Millennials believe tech giants will replace traditional banks: report
A growing number of millennials believes that giants in the technology industry, such as Google and Apple, will one day overthrow traditional financial institutions’ stronghold on mobile banking thanks to their innovative approaches, according to a Fintonic report.
The financial services provider recently undertook research to locate insights related how to the technology industry is affecting banking, particularly focusing on millennials’ perception of this phenomenon. Fourteen percent of survey participants believe major conglomerates such as Apple and Google will eventually become financial institutions, and will replace traditional banks in the eyes of consumers.
“The rise of the smartphone and rise of the middle class in Latin America is coming together to drive demand for the next generation of banking products and services,” said Sergio Chalbaud, CEO and founder of Fintonic, Madrid, Spain. “This newly ‘banked’ population is skipping the traditional in-branch stage of the relationship with a financial institution, and obtaining it through mobile.
“The growing affluence and expansion of the middle class is driving growth in consumer spending – and with it these consumers are already attuned to using technology to improve and make their lives easier.”
Big predictions for Google
Technology giants are being positioned to grab a significant share of mobile users’ wallets, as evidenced by the rollouts of payment platforms such as Android Pay, Samsung Pay and Apple Pay. According to Fintonic’s research, ten percent of Americans between the ages of 18 to 54 think that Google will become a viable banking institution in the future.
Six percent of Americans over the age of 55 agree with that prediction. These numbers suggest that some traditional banks are losing steam in regards to popularity among consumers, especially those who are tech-savvy and rely on their mobile devices to conduct basic errands such as depositing checks or monitoring account balances.
Consequently, traditional institutions must fight to stay innovative and offer useful features to their clientele.
“The majority of millennials believing that tech giants like Apple and Google will one day replace traditional banks is a very real prediction,” said Marci Troutman, CEO of Siteminis, Atlanta. “With ‘experience economy’ (an economy in which many goods or services are sold by emphasizing the effect they have on people’s lives) shifting consumers from active to passive consumption, the entire world is welcoming the change with open arms.
“Brands will be required to deliver an experience that encompasses cross media and is available in seconds through digital and the IoT (Internet of Things). In the future that is fast approaching, there will no longer be just commodities, products or services; but experiences on a digital platform that will seamlessly weave shopping with banking into an experience that has never been seen.”
The rise of mobile commerce features within messaging applications is also a notable trend. Western Union is bringing global money transfers to the forefront by enabling WeChat app users in the United States to distribute funds to 200 countries and territories via the messaging service (see story).
Big-name banks may therefore find success in engaging in cross-partnerships with these popular messaging apps.
Meanwhile, 14 percent of survey respondents claim that Apple and Google could do a better job at offering customer service and transaction options than traditional banks.
According to a Wall Street Journal report, Apple is discussing a potential P2P service with a number of major U.S. banks (see story). This suggests that the platform would allow users to transfer payments from their checking accounts directly to another person.
A surprising 16 percent suggest robots will put bank tellers out of business in bricks-and-mortar branches.
One commonality that all age groups agreed on is the inevitable upward trajectory of mobile payments. Forty-five percent of millennials and 44 percent of consumers aged 35 to 54 believe that mobile payments will overtake credit card and cash transactions within the next decade.
Winning over key markets
Additionally, many financial institutions have been missing out on marketing to a key demographic: the Hispanic community. If banks seek to stay competitive in the industry and further innovate with technological offerings, keeping in mind this target audience will become a must-have strategy.
The research revealed that a mere 20 percent of Hispanics want to do business in physical bank branches, while more than a quarter of those surveyed think that physical checkbooks will be a thing of the past in the next ten years.
Thirty-six percent of Hispanics are under the impression that mobile payments will be more common than cash or card transactions in the next decade as well.
An optimal communication channel that banks can leverage to connect with Hispanic consumers is social media. Fintonic’s study found that 25 percent of Colombians and 21 percent of Chileans aged 55 and over believe that social media networks will become the key communication avenue with banks.
Conversely, just four percent of United States customers in this age range have the same thought.
“Banks should absolutely use social media quite a bit more readily to connect with consumers,” Ms. Troutman said. “With this years holiday season, the reports will be very interesting to watch and view the changes that are swiftly becoming a reality.
“As millennials start to be the major force driving consumption, their demand for experiences will drive this change faster than everyone might realize. Banks need to be on top of this.”
Alex Samuely, staff writer on Mobile Commerce Daily, New York