Digital payment providers are finally earning the same level of consumer trust that banks have long cherished.
Historically, outsiders had trouble earning consumer trust, but the results of an annual study by Javelin Strategy & Research illustrate that "power is changing hands" in the payments industry, said Mary Monahan, head of mobile for Javelin.
"These players are moving into the banks' world," Monahan said. "The mobile wallet providers are very innovative and, over time, innovation translates to trust."
In 2011, only 45% of consumers said they trusted the digital wallet developers Apple, Google, PayPal, Amazon and Facebook while 61% said they trusted the top banks and 91% trusted the card networks.
In 2014, those numbers made a dramatic shift, with 80% saying they trusted the nonbank developers, putting them nearly dead-even with the card networks at 79%, while banks fell to 44%.
In the area of privacy protection, consumers rated the payment networks (79%) and mobile wallet providers (78%) nearly evenly in 2014, while banks fell to 43% from 51% in 2013.
"That's a dramatic change, and once you have lost ground in consumer perception, you can't make it up," Monahan said.
Javelin used its trust, innovation and privacy/protection [TIP] survey model to monitor consumer perceptions over the past four years. A report released last week compared a series of online surveys since 2011, the most recent from November of 2014, obtaining insights from between 3,000 and nearly 6,000 consumers each year.
The top five banks in the study were JPMorgan Chase, Bank of America, Wells Fargo, Citibank and U.S. Bank. The study also evaluated perceptions of Visa, MasterCard, American Express and Discover.
Using the TIP model as a guide, PayPal leads the wallet brands in consumer perception, an advantage it can pair with its its acquisition in early March of mobile wallet provider Paydiant.
Of all of the digital and mobile wallet concepts available, 42% of consumers said they would prefer a PayPal wallet, just below the 45% saying they would want their primary bank or credit union to offer one. Apple Pay came in at 28% even though it debuted in late 2014.
"Banks that may decide to wait another five to 10 years to develop mobile payments are taking a risk because customer perception is changing and making them more open to alternative players," Monahan said. "It won't just be PayPal, it will be all of the others as well."
Building their own mobile platform is timely and expensive for banks, which have found Apple Pay an easier way to get started, Monahan added. "The banks and networks are seeing the benefits of gaining transactions and introducing their cards to Apple users."
Apple ranked first in innovation in the study, but it won't be the only choice available to banks moving forward.
Around the same time PayPal was making its move with Paydiant, Google Inc. made a move to revitalize its wallet. The company purchased the technology behind the U.S. telcos' Softcard wallet, a former rival on the Android operating system.
All of this took place while Samsung Electronics Co. was developing Samsung Pay, which it plans to make available in the U.S. during the third quarter of 2015.
Consumers have shown little interest in the Merchant Customer Exchange's unreleased CurrentC mobile wallet, ranking it at the bottom of their preferences. But wallets not yet in use tend to score low, Monahan said.