According to a Carlisle & Gallagher Consulting Group survey, customers that are interested in mobile banking technology would consider an alternative to their primary bank for both mobile wallet and core banking services. The two largest consumer groups
demonstrating this interest are young consumers and affluent consumers, both important demographics for the banking industry. 76% of these consumers are either currently using or intend to use mobile banking and mobile payment services. These consumers can be segmented into two main market groups:
- Techno Shoppers (27%): Consumers attracted to shopping and social features of mobile wallets and currently use their cards to make the best possible payment decisions
- Payment Optimizers (21%): Consumers interested in making the best payment decisions based on their financial situation, loyalty benefits and account management
The Competitive Threat from New Entrants is Real
Banking customers have already reduced their use of cash and checks in favor of debit and credit cards. It is estimated that within the next five years, 50% of today’s smart phone owners will be using their phones as mobile wallets as a preferred method of payment. These smart phones are more equipped to utilize user preferences, location, and rapid adoption of technology to organize real-time incentives, loyalty programs, and search and shop features that these customer groups find the most useful. They also provide customers with a systematic way to track and manage the terms and conditions of the offers they receive from each of their payment options. Here are the top considerations that are lowering the walls for new entrants:
- Customers are frustrated by the inability to manage offers and incentives and keeping track of payment due dates
- 65% of respondents rated the ability to make better payment choices, such as maximizing loyalty programs or minimizing interest payments, as the most valued mobile wallet service
- 82% of Techno Shoppers responded that making shopping easier was very valuable
- 62% believe that mobile wallets will make shopping more fun
Ultimately, 8 in 10 consumers would use PayPal as their mobile wallet provider, and six in ten would use Google or Apple. 5 in 10 would actually use PayPal over their primary bank, 3 in 10 would use Google and 2 in 10 would use Apple. 8 in 10 would consider using PayPal if it offered banking services, 6 in 10 would use Google or Apple.
How should banks compete?
In order to compete under this era of disruptive innovation, banks need to ease the pain points with their mobile wallet features to retain customers. As we search the mobile payment market to see how the industry will evolve, one thing remains clear: Those players that can attract and maintain a critical mass of customers will dominate in the end. It seems to me, then, that if traditional banks, with their massive roster of clientele, can get their act together then they can dominate in the mobile banking industry. Now is the time to optimize bank branded mobile payment offerings. This ultimately calls for not only an update of core transaction processing capabilities, but banks need to offer better tools to help their customers optimize transaction choices. Banks can fast track this innovation through partnership or acquisition with smaller mobile banking and payment vendors that are able to innovate rapidly in today’s market.
With customers ready and willing to move not only mobile payments but also core banking services to rivals, the time for banks to innovate in this space is now or never.
