How Digital Wallets and Rewards Drive Financial Innovation
People will do a lot for rewards. Book with different airlines, walk an extra five minutes to grab a coffee, and maybe even share their personal banking information.
New financial research from Accenture has revealed that user experience is beginning to trump security in the financial sector, and that younger generations are leaning on new digital fintech to get their everyday banking completed. The new report, titled Driving the Future of Payments, outlined 10 trends that will dictate how next generations interact with money.
Below are a few of the key trends that paint a picture of what payments will look like down the line.
Generation Z on the Rise
Born after millennials, the newest generation of the bunch is really kicking up a stir in how banks interact with their customers. One-third of Gen Z wants to share their payments on social media, compared to only three per cent of baby boomers. Around 70 per cent of this generation uses banking apps daily or weekly, compared to 17 per cent of baby boomers. Mobile is a huge part of Gen Z, and will likely be the first group of citizens to stop carrying wallets and instead look to their phones to make every payment.
Open banking, APIs and the rise of small fintech startups are finally putting mobile payment on the map. According to a survey, 23 per cent of consumers would gladly ditch their mobile banking app for a digital wallet with all of their information in one place. In fact, 64 per cent of consumers plan to use a mobile wallet by 2020.
“Banks are essentially two APIs away from losing a big chunk of their mobile app traffic,” the report reads.
Bank mobile wallets are losing out to merchant wallets and the Pays (Android, Apple and Samsung) and if these big financial institutions do not do something soon, these tech companies will innovate them out of the mobile space.
Everyone Likes Rewards
Last year, consumers received $15 billion in rewards value through miles, cash back and points. Accenture notes that a few of the big companies they surveyed saw massive increases in their rewards and marketing budget over the past eight years, in some cases doubling the total spend. Close to 50 per cent of consumers would switch their primary rewards card to get more value for their purchases, showing that it the financial world is slowly becoming reward-oriented.
“Convenience is key too. Seventy-six percent of our survey respondents want to redeem deals tied to their card when swiping at the point of sale,” the Accenture report states.
“Consumers also crave personalized rewards. Half of those we surveyed are interested in or can be convinced with the right incentives to share their personal information to get more relevant offers.”
Rip off the Band-Aid
If many merchants want to keep up in a newly-burgeoning and mobile-first financial world, it may be time for an overhaul.
“The hard truth is that existing architectures have reached terminal velocity,” says Accenture. “They are no match for the industry’s quantum leap in speed, enhanced feature functionality or messaging standards.”
Real-time payments are the new future, as institutions that take days to complete a transaction are becoming laughably obsolete. According to InstaPay, 39 countries have implemented immediate payments, and this will only grow. Entire banking infrastructure must be rethought, as most current offerings are completely inflexible when it comes technology integration.
With the right kind of vision, banks can embrace the future of fintech and look to new generations for guidance on how they should be integrating new technology. Digital wallets, reward-heavy options and mobile-first development are a good option, but to truly embrace the future, a financial institution must become flexible.