It’s been an interesting evolvement – especially for those on the outside looking in. The quandary for banks and credit unions, for at least a decade, has been how to make the transition from the traditional bank branch to first, online banking and now, mobile banking. What many might not had expected, at least this soon, was mobile peer to peer banking services. Going online and then mobile has proven to be an easier feat than making their respective customers aware of their P2P options. A new report on the nation’s banks reveal that just 7 percent of online consumers have incorporated P2P banking in the past month. There’s a lot of unchartered territory. Here’s the latest in banking technology and what we can expect in the coming months.
The P2P Movement
Part of the effort in getting a big movement pushing forward is providing real-life examples of how consumers can benefit. PayPal did it well with this clever seed planted in the minds of millions: Instantly cover your cost of dinner with a fast P2P transfer to the one who’s putting it on his credit card.
Suddenly, college friends and best friends were able to make the waiter’s life easier by paying the restaurant with one credit card transaction and while the waiter was settling the balance, all of the friends who attended were able to move their share of the tab to whichever friend who’d handed over the credit card to the waiter. P2P – or person to person – was a brilliant idea. The challenge, it appears, was making sure the general public understood that it’s not limited to just the online payment providers like PayPal, but that their local community bank offered it as well.
It’s puzzling, really, especially since most banks don’t tack on any fees for this convenience. Even smaller credit unions and banks are in on the opportunity, albeit some are limited to P2P via their websites and haven’t yet developed a smartphone app. Younger consumers, naturally, are the ones who are evolving and embracing the new conveniences, but still, just 10 percent are incorporating it.
Is it just a case of a window of time to develop a habit? Maybe. Some say, though, it’s because the financial institutions aren’t doing well in getting the message to their customers. In fact, plunder around your bank’s site. How easily can you find its P2P availability? Better yet, ask around the office and see just how many coworkers understand the term “P2P”. This is why PayPal’s real-life examples worked so beautifully: it not only get the message across, but it showed consumers just how easy (and quick – as in a completed transaction in about 30 seconds) it is.
The POS Considerations
There’s also another opportunity that banks and credit unions – and ultimately credit card issuers – are missing out on. Point of sale payments are also being underutilized. Only 15 percent of consumers have made any kind of POS purchase in the past thirty days. There continues to be a growing number of retailers that incorporate this convenient payment option and in fact, by the end of 2013, it’s believed more than 2 million POS systems will be installed in retailers around the country.
A survey, conducted by FindABetterBank, shows that just 14.4% of online consumers have made mobile POS purchases in the last 30 days. The really interesting finding is that those under the age of 30 are the ones less likely to use POS. By now, we’ve all heard about the unbanked and underbanked – and the growing number of those without bank accounts.
Plus, there are many whose credit took hits during the recession and as a result, this younger age group simply can’t make POS transactions because they don’t have bank accounts or credit cards. Even with all of the amazing technology, most of those in this age group say they’re all about keeping it simple and don’t want to burden themselves with too many payment methods.
Generations See P2P and POS Differently
That could be a massive problem – truly massive – for the banks and even credit card companies. Because Gen Y is steering clear of these traditional financial products like checking accounts and credit cards, that leaves a wide open space for newer technology and payment options, such as PayPal and even prepaid debit cards that serve the purpose of a checking account and credit card, but come without concerns of bouncing checks, missing payments, higher APR and credit hits.
As mentioned, PayPal is the horse to beat in this money race. It already has 57% of all POS users in the U.S. It’s those insights that led to the easy to understand advertising efforts as well as its approach to merchants and retailers. In fact, if PayPal has any worries at all, it’s not going to be from the community bank or the credit card company: its biggest competition comes from the merchants themselves.
Some, including Starbucks, are developing their own POS apps and systems. Remember the survey that said the under-30 set was less likely to use POS? Those that do are using them at places like Starbucks and Target. If PayPal is doing well, the retailers with incredible visions for the future are making it rain with cash.
Banks and Credit Card Companies Must Reprioritize
Clearly, the banks and credit card companies have got to rethink their priorities. It’s surprising that any of them would allow these golden opportunities that are delivered via the latest technology to pass them by. Usually, and most certainly in the financial sector, we see aggressive movements towards the latest and greatest “must have”. Now’s the time because if they don’t, they’re going to the wayside – which is exactly where they pushed their tellers in lieu of computers.
For those who think it’s simply a fad, as yourselves this: When is the last time you actually wrote out a paper check? Then ask yourself how many checks you wrote each month, say, seven or eight years ago. See the shift?
So what are your thoughts? Are the banks, credit unions and card networks doing themselves a favor by treading softly or should they take a more aggressive approach, much like PayPal, and really push these conveniences for their customers? Better still, since most of them are free, do you think it could be they’re not pushing them (but still offering them) because there’s not potential revenue?