For decades, banks have for the most part competed against other banks and credit unions to be the cash management and transactional hub of the American consumer’s financial life. In recent years, however, many start-ups have emerged to challenge this position, offering inexpensive alternatives to traditional banking services. Like other financial services start-ups, these innovators have technology-centric brands and are focused on delivering an excellent mobile experience, two things traditional banks lack for the most part.
Banks should be concerned with the rising popularity of these alternative apps. Corporate Insight’s November 2015 survey of banking customers revealed that 71% of Millennials who use online or mobile banking are also using some type of alternative banking service like PayPal, Venmo, Google Wallet and Square Cash (versus 47% of Baby Boomers). One of the primary draws of these non-banks is Person-to-Person (P2P) payments, a service that most banks also provide but that just 10% of consumers we surveyed actually use through their primary bank.
Square Cash and Venmo are two of the more popular P2P platforms. It’s estimated that Venmo will exceed 9 billion individual transactions in 2016, while the most popular bank P2P service, Chase’s QuickPay, is only expected to reach 93 million transactions. Perhaps customers are turning to alternative providers for these transactions because they offer a better user experience and greater range of functionality. To test this theory, we recently used Corporate Insight’s new Mobile Banking Audit framework to benchmark the P2P payment offerings of 10 leading banks, as well as those offered by Google Wallet, PayPal, Square Cash and Venmo. In conducting the assessment we considered such attributes as payment scheduling options, payment speeds and payment requests. We found the two best performers were Square Cash and Venmo, with scores of 3.39 and 3.22 out of 4.0, respectively. By comparison, the top-performing bank – Ally – earned only a 3.07 and the average score for these 10 banks was just 2.74 out of 4.0.
Peer-to-Peer Payments Sub-Category Scores / 2016 Mobile Banking Audit
Square Cash and Venmo score high by offering such enhanced functionality as the ability to send and request payments, and to pay or request payments from multiple payees simultaneously within a single transaction. The latest iteration of their respective apps introduced integration with iOS 10 features, allowing users to send cash through the iPhone’s iMessage feature as a text message. Square Cash and Venmo also now work with the iPhone’s Siri feature, allowing users to send money via a simple voice command without needing to open the apps (e.g., “Send $10 for lunch to Jason with Cash”).
Few traditional banks offer advanced P2P functionality comparable to what Square Cash and Venmo provide. Those that do often run into issues where the added features are not well integrated into the overall experience and create additional steps and pain points for users. For instance, Square Cash users can complete a P2P transaction in only two steps, whereas one of the traditional banks included in the competitor set above requires users to click through as many as six screens to execute the same transaction.
Users’ expectations for app design and functionality continue to increase and already exceed the experience provided by most traditional banks. If these banks want to increase P2P payment adoption, they must embrace the services and functionality that have made standalone P2P payment apps so compelling, while at the same time providing an experience that is easy to use. If they don’t, customers will continue to choose more user-friendly non-bank alternatives for P2P, making it ever more difficult for banks to be the center of their customers’ financial lives.
For more information on Corporate Insight’s Mobile Banking Audit, please click here.