Amazon, Apple, Facebook, Google and PayPal, the Gang of Five in the words of Mary Monahan, EVP at Javelin Strategy & Research, are more trusted than banks. Speaking at the Chicago Federal reserve’s Payments Symposium, Monahan said that trust in banks and payment networks has gone down and the trust in the Gang of Five is rising. In fact, the Gang of Five is gaining in public perception for trust, innovation, and privacy — yes, privacy, even at Facebook.
This contradicts an April 2015 study by Accenture which concluded that “Bank customers in North America overwhelmingly trust their banks far more than all other institutions to securely manage their personal data.”
I have always thought the study was badly designed. “When asked what type of company they trust most with securely managing their data, the vast majority of respondents – 86 percent – chose banks and financial institutions.” By contrast, only one percent said social media.
The announcement didn’t explain the methodology, but I imagine if you presented people with multiple choice, they would put banks at the top…all those big pillars holding up the roof, a vault, and long history.
What does a local bank know about customers? Their name, address, perhaps age and marital status. But if a customer's credit cards and mortgage are with other institutions, all the local bank sees is lump sum transactions to them. With the average consumer holding financial accounts, including insurance, with 10 to 15 institutions, it is unlikely a local bank has a very complete 360-degree view.
By contrast, what Amazon can determine about a customer from frequent orders, or what Facebook or Twitter know from a user's posts and connections, or LinkedIn for that matter. Yes, a reflexive response to a list of firms and most people chose banks as most trusted, but what do their actions say? With a little thought, Accenture should have done much better, unless it didn’t want to tell banks what is obvious — they are losing the customer information race, and losing it badly.
Javelin’s results show this starkly.
This year for the first time mobile consumers said their primary bank is not their first choice to link their mobile wallets. Instead they chose PayPal and Visa. Banks are losing out in all three areas — trust, innovation and privacy.
“We found a lot of legacy systems are broken,” said Suresh Ramamurthi, chairman of CDW Bank, which is the bank behind Simple and Moven. Systems built in the 1980s had limited memory and limited CPUs.
“When we look at what is happening, see see a lot of people painting fake windows on the wall when what is needed is new plumbing.”
Still, he cautioned, change probably won’t come at the usual Silicon Valley speed.
“Tens of thousands of next gen kids are coming into fintech and they all think they are going to change the world instantly, and then you tell them what it takes to put money into the banking system…”
