Remember paper checks? Your boss would drop off your paycheck at your desk, and you’d zip over to the bank to cash or deposit it right after work. You didn’t think it was a pain—if anything, it was the highlight of your week.
Fast-forward fifteen years, and that celebratory transaction is now an outdated headache. Online deposits are the name of the game, and speed and convenience are everything. When you have to wait to access your account, you’re changing banks.
This paradigm shift in banking is entering its next phase, extending directly to consumers as peer-to-peer “instant payment” systems wedge themselves between individuals and their bank accounts, much as credit cards do. Instant payment services put the actual bank transactions into the back office. Users like the simplicity and the experience. Want to send your niece some birthday cash? Goodbye checkbook, hello Venmo. Forgot to get cash from the ATM for the lawn guy? Lucky he takes QuickPay. Freelancers and contract workers in the growing gig economy often accept payment via app, and trade their checking account functions for Google Wallet. Banks and credit unions haven’t been sitting idly by while this happens; they’ve allied to offer their own service in Zelle. Financial institutions that refuse to play ball are missing massive opportunities for growth.
Your call: 30% growth vs. 80% revenue disruption
Instant payment apps have put financial institutions at a crossroads, albeit one with an obvious choice. As things currently stand, modern digital payment models will impact up to 80 percent of existing banking revenue pools by 2020.1 But where there’s a threat, there’s also an opportunity. Banks that act quickly on digitization could see up to 30 percent revenue growth as early as 2022.1
The commoditization of getting paid
To the modern consumer, payments are a commodity. It doesn’t matter if they’ve been with a credit union for 15 years; if another model offers them greater value, that’s the one they’re going to use.
Everything from movies to insurance paperwork is now available at the tap of a button. This “anything, anytime, anywhere” mindset has also changed how consumers approach their money. Where your chosen financial institution used to have first pass at each financial decision you needed to make, disruptive mobile apps have swayed financial decision-making in favor of speed and convenience. It doesn’t matter how long your members have been with you—if your banking app requires three steps to make a payment and Venmo only takes one, they’re going to choose Venmo.