What Your Digital Payments Solution May Indicate About Your Bank's Future

April 13, 2021


Digital payments and your bank’s future

Your bank’s future depends on many things, one of which is whether you’re able to keep up with changing trends and offer solutions that are simple for customers to implement and use. 

A great example of this is digital payments solutions: mobile banking and ease of use are top priorities for today’s consumers. One-in-six consumers say they would switch financial institutions for a better digital experience; 53% percent also say bill pay is the most important digital/mobile banking feature—and these are pre-pandemic numbers.

Big banks, big tech, and retailers are already meeting consumers’ payment expectations by offering engaging and modern digital technology. If your bank doesn’t do this yet, you’re already behind.

In our recent webinar, Geoff Knapp, Chief Growth Officer, and Jeff Harper, Chief Revenue Officer of Allied Payment Network, Inc. took an in-depth look at today’s payment landscape, including:

  • Digital adoption and usage stats
  • The growth of biller-direct payments and how much they cost your bank
  • The best peer-to-peer payment method for your customers
  • Where to begin to modernize your payments solution


Current digital payments issues financial institutions are facing

New consumer bill pay trends

About 15 years ago, the promise of free online bill pay changed the billing landscape for banks forever. Consumers wanted a consolidated place to view their bills for convenience and security, while institutions wanted users to remain in their digital banking environment to enhance loyalty and gather valuable, monetizable data. 

In 2010, almost 40% of consumers made online bill payments through their bank, but in 2020, that number dropped to about 22%. This tells us that consumers don’t seem to care about everything being consolidated into one place; instead, they often prefer to go directly through billers’ sites instead of a bank’s website.

A few reasons for this include:

  • Mobile-centric users find bill pay payee setup through their bank to be cumbersome and error-prone. 
  • Biller sites display important details about the bill itself, such as amount owed, due date, late fees, and other terms. 
  • Payments directly through billers’ sites are often credited immediately, thus avoiding late fees and providing immediate gratification.

The importance of mobile payment options

A 2020 survey found that many consumers, especially those in more recent generations, think that flexible mobile payment options are very important when choosing a new bank or financial institution.

On top of that, according to 2020 FDIC data, 83% of the $2.4 trillion in new deposits went to just 13 banks with more than $250 billion in assets. Banks below $1 billion in assets actually saw their deposits decline, and big banks are capturing more of consumers’ primary banking relationships.

For other financial institutions, it’s now time to switch the focus from just having the tools available to prioritizing the experience those tools provide. Banks need to communicate the value that they bring to the table over competitors. These trends will likely continue with younger consumers whose lives are digital-centric, so smaller banks need to keep up if they want to attract and retain customers.

The rise of non-bank competitors

Younger consumers are looking for tools that make it easier than ever to move money around. Some of the big players taking over bill pay that aren’t traditional financial institutions include Google Pay, Chime, Venmo, Square, Stripe, etc. 

These companies are starting to offer more services and increasingly act more like banks. This means that incumbent banks should expect to see intense competition over the coming years. Being prepared to face these new competitors and implementing innovative digital payments solutions to stay on top will be essential.


How financial institutions can stay competitive

Focus on the experience

Consumers demand an intuitive, easy-to-use interface, or they will abandon the payment tool or institution. Determining how your services compare to competitors is important for ensuring that you’re offering the best solution that customers want to utilize.

Encourage users to be engaged

People that enjoy working with their primary financial institution create a lot more value for that organization in a variety of ways. They provide additional revenue per year, have greater deposit balances and investments, and remain loyal to that institution. Providing a great experience and working on your brand image can help with user engagement.

Level up your digital payments solution

With all of this in mind, it can be difficult to figure out where to start. The main things to work on are focusing on sharing your value with customers, comparing yourself to alternatives, going further than just offering the tool itself, and optimizing mobile usage.

Online bill pay must-haves include:

  • Mobile-first design
  • Up-to-the-minute information about bills
  • Real-time payments
  • Closed-loop confirmation—security and comfort of knowing payment is made
  • Smart messaging designed to drive healthy financial behavior

Put yourself into the shoes of your users, and offer digital tools and experiences that make their lives easier.

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