Despite the surge in mobile payments and online banking, no one is predicting the disappearance of traditional banks and their brick-and-mortar branches.
But one thing is clear: Americans would be willing to dispense with their local bank and make Amazon, Apple or Google their primary payment account provider if those 21st-century accounts allowed them to more easily manage and spend their money.
A PYMNTS survey of 3,000 U.S. consumers who have at least one credit or debit card and mobile device revealed that 24 percent would be “very” or “extremely” likely to switch to the new generation of banking. Another 48 percent said they would be “somewhat” likely to open accounts with these companies.
That’s $1.6 trillion in credit and debit card purchasing volume that could potentially be in play, which could hurt the financial institutions (FIs) serving these consumers today.
Our research suggests that traditional FIs may be underestimating consumers’ willingness to embrace new, and some say better, ways to manage and spend their cash.
The details are offered in Building a Better App: Banks and the Innovation Imperative Report, a collaboration between PYMNTS and Ondot Systems, the Silicon Valley-based FinTech.
The collaborative analysis does not predict an overnight exodus of consumers from their banks and does not assume that Amazon is ready to leap into personal banking. But a significant share of consumers are willing to bank with the institutions, financial or otherwise, that offer them the best spending and money management tools.
PYMNTS presented respondents with a hypothetical app, one that would allow users to manage multiple card accounts, debit and credit, and would offer features including lost or stolen card reporting, spending pattern insights and purchase financing.
This “better app” would also offer transaction confirmations and alerts, card location controls and the ability to track and redeem rewards.
The results? Nearly 44 percent of respondents said they would be “very” or “extremely” interested in downloading it. The rate rises to 60 percent among bridge millennials, those between the ages of 30 and 40.
Such an app could potentially involve as much as $2 trillion in card spending.
This prospect represents risks and opportunities for FIs. They can be proactive and cut themselves a share of the market by meeting consumers’ evolving needs, or they might risk being left behind by consumers seeking better ways to manage and spend their money.
Last fall, Forbes reported that while banks have historically been early adopters of technology like ATMs, online banking and debit cards, many traditional banks have been slow to embrace the latest innovations, as other FinTechs have given consumers more ways to spend and transfer their money.
A global banking study revealed that only two-thirds of banks planned to invest in technology that would help them “acquire, engage and retain customers,” the report noted.