CHICAGO –A significant consumer shift away from traditional banking tasks is already unfolding among early mobile-pay adopters and the underbanked.
Banks and consumers have several "disconnects" when it comes to services provided and services wanted, James Van Dyke, president and founder of Javelin Strategy and Research, said Oct. 22 at the annual Chicago Payments Symposium at the Federal Reserve Bank of Chicago.
Consumers are increasingly finding their needs met through prepaid cards and payroll cards, he says.
"Prepaid and payroll cards represent areas in which people are doing their 'banking' at Wal-Mart, because they are going to the merchants and retailers to upload their cards," Van Dyke says.
As consumers get comfortable handling money in this manner, managing a prepaid card becomes "like a depository relationship" with the merchant, rather than a bank, he adds.
When the nationwide "Occupy" movements pushed for a "bank transfer day" in which followers would move accounts from a bank with high fees to one with lesser or no fees, Javelin researchers spoke to many "Occupy" participants to determine what they decided to do with their bank accounts.
"They are making switches in an attempt to trump the fees, but they are not making significant changes," Van Dyke says, illustrating that financial institutions can still satisfy consumers by narrowing the gaps in the "disconnects."
It is far too early to "look into a crystal ball" and say which mobile payment company or method will gain the most consumer adoption, Van Dyke says. "But we do know what end users feel are the most important factors," he says. "They value trust, information and privacy."
Javelin views the year 2017 as the most significant for the payments industry in terms of which emerging payment methods will take hold and whether all issuers, merchants and consumers will have converted to EMV smart card technology, Van Dyke says.
In the meantime, banks would be wise to "figure out the value proposition and risk factors" of mobile payments because their mobile banking mechanisms will ultimately lead to mobile payments, he says.
As part of the discussion, Jeff Plagge, president and CEO of Northwest Financial, said financial institutions need to examine the "convergence of views" on the future of payments and determine when it is the right time to act.
"Some look at calendars [when considering payment changes], and some look at watches," Plagge says. "I'm an advocate of faster is better in this case."
Banks have to "move as an industry much quicker" in the adoption of new payment methods that match consumer demands, or the future of payments "will be outside of our industry," he says.
In conducting research on future payments for community banks, Robert Steen, chairman and CEO of Bridge Community Bank, says it comes down to a fairly simple equation.
"Financial institutions must offer the opportunity to move money faster, maybe even instantaneously," Steen says.
A critical component of future mobile transactions, Steen says, is that the consumer feels as though he is dealing with only one bank.
"The ultimate goal is to clear a transaction as quickly as moving money from one account to another," Steen says. "It has to be fast and secure — and we do this best — but it has to be anytime, anywhere."