Millennials may not understand the difference between a bank and a credit union, but when it comes to third-party payment apps, they know their stuff.
Individuals ages 18-to-34 are a technology-first, convenience-driven generation. Being able to access anything at any time is important for millennials. That’s why they prefer mobile for everything ? including banking.
According to a FICO report, 80% of millennials do most of their banking activities online and through mobile apps. Through bank and credit union apps anyone can check account balances, deposit checks, pay bills, and transfer money between accounts, all from their phone.
Millennials still aren’t satisfied.
The Rise Of New Payment Options
Third-party payment apps like Venmo and Square Cash allow users to make real-time mobile payments without fees, making them instantly popular with young adults.
Pay Pal-owned Venmo is particularly popular, as displayed by its dramatic 126% payment volume increase over the span of one year. Not only has Venmo made it possible to immediately transfer money from one account to another (though not withdraw), it has created a social media aspect to a payment method.
As 22-year-old DePauw University graduate Sheinnera Gerongay says, “It’s more social. You can put a funny tag on your payment whereas a bank app is more serious.”
I’m not the biggest believer in Venmo but sometimes boredom takes over and I find myself scrolling through my Venmo feed to see which of my friends transferred money to whom and the entertaining sayings attached to the transactions.
Aside from that, Venmo is convenient and available. Says Nathalia Melo, a graduate student at the University of Alabama-Birmingham, “It’s an easy fix when I forget my card or I pay for someone, instead of an ‘I owe you’ and then the person never pays you back.”
Personally, I don’t love Venmo, or other apps of its kind. I use them because it’s easy and because everyone else does. As skeptical as I am of the security and social nature of the app, I prefer Venmo over using cash. I hardly ever carry cash with me anymore and I can’t pay a friend back for late-night Wendy’s runs with my debit card.
Why Is This Important For Credit Unions?
The use of third-party payment apps not only buries credit union and bank accounts and cards anonymously under, say, the Venmo name, it also provides the illusion that financial institutions are not necessary in sending and receiving payments.
Soon enough, users may even be able to make retail purchases through these third-party apps. Additionally, more players are joining the fray: Apple is creating a peer-to-peer payment option through iMessage with its new iOS 11 update.
As capabilities grow, Melo sees only increased usage of third-party payment apps unless, “they get hacked or something crazy like that,” she says.
I personally think the end of Venmo is far from near, but I think security issues may be the downfall. A “free” service such as Venmo has me constantly wary of the potential dangers associated with my usage. However, these concerns are not enough for me to forego the app and its benefits entirely. I think this belief is consistent among millennials.
We know the risk, but enjoy the convenience too much.
Purdue University student Hunter Wieczorek also displays some skepticism for third-party payment apps. However, he also sees a bright future for them, even if he would prefer to use one through his financial institution.
“If banks or credit unions were to incorporate a debit card transaction feature into their mobile apps, it would probably eliminate the market for something like Venmo,” he says. “Banks and credit unions should be serving the function of Venmo in the first place.”
The fact of the matter is, even if banks and credit unions do currently offer P2P, they often only transfer between internal accounts, and millennials already have in Venmo an option that works to make and receive payments to and from anyone at any institution. Even though this generation lacks brand loyalty, they won’t switch payment method unless provided an advantage in convenience and value.
Time For Credit Unions To Catch Up
Financial institutions are not new to the P2P game. Dwolla and Fiserv’s Popmoney have been around for years. Dwolla, however, has rebranded to a B2C service but Fiserv claims more than 1,000 financial institutions in its white-labeled P2P network.
Being white labeled means the credit union doesn’t have to put any name but its own on the service. Great for branding, but there is one problem. The service charges a $0.95 fee per payment and credit cards are not accepted. Few millennials will choose this option while Venmo is still around and essentially free.
But what is it that young adults love about Venmo so much?
They can transfer and receive money from anyone regardless of financial institution, there are no debit card transaction fees, and moving money from one Venmo account to another is instantaneous.
The one downfall to Venmo is that withdrawing money from a Venmo account to a checking account can take up to a day. This means, to receive a payment through Venmo, there is a wait period before an individual can actually put that money to use. In addition, the delay opens Venmo users to fraud scams.
Millennials don’t mind this since it’s the best option available … for now.
A network of major banks has created an app called Zelle. There are no fees for any type of payment and users can transfer money to anyone with an account at an institution within that network. Additionally, withdrawals can occur instantly.
More than 30 financial institutions have joined the Zelle network. That includes Chase, Citibank, Bank of America, TD Bank, and Wells Fargo. Those are five of the eight largest banks in the country and represent nearly 40% of the industry’s $15 trillion in assets. That’s a huge network.
Credit unions are not left out. CO-OP Financial Services and FIS are also partnered with Early Warning, the owner of Zelle. Because of this, credit unions can soon offer this P2P service to their members.
Because there appears to be a need.
The three millennials I talked to agree if their credit union or bank offered a peer-to-peer payment method like Venmo, they would use it. I’m one, too, and I know I would.