Banks vs. 'new finance' players – a battle for the consumer

There has been much speculation of late about the future of Europe's banks. For one thing, discussion has been rife around falling consumer loyalty, spurred on by the combined factors of the financial crisis, technological advances and emerging alternative players. What's more, when it comes to their customers, banks are operating on previously un-trodden ground – significant advances made in technology and the ubiquity of the internet and mobile have increased consumer demands for ultimate convenience, speed and security, writes Thomas Heldner

Thomas Heldner is Head of Key Account Management, Merchants at SIX Payment Services. Prior to this Thomas held the role of Head of Enabling Solutions, a position he had held since 2009. In this role Thomas was responsible for the strategic and operational guidance for the ‘Enabling Solutions’ department.

Thomas has more than a decade of card services expertise, previously having held the position of Head of Business management POS and e-commerce. SIX Payment Services provides financial institutions and merchants with secure and innovative solutions along the entire value chain of cashless payments.

 

There has been much speculation of late about the future of Europe’s banks. For one thing, discussion has been rife around falling consumer loyalty, spurred on by the combined factors of the financial crisis, technological advances and emerging alternative players. What’s more, when it comes to their customers, banks are operating on previously un-trodden ground – significant advances made in technology and the ubiquity of the internet and mobile have increased consumer demands for ultimate convenience, speed and security. Combine this with a growing number of alternative providers entering the mainstream, and the result is that commentators are increasingly coming forward to predict the end of the ‘traditional’ bank.

It has been well-documented that consumer trust and confidence in banks is at a low, and bank loyalty and the resulting ‘stickiness’ has suffered as a result. Certainly, as we approach the September 2013 account-switch deadline in the UK, when it will be made substantially easier for consumers to move their bank accounts, there will be much concern among banks about how many people will switch to alternative payment players, and the subsequent impact this will have on their own customer numbers – and revenues. After all, at a time when falling interchange fees and increased competition are impacting on banks’ profits, there is little room for further loss.

Yet evidence suggests that banks still have reason to be confident. Recent research from PwC shows that despite the large number of new and innovative start-up companies entering the market, 61 per cent of consumers still trust the traditional, established banks over these new providers – clearly consumers are not yet ready to trust alternative financial players with their money matters.

There exists a clear opportunity for incumbent players to take full advantage of recent technological advances, in order to offer alternative payment methods as value-added services for a flexible and commodity-driven customer base. They are bound to increase customer loyalty, brand awareness and provide – at least for the time being – a boost to revenues in these difficult economic times. Of course some UK banks are already leading the charge in this area, most notably Barclays with its Pingit mobile payments application.

It’s true that new players are well-positioned to enter the market without the headache of a decades-old legacy IT infrastructure, accommodating evolving customer demands. But, are consumers ready to turn their backs on their high street banks? Banks have a lot at stake and it certainly seems to me that this is a battle they will not be willing to lose.