On-demand access to the most comprehensive identity data available is essential for real-time identity verification – and for Millennials it must include mobile phone number and email addresses.
The data you use for this function must also be up to date, and multiple email addresses must be correctly linked to the individual identity to reduce confusion and false negatives.
To determine likeliness to buy and intention to pay, you typically start with credit history. For many Millennials, however, that measure is unreliably thin, so risk managers have turned to substitutes.
For some Millennials, this data can provide valuable insights into risk. But a significant percentage of them joined the workforce in the late 2000s, during the global recession. As a result, they faced limited job opportunities and a reduced earning potential. And even those who fared well entering the workforce share with their generation a strong interest in maintaining a balance between life and work.
These factors have influenced how Millennials choose to support themselves. Many have turned to freelance and consulting work, for some because it is their best employment option, and for others because it offers more freedom and flexibility than a conventional job.
Regardless of the reason, this approach to work does not provide the solid, reliable income history you prefer for risk evaluation.
Once again, this information is helpful for Millennials who have purchased a home. But the same economic downturn that challenged Millennials entering the workforce affected their home-buying options; they faced reluctant lenders and difficult loan requirements.
As a result, many older Millennials entering the traditional home-buying years were prevented from buying. Moreover, they do not place the same importance on home ownership that other generations have, so that even as the housing market has recovered, many still choose to rent, attracted by the freedom and flexibility of not having a mortgage.
For this generation, even the tested non-traditional methods of evaluating purchase interest and intent to pay may not provide the answers risk managers need.
Fortunately there are additional approaches – although they do require richer, more detailed consumer data, accurately linked to identity data.
Alternatives to Proxy Models That Will Help
As we’ve seen, traditional pre-credit approval and even proxy scoring models may not deliver sufficient insight to make an accurate risk assessment – or may characterize Millennials as poor risks when in fact they are good prospects for your services, offering significant revenue potential without undue risk.
The solution is to dig deeper into their history and behavior to uncover insights into long-term stability. Using consumer data for specific attributes, you can create an identity profile that is almost as powerful as traditional credit indicators in predicting willingness to purchase and intent to pay. Your profile could include:
Housing history and address longevity
Even without a history of home ownership, you can consider rental history, length of time at current address, and the number and frequency of address changes.
History for automobiles and other assets
The type of automobile an individual is driving and how long they have owned or leased it can provide insights into stability – as can the history of other significant assets such as a motorcycle or watercraft.
Mobile phone ownership and plan
Mobile devices are important to Millennials . How long they’ve owned their phone and whether they have a traditional or a pre-paid plan can shed light on their stability.
Demographic and lifestyle attributes
Factors such as the presence of children, estimated wealth score, and education can be strong indicators of stability.
Consumer purchasing and lifestyle behavior
Attributes such as regular clothing purchases, interest in technology, interest in food and wine, vacation travel, and even charitable donations can help gauge a consumer’s stability, and intent and ability to pay.
To evaluate Millennials that fall between the cracks of traditional risk evaluation tools, you need on-demand access to complete and up-to-date demographic and attribute data, covering online and offline behavior and purchases in as much detail as possible. This attribute data must also be correctly interlinked with authoritative identity data.
Deeper Data is the Key to Millennials
As Forbes noted in a report summarizing the 2015 ABA National Convention:
“Millennials aren’t coming – they’re here. Given their dominance, banks must now prioritize their approach to attracting constituents of this key demographic.”
They’re simply too important to the future of every financial services provider to ignore – your business included. Unfortunately, it is more difficult to verify their identity and assess the risk they present. The traditional measures of creditworthiness simply do not work as reliably with this generation, because those measures rely on attributes – such as credit card history and home ownership – that do not accurately reflect Millennial priorities, or their degree of financial responsibility.
As a result, you may be rejecting prospective Millennial customers who would in fact be profitable, valuable contributors to your business. Fortunately, by using measures that more accurately reflect Millennials priorities and behavior, you can make accurate predictive determinations that expand your opportunities while protecting your risk exposure.
The key is having access to accurate, complete and up-to-date consumer identity and attribute data with the depth to provide the insights you need – and a data partner with the experience to help you identify how to use it to meet your company’s growth strategies and risk profile.
While Millennials may not have the strong, traditional paper history to indicate purchase intent, key stability, behavioral and lifestyle indicators can provide banks and financial institutions with the additional means needed to successfully evaluate the potential spending power of millennial consumers.