Tags: bank | competition | digital | Accenture

WaPo: Big Banks Are Looking More Like Dinosaurs These Days

By    |   Wednesday, 28 May 2014 11:52 AM

Big banks like JPMorgan Chase once worried only about losing customers to other big banks like Bank of America. But now that universe of competitors has grown to include Google, Wal-Mart and a host of other unlikely non-banking companies.

According to The Washington Post, competition for traditional banks now comes from established retail, technology and telecom companies, not to mention a host of startups.

Compounding the problem is the fact that the appeals from non-banking companies are resonating with people in the sought-after ages of 18 to 34, who represent the banks' future prospects.

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A new study from Accenture found more than one in four customers would consider a branchless digital bank. "This is particularly true among younger customers who are less interested in branch locations and more interested in digital services at the time and place of their choosing," Accenture said.

Nearly 75 percent of U.S. customers consider their banking "merely transactional, rather than driven by advice or a broader relationship," Accenture found, which likely creates an opportunity for digital-only providers.

"A potentially ominous sign for banks is that nearly half of customers would likely bank with a company they currently do business with but that does not currently offer banking services," Accenture reported. Those companies included PalPal, Square, Apple, Google and Amazon.

Costco Wholesale already offers mortgages and investments through a third-party lender, and Home Depot offers home improvement financing up to $40,000 through a financial partner.

The bottom-line prediction from Accenture is that 35 percent of traditional banking revenue will be at risk by 2020 due to disruption from non-traditional competitors.

The Post noted it is already possible to use prepaid debit cards to pay bills, make purchases and deposit checks via smartphone camera — capabilities that appeal to younger Americans.

Potential disrupters like T-Mobile, Amazon and Apple already have an existing customer base, scale and an ability to adopt new technology quickly.

"These outside threats are coming at a bad time for banks. Slow growth and high regulatory costs continue to put pressure on banks' return on equity, a measure of the bank's ability to squeeze profits out of shareholders' money," The Post said.

24/7 Wall St. conducted a "value review" of the biggest bank stocks, and found some are still appealing — at least for now.

"The bank with the least restructuring and least likely to change due to future regulations is Wells Fargo. Citigroup is by far the most speculative of the lot, followed by Bank of America," 24/7 Wall St. said.

"JPMorgan also offers the fortress balance sheet, and Goldman Sachs offers perhaps the most upside and downside for traders due to its ongoing extensive trading operations."

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Big banks like JPMorgan Chase once worried only about losing customers to other big banks like Bank of America. But now that universe of competitors has grown to include Google, Wal-Mart and a host of other unlikely non-banking companies.
bank, competition, digital, Accenture
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2014-52-28
Wednesday, 28 May 2014 11:52 AM
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