Financial institutions, once revered, now rank lowest in Edelman’s research into consumer trust; conversely tech companies top the poll.
Companies like Venmo, the peer-to-peer payments app, are outflanking traditional players by combining genuinely useful capabilities, like splitting payments across a group, with zeitgeist features such as transaction history in a social media-style feed, replete with comments. This approach saw $1bn worth of transactions processed on the app last month.
The banks have previous too. In 2007 Western Union seized on the rise of mobile phone ownership within developing countries, especially Africa, to dominate a burgeoning money transfer industry, an area where banks could have thrived by utilizing their access to clearing houses and branch network.
They also overlooked PayPal in 2003 allowing eBay to swoop for the payment provider which had 125m active user accounts by the time the companies parted-ways in 2014.
Banks are now trying to muscle-into the P2P sector – expected to be worth $336bn by 2021. Last week 19 of America’s biggest confirmed that they would integrate with Zelle, a rival to Venmo and Square Cash.
This should be seen as a first step: now is the time for the big banks to invest in innovation, not only to attract new consumers, but also to capitalize on their enormous existing customer base – Chase, Wells Fargo, and Bank of America have 67m mobile users – both to fulfil their needs and to reduce costs, such as account-related mail, check usage, branch footfall, and customer service issues.
A 2016 Clarabridge survey found that 67% of respondents had placed a call with their bank that year; how many of these could be resolved by online banking or bots in the future?
It is not too late whilst Google, Amazon, and Facebook’s attention is elsewhere. However, if they do enter the sector it soon will be.