The results of a new survey of 4,000 North Americans by professional services company Accenture portray a continent warming to the idea of new payment methods while needing more convincing before they adopt them en masse.
Accenture’s North American lead for Payment Services Robert Flynn said that consumers have more ways to pay than they did even last year. The 2014 survey identified eight different methods. That number has grown to 13 in 2015 and includes Apple Pay and Samsung Pay.
“The industry is continuing to fragment,” Mr. Flynn said.
But the availability of more options does not automatically translate to use, Mr. Flynn acknowledged. These new options have to generate awareness that they even exist. Then they have to convince users to switch. That involves showing them how the new option reduces time and friction.
The path of mobile payment awareness is the perfect example. For the first time, more than half of respondents knew they could conduct transactions with their phone. That is the good news. The bad is only 18 percent actually do it.
“While we’ve seen this surge in awareness, usage is flat,” Mr. Flynn said.
At this stage the upstarts best be aware it is not an even fight. This is not the Pepsi Challenge, where they are asked to choose which one they like best and then switch. The new option has to be substantially better, for it has to build in the energy it takes to break one habit and begin another.
“The new solutions have to be easier than ripping out a credit card,” Mr. Flynn said. “Some are getting there but it is all about simplicity.”
Mr. Flynn spoke with Bankless Times at the recent Money20/20 conference in Las Vegas. It took place in October, the same month of the EMV migration deadline.
For all of the attention devoted to the switch, EMV technology is doomed. Keynote speakers including Vinod Khosla and Osama Bedier were looking steps ahead before it even launched.
Mr. Bedier passionately described his reason for creating Poynt, his new smart terminal he introduced last year, in an exclusive session at the event. Many of the new technologies are at best intermediate solutions, and the current pace of innovation renders them obsolete before they can scale.
Any new entrant hoping to stick around better do more than incrementally improve the payment experience, Mr. Bedier said.
“The best payment experience is the one which does not exist,” he said, citing the Uber experience as the level he intends to reach.
Yet as fast as technology improves, society will their sweet time adjusting, thank you very much. The group with the highest adoption rate are those making at least $150,000 per year, and they are only at 38 percent. Millennials are next at 23 percent. While still under 50 percent, Mr. Flynn said it is still a significant shift for a habitual behavior.
To see the grip payment habits have on us, look to the developing world, where mobile penetration is high and adoption of new technologies is also high.
The reason is the behaviors being adopted are in many cases entirely new, Mr. Flynn explained.
“There is no history to unlearn.”
And whatever you do, make sure your solution is mobile friendly, Mr. Flynn advised. While most developers acknowledge mobile’s importance, how they actually incorporate the mobile experience into their design is a mixed bag.
The big players are taking the mobile experience seriously, so seriously they are buying entire design studios to create the optimal experience. Capital One bought two.
While online and mobile experiences will increase in popularity, the survey results pointed to four opportunities banks can leverage to reinvent the customer relationship.
The first is the branch experience. Eighty-one precent of respondents said they would not switch banks if their local branch closed. Two thirds said they plan on using their branch just as much, if not more, in the future as they do today.
This presents banks with a great opportunity to reimagine how they interact with customers whose needs and preferences are clearly changing. The biggest reason customers stay with a banking brand is because of a positive online banking experience, which includes being able to switch from mobile to tablet to desktop and back again, with actual branch visits limited to the most intricate matters. Fewer visits mean proximity is a lower priority.
When those customers have to visit a branch, they need to see an efficient, customer-focused process. In a sense, it is a Back to the Future model with incorporates community banking elements.
But banks would be foolish to assume the loyalty is set in stone, for some cracks are beginning to show. Four out of five respondents viewed their banking relationship as transactional. They buy low-margin products from their primary institution while shopping around for the higher margin ones.
A key retention strategy for banks is to offer value add services such as discounts, proactive bill payments, and even proactive product recommendations. They cannot assume that if the customer has an account that they will likely upgrade to mortgages and other profitable products. Not with the growing number of niche services able to go narrow but deep in their area.
Even though their credibility took a beating at the national level, banks are still trusted to manage personal customer data. Given the growth of data collection and analysis, this is a key strategic advantage. “An overwhelming 86 percent of consumers trust their bank over all other institutions to securely manage their personal data,” the report stated. “No other provider in our survey…comes close to this level of consumer confidence.”
Banks should use consumer data to improve the sales and service experience, the report concludes.
Retaining and attracting millennials will play a key role in bank health in the coming decades, the report concludes. They easily switch banks and are more likely to move to credit unions and local community banks.
Do not give them their parents’ bank, the report advises. Provide excellent digital experiences reasonable fees, convenient physical locations and great loyalty rewards. Use the digital experience as a springboard to deeper, proactive, and value-added experiences.