientation events to lure new customers.

"It's highly competitive," says Whitechurch.

"The conventional wisdom is that somebody who's at university will, later in life, earn above average wages."

The BNZ increased its number of tertiary student accounts by 60 per cent this year on last year by putting similar effort into that market.

A hook-up with StudentCard, which offers sizeable discounts at certain stores, was the main reason for the success.

Venturing into areas populated by other banks will always draw fire.

In this case, the questioners doubt BNZ's commitment to the market.

Massey University banking analyst David Tripe says many banks have had an on-again, off-again affair with the youth market.

"The BNZ is on again. They've had bursts when they weren't very interested.

"The National Bank has had a bit more consistency in its policy."

Switching is easier for the young, says Tripe, because they have fewer links with their bank.

"If a bank can establish a decent relationship with somebody under 30, it will probably develop a sufficient set of linkages with that person so that it will be inconvenient for them to change to other financial services."

National Bank is a clear leader in the tertiary sector because it has had a highly visible presence in and around campuses for a long time.

Its youth segment manager, Nick O'Reilly, has noticed more competition this year.

He says it is the first time the other four major banks have all gone aggressively into the school leaver/tertiary market.

"We remain committed," O'Reilly says. "It's something that doesn't happen in one or two years, it's over a long period of time.

"We have the attitude that youth customers are of value and should be treated well.

"They might be in tough times financially, with not as much money as others, but it's a long-term view."

National Bank focus groups supported the idea that those customers would stick with the bank.

"They say they are positive about us because we looked after them when they were students," says O'Reilly.

BNZ knows it is behind the National Bank in the student market.

"They've been at it for 10 years and have made good inroads," says Whitechurch.

"But we have some advantages - we can make a very price-competitive offering without cannibalising existing revenue streams."

If the National Bank wanted to offer more attractive deals, it would have to give the new terms to existing customers, reducing the money it was already making.

The ASB is the other leader in the tertiary and youth market.

Its marketing boss agrees with the observations of other banks - the youth market is getting hotter.

"It's a good opportunity to prove yourself to people of that age group," says ASB's general manager of marketing, Jonathan Symons.

"It's a key market for everyone. It takes a while for these things to come through in market share, in banking. It takes a lot of sustained effort."

He says ASB created an account a couple of years ago aimed at people aged between 20 and 29 and also tried to use technology to woo young people.

It offered online services early and has now linked with Telecom and Vodafone to bring banking to cellphones.

"We like to think that we're a natural fit because that age group tends to be high users of technology, and is often looking for innovation," Symons explains.

Many of ASB's young Auckland customers came to it through school banking, and it wanted to meet their changing needs.