Phoenix Synergistics: The New Financial Competitors
The financial services marketplace has become extremely crowded with all types of competitors. Check cashers and payday lenders have been largely serving lower-income and underbanked consumers. Retail giants such as Walmart and Target are also major competitors. While many of these organizations compete initially with more traditional money services and products such as prepaid and secured cards, their foray into the financial services industry is unsettling, keeping many traditional providers wondering about their next move.
More recently, online and financial technology (fintech) players are vying for a share of the financial marketplace. The payment and credit areas have been virtually bombarded with new fintech players such as Google, PayPal, Lending Club and SoFi – to name a few. The investments market has seen the rise of new entities such as Credit Karma, Envestnet, Betterment, and Wealthfront, as well as new services such as robo investing.
Should traditional financial institutions view these various new entrants as partners or disruptors? Trust has typically been on the side of traditional banks and credit unions, but has the impact of the financial crisis opened the door for these various new players? Today, consumers have increased flexibility to conduct financial activities when, where, and how they want to do so. And with tech-savvy millennials entering the financial marketplace, will non-traditional players, particularly new online and fintech entities, wrest share from traditional financial institutions? Having a clear understanding of the consumer perspective is essential for traditional financial institutions in developing strategies to face the challenge of a host of new competitors.
- Measure the importance to consumers of various features and factors in the selection of a financial institution.
- Examine current relationships with internet-based or direct banks – including their role (primary or secondary) and the reasons for opening an account. Measure interest among nonusers.
- Assess the potential for banking relationships with a number of non-traditional providers such as Amazon, Facebook, and Twitter. Evaluate consumer reaction to fintech partnerships with traditional financial institutions. Examine experience with alternative providers such as check-cashing centers, pawn shops, and short-term loan companies.
- Determine the payment methods used by consumers for e-commerce activities – including alternatives such as Amazon Payments, Venmo, Google Wallet, PayPal, and paysafecard.
- Examine experience with and the potential for peer-to-peer lending sites. Assess activity with crowdfunding services and determine the likelihood of future usage.
- Evaluate experience and activity with robo investing services. Measure the potential for adoption among nonusers.
- Identify consumer segments – defined by demographics, financial behavior, or attitudes – that are key potential customer groups for new financial providers.
- Current Environment
- New Financial Competitors
- Fintech and Alternative Providers
- Marketplace Lending
National Internet Survey – The report features 1,015 Internet interviews with consumers age 18 or older.
Key Finding from the Report:
Nonbank organizations could make inroads into the banking space. Receptivity to opening banking accounts with a number of non-traditional players is significant.