It’s Time For Banks and Credit Unions To Take Back Banking
Neobanks, “big tech,” and fintechs such as Square, Chime and Paypal are helping erode the banking industry. With each new entrant or product, bank brands are being disintermediated from the consumer. Here are just a few examples of the shifting dynamics in the banking industry that have the potential to leave banks and credit unions behind:
• Chime, now the number 1 neobank in the US1, currently has 20.2M account holders, and is expected to grow to nearly 25M by 2022. By the end of 2025, close to 40 million US adults will hold accounts at digital-only banks.
• Niche financial institutions are popping up at an alarming rate, offering community to groups of people aligned to a specific purpose or mission. Examples include Greenwood Bank, Majority, and Laurel Road.
• In 2023, more than $1 trillion will transact via mobile P2P apps.2
Google, Amazon and Wal-Mart are all closer to being banks than ever before.
According to Segmint’s internal data, comparing year-over-year payment volumes from April 2020 to April 2021, Venmo grew 69%, the Cash App by Square grew 80%, and Apple Cash grew by 42%. At the same time, Zelle, a bank P2P app, grew just 5%; all transactions that could have instead originated from within a financial institution.
The financial institutions that are having the most success competing…and winning…in the battle for wallet share are those that are creating timely and relevant experiences for customers and members. There’s been a greater emphasis placed on personalization over the last few years, but personalization alone is not enough. Just knowing the name of your customer and the products they have at your institution leaves you vulnerable to competitors with better technology that can harness data to create best-in-class and timely experiences. Relevance takes personalization to a whole new level by providing the insights around customer behaviors, mined from actual transactions, and recommendations based on the needs of the consumer at a particular moment in time. It’s time for banks and credit unions to take back banking.