Facebook-owned messaging platform WhatsApp has recently launched its payment feature in India, allowing the country’s 200 million users to transfer money through the application. Today, India is one of the biggest markets for WhatsApp.
Already having been threatened by the disruptive FinTech startups, banks in India are feeling the heat from the tech giant’s new initiative. Global consumer companies like Google, Amazon, Facebook, and Apple are quickly building a reputation for their know-how on the evolving behavior of the consumers[1], and they have been rewarded with heightened penetration, reach, and popularity in comparison to banks.
The one competitive edge that banks could always boast was their exhaustive customer database. But now, with the implementation of PSD2 in Europe, banks’ monopoly on their customer’s account information will likely disappear. This worrying development is coming at a time when the banks’ monopoly over their customers’ relationships is already left in a state of vulnerability with the entry of new-age FinTech companies[2].
With the ripples non-banking institutions have created so far, the banking industry worldwide is likely to witness many more WhatsApp moments in the years to come.
Banks will eventually fade away out of consumers’ sight and will fail to take center stage if they do not keep pace with the innovation. The only way out for banks to sustain their dominance is to up the ante by responding to the ongoing events in the digital payment industry and growing competition from non-banking players[3].
The digital wallet war
A 2017 survey revealed that 23%[4] of consumers would give up their mobile banking app for a digital wallet with all their payments information in one place.
The days are not far when millennials and Generation Z will abandon the leather wallet for the digital wallet. Technological advancements in the fields of near-field communications and mobile payment systems have caused a shift in the consumer payment behavior, altering the banking landscape and necessitating a change in operating models for banks. The most pressing of those changes is the reorientation of banks’ legacy IT systems.
This shift in the consumer behavior has opened the opportunity for the non-banking players to penetrate the digital wallet landscape, posing a threat to banks’ relevance. If earlier competition came from FinTech startups, the current crop of competitors has only gotten bigger and better[5], with tech giants like Google, Amazon, Apple, and Facebook dominating the payment industry.
The rise of technological devices as payment platforms has only put further pressure on banks to respond to the demands of the digital payment market. With nearly half of banking consumers engaging multiple digital channels to conduct banking, banks are quickly finding that omni-digital strategies are essential to sustaining existing customers and acquiring new ones.
