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Will ApplePay be good or bad for UK banks? What about the consumer experience?

A new report on the experience of retail banking customers painted a sobering picture of a banking industry slowly loosing touch with its customer base and threatened by all sides by new innovative entrants. The new “Pay” wallet offerings by tech giants may only be the latest threat in a long list, but may be the most serious yet.

The latest World Retail Banking Report from Capgemini and Efma is based on polled data from over 16,000 retail-banking customers in 32 countries in 6 geographies. It found stagnating or declining customer experience levels in banks across regions with corresponding increase in customers open to switch financial institutions. The report also mentioned the latest FinTech innovations from Apple, Google and other tech companies as one of the main threats to a bank’s consumer experience perceptions.

The data bodes especially bad for the future of banks because in all regions Gen Y customers were found to have the lower customer experience levels compared to those in all other age groups. And those are exactly the early adopters of technology that would be more easily convinced to turn to an emerging FinTech offering for their financial needs.

For example, the calculated “Customer Experience Index” for North America’s Gen Y customers was 8 basis points lower than the same index for other age groups. Latin America Gen Y customers showed a similar lack of excitement to bank’s customer experience, being almost 7 points lower than other age groups.

These lower experience levels directly affect customer retention and loyalty. The survey showed that less than 50% of Gen Y customers globally are likely to continue with their primary bank in the next six months. Reasons cited include an increase in non-bank competition, growth of start-up banks offering attractive digital products, and the ease in logistically switching banks.

But European banks are not much better off, while the gap between Gen Y and others groups is smaller; the region had the highest level of negative experience across all age groups in the report. Eight of the ten countries with the highest increases in negative customer experience levels were in Western Europe; and five of them posted negative experience increases of more than 10 percentage points.

One thing that became clear was that among all low-cost / high-impact channels of customer interaction mobile is the one growing the fastest across all regions. Mobile’s popularity also rose in every region and had double-digit growth rates across the Americas and Central Europe over the last year. Across most regions, mobile usage is at or close to one-third of customers accessing it at least weekly.

Given this scenario the ability for a bank to allow customers to pay with their phone using digital versions of the plastic cards already in their wallets is a net positive. Transforming their banking app into a so-called mobile wallet would give them a key desirable functionality that differentiates their offering and keeps their apps ahead of the curve and relevant in the highly competitive mobile app ecosystem.

Banks could also open this platform and allow other apps to make payments with a bank’s card, such as merchant apps. That would allow banks to strengthen partnerships and provide customers with an expanded choice of innovative services under their own brand.

But the funny thing happening is that banks are choosing to enable payment functionality through third party “Pay” wallet offerings in most part, and not their own mobile apps. And these are the same internet and technology companies banks themselves perceive to be their biggest threats in the report.

Banks may be jumping on the bandwagon because they feel they have no option, but they do that at their own peril. By allowing third parties to intermediate their customer experience on mobile devices they are delegating a key channel of communication to some of the most innovative and powerful companies in the world. They are also decreeing the eventual obsolescence and death of their best cheapest connection with their customers: Their own banking app.

Mobile wallets could be a major boost for a banks’ customer experience rating if these were done under a bank’s brand. A payment platform for their own apps that is also open to their partner’s apps would keep banks in center stage and provide their customers an exciting mobile payments experience on their own terms.


Banks experience made worse by not having their own wallet

Comments: (1)

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 15 July, 2015, 10:01Be the first to give this comment the thumbs up 0 likes

Everything depends on the source of data and analyses but, based on my sources, I couldn't disagree more:

  1. 7 out of 10 Top companies in the list of Best Web Experience are BFSI ( So banks have surpassed others in delivering a digital experience.
  2. Apart from balance inquiry and last 5 transactions, I really don't need my Mobile Banking app so often. On the other hand, since the Mobile Banking app supports a lot of other features, it is compelled to implement stringent security measures. These make it too painful to use a Mobile Banking app for just my frequently used features. So, I’ve stopped using it altogether.
  3. Bill payments is a powerful and high-frequency use case. A separate mobile wallet for paying bills is more compelling. Had my bank (HDFC Bank, for example) put its mobile wallet functionality into its mobile banking app, I would find the friction too severe to bother using it. Thankfully, it has not and I find its (separate) mobile wallet app, PayZapp, most compelling. It's still early days and there's always the overzealous regulator to manage but, if my experience of using PayZapp to pay my last 5 bills is anything to go by, it will have have succeeded in ending my bill payment woes (HDFC Bank's PayZapp Ends My Bill Payment Woes).
  4. As I've said many times, including in my op-ed piece in JIBC (, banks don't need to fear nonbank fintech players. Maybe fintech companies have realized it themselves, going by how collaboration, not disruption, is the overarching theme in many recent fintech conferences. I see it as a smart move by banks to partner with third party fintech firms to launch their mobile wallets. Davids can beat Goliaths but surely not just when a tiny fintech firm (e.g. Wibmo in the case of HDFC Bank's PayZapp) powers a giant bank's mobile wallet. For fintech, banking rails is a question of survival whereas, for banks, fintech is merely a way to accelerating speed to market.

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This post is from a series of posts in the group:

Innovation in Financial Services

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