The Mobile Experience Now More Important Than In-Person Banking

People are increasingly receptive to obtaining financial services from digital-only providers, including the big-tech firms. Fewer than one in five consider an in-person experience to be the most important benefit of their banking relationship. A good mobile app and even no-fee ATMs rank higher.

Consumer inertia over leaving their primary financial institution continues to lessen. Evidence suggests the point at which significant numbers of people will abandon traditional banks and credit unions for fintech or other options may be closer than people in the industry think.

In a survey of 2,027 consumers by payment card platform Marqeta, nearly half say they would consider switching their banking relationship to a digital-only provider. While that would be good news for  challenger banks like N-26 and Monzo, it’s a problem for traditional financial institutions already facing stiff competition for deposits and consumer loans from direct banks like Ally Bank and Marcus by Goldman Sachs.

Likely more worrisome for banks and credit unions, however, is the survey finding that almost half of U.S. consumers (46%) say they would consider using a banking service offered by Facebook, Google or Amazon if those big tech/ecommerce firms should decide to enter the market.

Saying you’ll bank with Amazon, when it’s not currently possible, is one thing. Actually moving your primary transaction account out of a bank or credit union, if and when it does become possible, is another. The experience in the U.K., where many challenger banks operate, is informative. By one measure, 12% of U.K. consumers have switched their primary account to a digital-only institution — primary account being where a person’s salary is deposited. However, fintech observer Chris Skinner notes that even if you regard that percentage as low, it masks a trend in which consumers are using fintech banks for lifestyle spending while leaving a portion of their funds in their primary bank account to pay the bills.

“Over time,” Skinner states, “the issue with letting challengers steal the data about customer behaviors means that the boring old bank is left with the utility bills as a pure utility that, when you have your main relationship with the newbie, is easily deleted.”

A similar trend is deposit displacement, in which funds that used to be kept in a bank or credit union checking account are now diverted to health savings accounts, P2P apps like Venmo or Square Cash, and merchant apps from Starbucks, Walmart and others that let people load funds onto the app, according to Ron Shevlin, Managing Director of Fintech Research for Cornerstone Advisors.

The point is, consumers increasingly are getting used to digital transactions, especially with ecommerce players. Nearly 80% of the respondents to the Marqeta survey, for example, had made an online purchase within the last month. Consumers clearly are growing accustomed to a digital lifestyle, particularly among younger generations and urban residents.

Four Out of Five Millennials Would Consider Changing Banks

Several questions Marqeta asked relate to how likely consumers are to change financial institutions. Of the entire sample, just one out of five (21%) consumers “could not imagine wanting to change banks.” For U.S. Millennials, the figure was lower — just 17% say they couldn’t imagine changing banks. Looked at from the other end of the telescope, however, that means more than four out of five Millennial consumers would consider such a change. The primary reason stopping most people from changing their financial institution — reported by 40% — is that it seems like too much work or they wouldn’t know where to start.

Combined with the finding about willingness to try digital-only players, this suggests that traditional institutions, while they may be holding onto consumer accounts for now, could find the situation changing quickly if an entity trusted by consumers were to offer a compelling package — unless the financial institution has comparable or better products and services in place.

Read More: Build Your Digital Banking Strategy on a Mobile-First Foundation

Preference for In-Person Banking Waning

In-person service is not likely to be a deter many people from leaving their financial institution, based on the Marqeta findings. Even though nearly half (49%) of U.S. consumers say they have visited a bank or credit union branch within the past month, just 15% say an in-person presence is the most important benefit they look for in a bank or credit union.

There is a clear demographic split here, however. The 50-to-65 age group was nearly twice as likely (20%) as the 18-to-34 group (11%) to say an in-person presence is the most important benefit their bank provides. The age differential suggests that the branch preference will continue to diminish, the survey states.

On the other hand, just over a fifth (21%) of U.S. consumers consider an easy-to-use mobile app as the most important benefit their financial institution provides. Not surprisingly, Millennials are nearly twice as likely as Baby Boomers to say a good mobile app is most important (27% versus 14%).

The only service ranking higher than a good mobile app as a benefit is the original low-touch banking innovation: the ATM. 31% of U.S. consumers consider easy access to ATMs and no ATM fees to be the most important benefits their banks provide.

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Consumers Still Want it All, but Especially Digital

The survey results confirm the difficult balancing act traditional institutions must cope with. The continued popularity of ATMs and the increasing use of mobile apps show that when it comes to consumer preferences, patterns may shift, but nothing ever goes completely away — even checks. An interesting finding is that while over half of Millennials have used a mobile wallet to complete a purchase, and nearly three out of five have sent or received money using a P2P service such as Venmo, one quarter of this digital-native group say they wrote a check for something other than rent or utilities.

Consider too that even though Amazon Go stores, conceived as cashless, cashier-less outlets, continue to open, ordinances banning no-cash stores have been passed in multiple cities.

Still, the results of this survey show the preference of many consumers for digital banking services because of the speed, ease of use, and convenience. Even though Marqeta’s survey doesn’t point to a stampede to the exits, the results indicate that given a better experience, younger consumers in particular will move.

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