Today, it seems like big banks and corporations are constantly in the news. With the recent financial crisis, there have been massive government takeovers as well as buy outs from other banks.
But there’s more bad news for the beleaguered banking industry, and it has nothing to do with regulatory scrutiny or shareholder displeasure.
People no longer need to go into banks to deposit checks and pay bills. With online banking becoming a preferred method for many people, there is less of a need for physical banks.
But there is more disruption to come. It is predicted that within five years half of today’s smartphone users will take advantage of phones and mobile wallets as their preferred form of payment method.
A mobile wallet is essentially a connection between your payment details and your smartphone or tablet device where funds are taken from your accounts and then digitally sent for in-store purchases.
Interest in mobile wallets is not what worries banks. A host of traditional banks are exploring offering mobile wallets. What is troubling is the willingness of consumers go outside the traditional banking establishment for making payments.
A study form Carlisle & Gallagher Consulting Group (CG) found that:
8 out of 10 consumers interested in mobile wallets said they would use PayPal as their mobile wallet provider and would consider the service for other banking services if they were available
6 out of 10 said they would use Google, and the same number would consider using Apple
The competitive threat from new entrants is real. Consumers are open to considering alternatives to their primary banks to provide mobile wallets and even core banking services. People have already slowed their use of cash and checks in favor of credit and debit cards. Within five years, half of today’s smartphone users will be using their phones and mobile wallets as their preferred method for payments. These customers will be using better tools to help them optimize transaction choices.
With the physical wallet quickly disappearing banks will need to figure out how their products will stay “top of wallet” in the new mobile wallet world.
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