Panel: ‘Fractured Banking System’ Presents Opportunity for New Players (March 5, 2014)
The “fractured” U.S. banking system, which shuts out many consumers and fails to provide ideal utility for others, presents a major opportunity for new players to enter the financial services market. But to succeed, those providers must understand their customers’ needs and meet those needs in a unique way to stand out from the crowd. Those were among the main takeaways from a panel this week at the All Payments Expo (APEX) in Las Vegas, featuring a trio of executives from nonbank players currently making waves in the financial services and payments space.
Basic deposit and payments products—whether they be checking, prepaid or even a credit card—are becoming a commodity, with little differentiation or added value to consumers, said Alex Sion, president of financial services startup Moven. To offer its customers added utility, Moven focuses on providing insights into personal spending. “The value proposition of payments needs to be focused on financial control,” Sion said. “You need to be able to give people insight into their spending behaviors as they’re making their spending decisions.”
Meanwhile the opportunity remains huge for new players to reach those consumers who aren’t already served by banks, noted Stefan Happ, general manager, online and mobile, American Express. “There are tens of millions of people who still don’t have access to traditional bank accounts,” Happ said, predicting that the number of those underserved by traditional banking will become even larger over the coming years as banks scale back their offerings and shutter physical branches. The next several years will bring “a fundamental revolution in the way that banking in the U.S. is conducted,” Happ said. “Alternative delivery mechanisms to provide [banking] services at far better value are about to hit.”
And those alternative financial tools, including prepaid, have increasingly been offering services that had previously been the domain of traditional banking, noted Amit Parikh, head of prepaid and director, global business development, Discover Financial Services. “We’ve been able to move fast … in coming out with offerings like direct consumer deposits and online checking. So there’s less of a difference between a prepaid card and a checking account. The lines between the two are really blurring.”