The Uber For Banking

Discussions on the future of mobile banking and more millennial research Wednesday at the Emerge Forum.

 
 

Austin, TX is a hot place, even if you fail to account for the weather. On Wednesday, the first day of the Emerge Forum presented by the Center for Financial Services Innovation and American Banker, speakers hit the hot topics.

Uber For Banking

In an early morning interview, Jay Sidhu, chairman and CEO of BankMobile, an anytime mobile-only bank that offers free (and fee-free) checking and savings accounts along with lines of credit and access to ATMs, made the case as to why his company will play a large part in the future of banking.

Uber, poster company of the shared economy, has become a verb, and startups and established companies alike trying to build buzz use it as a way to describe their potential to disrupt whatever sector in which they exist.

BankMobile was introduced to attendees as the “Uber for banking” and certainly its plans are just as ambitious.

Sidhu, BankMobile founder and former chairman and chief executive officer of Sovereign Bancorp Inc., one of the nation’s largest banks, wants to totally disrupt the banking industry.

BankMobile is “not in the business of selling products, we’re in the business of selling experiences,” says his daughter and the company’s chief strategy and marketing officer, Luvleen Sidhu. To do that, the company wants to open checking accounts in less than five minutes using ID photo capture as well as leverage data to create a proactive banking experience. For example, if a customer buys a plane ticket overseas, he or she would then be prompted with lines of credit or money transfer services.

When asked how he saw the landscape changing between today and 2020, Jay Sidhu saw a digital future, though the industry would be slow to adapt.

“Banks are slow,” he says. “They are built upon the idea that what works for us today will work for us tomorrow.” Banks, he says, should innovate.

He believes there will be roughly 25% fewer bank branches in 2020 than there are now. Additionally, 90% of transactions will be done digitally (versus 50% today), and 75% of new relationships will be born digitally (versus 3% today). He also believes the top 50 largest banks would focus more on the largest metro areas of the country, opening opportunity for community banks and credit unions that already focus in small markets.

Millennials: A Clear And Present Danger

Niti Badarinath, senior vice president of mobile banking and payments at US Bancorp, says there are three threats to the financial services industry as it stands currently: mobile devices, disruptive companies, and millennials.

Taken together, these threats represent a “clear and present danger” to the industry. “Times,” he says, quoting Bob Dylan, “are a-changin’.”

Badarinath focused his presentation mostly on millennials, those between the ages of 18-34, providing his own research and the research of others to draw conclusions on the country’s largest generation. His advice: “Don’t wait to start a relationship until they are profitable. Invest in what they want and grow with them now.”

His findings:

  • 3/4ths of millennials think their bank is transactional and not relationship driven
  • 1/3rd are open to switching to another bank in the next 90 days (from Digital Disruption in Banking, Accenture)
  • 60% bank with a major bank
  • 60% pay bills on a mobile phone
  • 50% make peer-to-peer payments on mobile
  • 50% would switch banks for a better mobile experience
  • 90% of millennials check their smartphones before they dress, eat, brush teeth, or get out of bed
  • 50% start their research or purchase on mobile
  • 40% would rather use their phones as a payment instrument
  • 50% have recommended companies or banks to their friends

But what does this mean? Not only are millennials more likely than others to use their mobile phones — Badarinath calls it “the most personal device ever created” — their propensity for mobile and social media means they leave a huge digital footprint that banks and credit unions can use to be more “predictive, proactive, and personal.” Millennials are willing to share personal information as a currency exchange, as long as they perceive what they are getting back is something valuable.

All in all, Badarinath believes that banks and credit unions can engage this generation in a few ways:

“Invite them to be part of ideation and creation,” he says. “Ask and listen. Market to their life stages. Build experiences they connect to.”

 
 

June 10, 2015


Comments

 
 
 
  • Good stuff - speaking of Austin, Malauzai stays a few steps of the pace. Great organizational blog to follow if you want to know where mobile is going.
    Frank