First-rate mobile apps mean more to consumers 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 two Europe-based challenger banks, N-26 and Monzo, that announced plans to enter the U.S. market, it’s a challenge for traditional financial institutions that already face 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.
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