How banks are keeping up with Venmo in attracting millennials
By Mike Derins, CEO, The Archer Group
"I'll Venmo you for that."
Venmo has become so omnipresent, it's now a verb.
In the course of just a couple years, peer-to-peer (P2P) banking has gone mainstream. In 2016, users exchanged more than $17 billion over Venmo alone. PayPal, Venmo, Square Cash and the like aren't merely apps; they've introduced an entirely new way of exchanging money that could eventually replace cash. The new wave is already in motion. We’'re carrying fewer bills than ever—particularly millennials, 64 percent of whom report preferring to use cards over cash, even for purchases of $5 or less.
Zelle joined the fray in 2016 as the big banks' answer to P2P mobile payments. It's not a standalone app, but rather a ready-made platform banks can build into their existing apps. Customers can send and receive funds within minutes, and all they need to know is the phone number or email address of the recipient or sender.
So far, 30 financial institutions have adopted Zelle, offering it as a free service to their customers. And with the wild popularity of peer-to-peer financial apps, the rest of the banking industry appears poised to follow suit.
It's a decision they'll benefit from. Zelle's plug-and-play platform offers significant advantages to banks and customers alike. It links directly to users' bank accounts, so funds transfer instantly rather than waiting in limbo for approval. And it saves banks the time and resources it would require to develop similar technology from scratch.
There's one catch: The service has to be integrated correctly. It's in this area that some financial institutions, and their developers, have fallen short. While banks stand to improve their digital customer experience immensely through P2P payments, user experience and security are critical.
Here are some strategies that can help financial institutions maximize benefits—and mitigate liabilities—as they adopt P2P functionality.
Make it seamless
Designers and developers need to consider how Zelle fits within, and complements, the bank in question's digital experience. Zelle is not meant to be a Venmo rip-off, grafted onto an existing mobile infrastructure. It should be a fully integrated feature that feels and works like an authentic extension of the experience.
It's common to come across otherwise impressive apps, with wide-ranging and intuitive functionality, that are haphazardly integrated. Some financial institutions require customers to use one app to deposit a check, another to view their account balance, and yet another to send money.
Streamlining this menagerie of apps into a coherent experience has been a major pain point for banks and customers alike. To avoid alienating users, developers need to deliver these features in a logical, unified, and on-brand fashion.
Make it beautiful
To convert loyal Venmo users, banks using Zelle will have to compete for their attention. This is easier said than done. Startups that deliver sleek interfaces are more willing to take risks in design and user experience. But financial institutions aren't fintech startups. They have less of an appetite for certain types of risk, and many more constraints. They have an established brand image, a style guide, and governance boards with whom they need to litigate even small changes.
For instance, the social feed on Venmo's home screen—which displays the financial transactions of the user's entire social community, replete with custom emojis—wouldn't exactly align with the conservative aesthetic of a major bank.
Fortunately, banks won't require flash and off-brand whimsy to successfully grab market share from the independent apps. However, they will need to partner with the designers and UX experts who understand how to deliver beautiful, functional experiences that bolster their brand.
Make security your main attraction
Big banks offer security, and there's no denying the peace of mind this provides. This is the prime advantage Zelle holds over other independent peer-to-peer apps. As stories surface about cracks in security—as they often do with first-generation technology—customers will be inclined to look to alternative solutions, which should already be conveniently integrated into their bank's app. Banks should embrace this security message, and tout the thorough third-party testing their apps have undergone.
For big banks, it's not risky to adopt P2P transactions. It's necessary.
Banks haven't been P2P pioneers. But there's an advantage to their caution. Any new technology has a few kinks that require smoothing, and the industry can learn from the challenges early adopters confronted. Now, when major banks adopt the service, they have the tools and knowledge to ensure their customers enjoy a rivetless, responsive, and reliable experience.
But the establishment shouldn't wait much longer to fully embrace P2P.
The future of banking will be defined by self-service, supported by smart technology. AI and chatbots, teller-less branches, even virtual and augmented reality experiences will radically expand the range of interaction points between customer and financial institution. A luxury will soon become an expectation.
P2P is at the crest of this wave. For the banking industry, it's time to get on board.