Today’s Most Innovative Fintech Solution: A Refresh of an Industry Mainstay
Debit presents an opportunity to drive customer engagement and loyalty.
Imagine a future where the average consumer has three or more debit accounts and the experience of banking is both personalized and seamlessly integrated into our lives. One account is similar to a traditional bank account. The second they keep as part of a peer-to-peer payments app like PayPal or Venmo. The third is tied to their side gig employer, like Lyft or Fiverr. Not only is this scenario possible today, it could be exactly what more consumers want in the future.
Research indicates consumers are interested in banking (and spending) contextually. Rather than trying to keep all their funds in one place, consumers’ expectations around money management are evolving. Because of value-driven, mobile-first user experiences, they’re interested in staying within the technology or e-commerce ecosystems they’re already in — opening up the potential for multiple financial accounts and debit cards.
This creates an exciting opportunity for technology companies and brands that are looking to create seamlessly integrated user experiences and deepen customer relationships. In 2020 and beyond, numerous platforms will consider offering their own debit products for three key reasons:
- Debit gives consumers what they want. Consumers love debit. In 2018, debit cards were the most popular payment type, accounting for 28% percent of all payments. According to research, nearly half (44%) of Americans use debit cards for everyday purchases, including groceries and gas. This preference is keeping up with the times, too — more than one-fourth of 18 – 24-year-olds have a debit card on their mobile wallets. Tech companies and brands that offer debit products are meeting their customers where they are. This is especially true for those who are doing so in ecosystems where the consumer is already receiving or spending money, as more people have a growing desire and aptitude to compartmentalize their money via multiple debit and banking relationships.
- Offering debit can drive customer stickiness. Nearly one-third (31%) of consumers are open to non-bank debit alternatives, and the percentage is even higher for younger generations. Many are willing to try banking services from brands they trust and digital-first tech companies that provide more engaging, simpler experiences. Mostly, research indicates consumers just want a seamless customer experience within the channels they’re already using. Challenger bank brands are tackling this head on — challenger banks are tech companies that are offering digital-only banking experiences. They are evolving multi-pronged solutions that help customers spend, save, invest and access extra funds instantly when they need them. For example, a challenger bank’s fee-free investing platform or early access to earned wages might win customers with an initial relationship that helps them achieve their financial goals, while an integrated debit product keeps them engaged with the platform on a daily basis. Challenger banks offer a debit product to keep customers who are already in their financial services ecosystem there, and they create additional stickiness with perks layered on top of the debit products like financial health advice, cashback rewards or bill payment tools.
Read More: Are Banks Going to Win on Open Banking?
- Debit has the potential to increase worker retention. The way the average hardworking American earns their income is changing radically and quickly. Gig economy workers are the fastest-growing segment of the American workforce and are expected to comprise half of all workers within a decade. Also, fewer workers get one paycheck from one employer at a set cadence, but rather are earning from multiple platforms and are demanding to be paid for their work as they earn money. For companies that pay gig workers, this is very important to understand — 73% of gig workers are willing to leave a marketplace if they are unsatisfied with its method of pay. But a method of pay can be an asset in keeping workers, too — take Uber and Lyft as an example. There is fierce competition to help drivers be successful on each platform. Adding a debit product for drivers (or any freelance-type workers) that allows for immediate access to earned wages and cost-savings benefits adds one more way for companies to compete and increase retention.
Financial services providers, digital-first tech companies and brands should take note: today’s most innovative fintech solution isn’t new at all but rather a tool that’s already in consumers’ wallets — debit. This solution is being seamlessly integrated into digital-first experiences in a way that’s compelling, fresh and exciting for the consumer. And it has the potential to drive a new attitude toward contextual banking relationships, financial engagement and loyalty, too.