Pub. 5 2016 Issue 2

l e a d i n g a d v o c a t e f o r t h e b a n k i n g i n d u s t r y i n k a n s a s 14 W HEN I WAS a kid, my first hands-on experience with a bank was when I opened a junior savers account at a Seattle-based institution that is now part of Bank of America. I was flush with cash earned from a newspaper route and mowing lawns, and my father rightly advised me that I needed a safe place to deposit my money so it could earn interest and grow. This was a big deal. Opening a first bank account was a valuable, confidence-inspiring right of passage in terms of my taking on greater real-world personal financial responsibilities. It also instilled in me respect for banking. Looking back, I was taught valuable lessons during my regular visits with my father to my bank. I’m sure all of you continue to impart these lessons today to your new generations of customers walking through your doors. And many of you go even further, delivering lessons on savings and credit in classrooms and community centers, lecture halls and student forums. It’s an important service to provide your customers and community that has the added benefit of reminding today’s youth of the banking industry’s value. It’s imperative that tomorrow’s customers see the need for banks in their lives today. Our industry’s future literally depends on that. This message about the need to preserve banking’s relevance is one that I’ve been spreading everywhere I’ve travelled since being named ABA’s CEO. Demographic changes make the message both urgent and compelling. Consider that, according to one survey, one-third of millennials — the 84 million Americans born between 1981 and 2000 who now comprise one-third of the U.S. population — don’t think they need a bank at all. And a disturbing 71 percent say they would rather go to a dentist than listen to what banks have to say. The same survey, dubbed the Millennial Disruption Index, also found that nearly half of millennials are counting on tech start-ups to overhaul the way banks work. That’s tough to hear. But at the same time, other surveys show tremendous opportunity for banks to appeal to millennials and showcase their expertise. A recent study by PwC and the Global Financial Literacy Excellence Center on young adults’ financial capability found that U.S. millennials are lacking in their understanding of financial concepts, with only 24 percent demonstrating basic financial knowledge. Thirty-four percent reported that they were “very unsatisfied” with their current financial situation, and 50 percent said they lacked the ability to cope with even a moderate financial shock. The study, which surveyed Americans aged 23-35, also found that debt obligations, particularly from student loans, are a main point of concern. Two-thirds said they carry at least one source of outstanding long-term debt, and 54 percent are concerned about their ability to repay. More than half reported carrying over a credit card balance in the last 12 months, and many reported turning to alternative financial services, such as payday lenders or pawnshops. They should be turning to banks. That’s where they can find help with managing debt and building savings. That’s where they can find both “fintech” innovations and the commitment to security that comes with doing business with an FDIC-insured and regulated institution. Banks have a good story to tell, and it’s up to us to tell it. Community outreach and financial education programs -- like the ABA Foundation’s Teach Children to Save and Get Smart About Credit programs, and our newest Safe Banking for Seniors initiative — can help. These programs and others like it demonstrate your commitment to the people and communities you serve. They help create more informed, financially capable and confident customers. And they help safeguard customers’ money by making people wise to poor money management habits as well as fraud. They are a win for both banks and customers. If you already participate in such programs, thank you. If not, I strongly encourage you to enroll today. Learn more at aba.com/ Engagement. E-mail Rob Nichols at nichols@aba.com . EDUCATING CONSUMERS HELPS DEMONSTRATE BANKING’S VALUE By Rob Nichols, President and CEO