Ryan Craine hates carrying cash and finds writing checks to be a headache. He doesn’t do much of either anymore — he mostly uses his smartphone to pay for things.
Mr. Craine, a 28-year-old tech support worker in Washington, D.C., uses Apple Pay at the stores and restaurants that accept it. About 20 times a month, he turns to Venmo, a digital wallet for transferring money from one person to another, to pay his share of rent, meals, groceries and utility bills. To refinance his student loans last year, he went to an online lending start-up, Earnest.
Mr. Craine’s money choices point to the millennial-led shift toward new digital financial services, a change in behavior that threatens to upend the consumer banking industry. The popularity of the services has left the major banks rushing to adapt, even as they have regained their footing after the financial crisis.
If the banks fail to meet the challenge, Brian Moynihan, the chief executive of Bank of America, warned in November, “it may allow part of our industry to be forever taken away from us.”
As the competition continues to heat up for today’s banks and credit unions, the types of competitors are expanding as well. In addition to traditional financial services firms, market entrants increasingly include organizations that can expand their mobile and digital banking and payments footprints as part of their expansion strategies. These firms can range from core and channels systems suppliers, mobile banking and payments solutions developers, independent software vendors (ISVs) and other technology providers, and consulting firms and systems integrators. Collectively, these organizations can create a wide range of challenges for traditional financial institutions, and should be FIs’ radar.
Overview by Ed O’Brien, Director, Banking Channels Advisory Service at Mercator Advisory Group
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