Payment apps' stickiness threatens banking's hold on consumer branding
From messaging and social media, to health monitoring, streaming and on-demand delivery, digital services have disrupted every aspect of our everyday lives, making our mobile devices an extension of ourselves.
In fact, American adults (ages 18 and above) own an average of five devices, including PCs, smartphones, tablets and wearables, and engage in 114 minutes of active mobile screen time per day, on the foreground. That’s a lot of time and attention!
It’s no surprise that consumers are doing more on smartphones and in apps than ever before. And the next generation of consumers have already transformed the way they communicate (bye bye email, welcome Snapchat and Kik), order food (Foodora), transport themselves (Uber) etc. When it comes to finances, consumers (especially millennials) heavily rely on apps to help them streamline their finances, and traditional physical or desktop-centric online banks are challenged by these consumers and their expectations for always-on, always-with-them, mobile banking.
With the rise in cross-device usage, major banks and startups alike are closely watching the rise of of the mobile payments industry. A report from the Federal Reserve projects that up to 70% of Americans will make at least one mobile payment in 2017, and that number may be even higher in other key markets in Asia and Europe. For instance, fintech companies like Venmo processed more than $1 billion in one month in mobile person-to-person payments and Square processed billions more on mobile devices.
However, while major companies like Google, Apple and even Snapchat vie for consumer attention in the mobile payments space along with fintech players like Square and Venmo, traditional banks and financial properties still dominate in popularity, and the battle between the two groups is just beginning.
We already face huge competition between the new breed of Internet companies like Google and Facebook, and traditional telecom carriers, like Verizon and AT&T. It is likely that the next 10 years will provide a playground for traditional banks like Bank of America and Citibank, to wage war against Google, eBay and Apple, and it remains to be seen how traditional credit card companies like American Express and Visa, or startups like Square, will play on this new discontinuity in banking.
Our data shows that the 10 most popular banking and financial properties are still today largely dominated by major banks, with a few notable exceptions. For instance, PayPal is the top-ranking banking or financial property, with nearly 90 million monthly users – more than twice the user numbers and reach of Chase, its second-ranking competitor.
Moreover, PayPal’s user base is evenly split between mobile-only users and those who access PayPal through a PC or across multiple devices. That's strong indicator of PayPal’s entrenched dominance across screens, both desktop and mobile. PayPal has a significant early-adopter advantage: the company launched its first payment service in 1999, and unveiled the PayPal brand in 2001. By contrast, Android Pay, the only other non-bank backed payment service in the top 10, did not launch until 2015, more than 15 years later. While nationally-recognized banks and credit card companies are jockeying for position in the rankings, other payment services, like Venmo and Google Wallet, lag far behind (ranked 20th and 39th, respectively).
Other large, national banks, such as Chase, Wells Fargo, Citibank and Bank of America, are still catering to a wide variety of customers across multiple devices. While our data shows legacy banks and financial institutions have the most users, they don’t rank in terms of engagement.
Verto’s stickiness rating compares daily and monthly users to quantify the most engaged users. According to our data, some of the stickiest banking and financial properties aren’t necessarily the ones with the largest monthly user numbers. Take Venmo, for example, which has less than 10% of PayPal’s user numbers, but its stickiness rating is 17%, compared to PayPal’s 12%. And Venmo attracts repeated visits. The average user engages with Venmo 10 times per month, compared to PayPal users, who use the service an average of just five times per month
While several national banks are represented, the stickiest property on our Index is Quicken, a personal finance and management tool. Its 44% stickiness rating is nearly double that of any other property across our entire Index. Although its nine million monthly users only account for a 4% overall reach, those users spend an average of four minutes using Quicken per session, and the majority of users (90%) use a PC to access Quicken for some portion of their sessions.
What does this all mean? With opposing sides dominating user numbers and engagement, consumers are still looking for a streamlined payments tool with the services of a traditional bank. And as financial services continues to become digitized, consumers will likely move more towards mobile-centric services that eliminate traditional obstacles that typically come with their bank of choice.
For instance, two of the stickiest properties on our Index are mobile-only, and some of biggest national banking and credit institutions are vying for a mobile-first (or mobile-only) strategy. American Express appears to be the only major credit card company with a mobile-only app that ranks on our Index, which supplements its other existing online properties. American Express claims nearly 16 million monthly users, while its mobile app has nearly half as many monthly users. And TD Bank (a major American retail bank that advertises itself as a “convenient” institution) is the only banking institution to roll out a mobile-only app. None of the national banks have more than a 50% mobile-only audience.
The fintech ecosystem continues to grow, as consumers expect a consistent cross-device experience from their financial institutions. And major banks are realizing their best shot at competing may be setting up a united front. Recently, 30 US banks backed a Venmo competitor earlier this year called Zelle, a P-to-P payments network that allows transactions to move seamlessly within minutes instead of over a few days. Throw in recent and significant new services from Google and Apple, and the market is clearly flooding with a myriad of competitors striving to be a one-stop shop for consumer finances.
While the mobile payments race has yet to find a dominant winner, it’s a great example of how consumer behavior influences the way businesses design apps and services. The battle between traditional banks and fintech properties continues to heat up, and one thing is for sure: the future lies in mobile banking.