Responding to consumer mobility needs
The share of disbursements received via instant payment rails has tripled since 2020, even approaching that of the most common method, the same-day automated clearinghouse (ACH), which commands 22% of disbursements received. In 2021, 17% of all disbursements received were made through instant payment channels, compared to 5.7% in 2020. In contrast, cash disbursements fell by more than 35% and check disbursements fell by more than 50% between 2020 and 2021.
The effort to inject funds into the economy through stimulus payments after the onset of the pandemic has contributed significantly to the number of payments received by consumers. As of July 2020, the United States government has issued approximately 171 million payments totaling over $400 billion. As economic pressures increased the urgency of receiving funds, consumers became more interested in instant payments. Given the multiple disbursement options, consumers prefer instant payments when available.
This desire for faster payments also extends to how consumers connect their accounts. Fifty-eight percent of consumers have linked their bank accounts to at least one other platform or service, like Venmo or Apple Pay, and 57% of those with linked accounts would consider using a connected service instead of one. traditional bank account. This month, PYMNTS Intelligence examines the money side of money mobility, including consumer preferences when opening and funding accounts, trends shaping disbursements, and what consumers expect from providers. of accounts.
Take the non-digital route
Consumers generally favor digital rails when opening new accounts, but exceptions remain. It may seem counterintuitive that 29% of consumers aged 18-24 prefer to open a financial account through traditional channels such as phone and mail, while less than 8% of consumers over 65 prefer these methods. inherited. Despite the ubiquity of mobile apps in the lives of young consumers, only 49% of consumers under 25 said they would be comfortable downloading a financial institution (FI) app to open a new account.
The type of new account they open also affects consumers’ channel preferences. Seventy-one percent of consumers said they would open a new credit card account digitally, 64% would for cellphone billing, and 62% would open checking and deposit accounts on channels. digital. Meanwhile, only 24% of consumers said they would be comfortable using digital means to open a mortgage account or personal loan. Despite the close connection between BNPL (buy now, pay later) accounts and online transactions, only 23% of consumers said they would feel comfortable opening a BNPL account only through digital rails.
The lure of digital channels
There is no doubt that digital has become an integral part of most consumers’ financial lives. A recent survey of US consumers found that 84% were able to name at least one banking app feature they use, and 39% said they rely on budgeting apps to track their finances. Another survey found that 35% of US consumers rated mobile check deposit as the most valuable feature of a banking app, followed by viewing statements and account balance at 33%, the ability to transfer funds at 31% and paying bills at 28%.
Comfort with digital channels has prompted many consumers to consider using digital-focused entities as their primary FI. Thirty-seven percent of consumers aged 40 or younger said they would choose a FinTech over a traditional bank when selecting a primary FI. Fifty-seven percent of all consumers said they would consider using an app, such as Apple Pay or Venmo, for this purpose. That share jumped to 75% among Gen Z respondents, but fell to just 20% among baby boomers.
FinTechs can face a daunting task if they try to create in-house solutions to meet the widely varying needs and preferences of consumers when it comes to money accounts. The operational costs of managing multiple rails can quickly become overwhelming, and risk mitigation is always more difficult when working alone. Partnerships can offer the means to meet these needs without getting bogged down in costs and details that can detract from a FinTech’s core mission.