According to a new Price Waterhouse Cooper digital payments study, 46 percent of bank customers interact with their banks EXCLUSIVELY through digital channels (e.g., mobile, tablet and PC). This staggering trend away from traditional banking methods begs this important question: “What products and services is my bank delivering to customers living a digital life?” If your answer is none and you think that your bank will be unaffected by the digital payments tsunami because your customers aren’t asking for digital services, think again. If you’ve subscribed to the notion that older customers don’t bank digitally or that younger customers won’t be attracted to a community bank, let me dispel those myths right now!
Myth #1 – My customers aren’t asking, so we don’t need to provide it.
Guess what? If your customers are not asking for digital services, it’s because they are already getting them elsewhere. According to First Annapolis Consulting, 51 percent of respondents in their 2016 Study of Mobile Banking & Payments have a mobile wallet. Yet, only 7 percent are getting the wallet from their bank! Not surprisingly, Apple is leading the pack as the purveyor of digital wallets, followed by PayPal and Google. But guess who is tied for fourth with banks? Amazon! If you just sucked in your breath when you read the name Amazon, don’t despair. Forty-five percent of respondents in the same study indicated that they would prefer a mobile wallet from their bank versus a non-bank provider.
Myth #2 – My bank serves an older clientele.
The average age of a community bank customer is just over 51 years old. Don’t let age fool you, the First Annapolis study indicates 64 percent of consumers aged 45-54 have made a mobile payment - even baby boomers are getting in on the action! According to the 2017 FIS Consumer Banking PACE report, baby boomers have 9.1 touches per month with their bank through digital channels and only 2.9 via a branch or ATM. That number would probably be higher if it wasn’t for consumer concerns regarding merchant acceptance, privacy and security.
Myth #3 – My bank doesn’t attract younger customers.
Why not? According to FIS, 5 million (about half) of all small businesses are owned by millennials and Gen Xers (age 18-52). But here’s an interesting statistic - by 2020, millennials and Gen Xers will make up 70 percent of the workforce in the United States. So, the number of this group who are business owners is likely to grow. Unlike consumers, small businesses use their bank’s mobile services slightly more than services from non-bank providers. In fact, these small business owners wish they could offer MORE digital services through their trusted bank partner.
It’s not too late to get in the game.
Now for the good news - it’s not too late to get in the game! While the speed of change is beyond anything we have historically experienced, there are many partners out there to help your bank succeed in navigating the digital payments space (including ICBA Bancard). Customers will still seek digital services from their bank first. Not only that, if they are already with a non-bank provider, they will switch back to their bank when the digital solutions become available. Why? Because banks offer security and regulatory protections that non-banks cannot. Year to date, there have been more than 760 data breaches in the United States affecting over 12 million records, 55 percent of which were in the business sector.
Where to start.
It seems like a daunting task if you feel like you’re already out of the game, but with three steps you can get back in there.
First, you need to create a digital payments strategy. For help getting started, read my first two blogs (and coming soon, I will provide a template to help you).
Second, look at your organizational structure. Where do payments fit? Are the responsibilities fragmented and siloed? Is there a payments champion on the senior/executive management level? Organize around digital – always think digital first.
Third, more of your customers will adopt digital technology when you do. Do you have the right services in the right delivery channels? Are your employees embracing these channels? Can your employees talk about the features, benefits, and demo the solutions?
Next month, we will take a look at the various digital wallets on the market and why this is a channel you can’t afford to ignore.