A major perk of our work at Carta is connecting with some of the smartest people in finance around the world. Recently I sat down with an SVP from a large global bank who (under the promise of beer and anonymity) gave his candid opinions on Apple Pay, banking in Canada vs. the US, and the state of in-house banking technology.
by Paul Brandner
Director of Marketing
The Kennedy Public House, Toronto, ONI wanted to understand how big banks can successfully navigate the mobile payment space, while contending with infamous innovation killers: size and bureaucracy. What I got was a hint at who really has an edge in the mobile payments game, along with a diatribe on the differences between the Canadian and US landscape.
“In Canada, customers might feel they’re not getting the best deal but they’ve been at a bank for 20 years, and their parents banked there. Maybe they’re paying a percent more, but they think, no big deal—and they’ll just stay,” explains our expert.
But south of your border it’s a different story. Big banks don’t hold the same customer loyalty. Bankers themselves do:
“In the US, big businesses do 60–65% of their business outside of the North America. So really, the guy who’s driving the engine that is America is a small to medium enterprise. Those people tend to be state-based and biased.” They want to deal with a regional bank that understands their realities and the nuances of their market.
Where a national bank feels like a faceless entity in New York, he says, “These regional banks know their clients. Their clients even tend to be shareholders of their company. That gives the clients a sense of ownership.”
Often middle aged or baby boomers, these business owners aren’t totally at ease moving cash through Apple Pay or Google Wallet—they’d sooner trust a branded app from their regional bank. And here’s where he answers my question. Ultimately, he says, the big winners will be the local banks who can create a tool that’s easy to use and familiar for the baby boom set.
But where does Apple fit in? Now that they are in the payments game for a few months, have US banks felt any effect?
“I’m an Apple believer,” he says. “If someone can do it, they can do it. Apple’s brand is synonymous with quality products. Can they continually take market share? Absolutely. Let’s be honest, if someone came to me and asked ‘Would you rather deal with a national bank or Apple?’ I’d say Apple.”
The key to remember, he says, is Apple isn’t trying to be a bank. They WILL however, take a chunk of market share. And maybe a lot of it. Why? Because Apple invests time and money in their technologies. They’re not reactive or racing to keep up with anyone.
So should banks focus their energy on Apple Pay or branded apps? And he says, it’s not one or the other, it’s both.
When it comes to securing walletshare, he explains, banks would rather have their own apps. But because very few spend the time and money required to make an outstanding product, they need to expect that younger customers will want the option of Apple Pay and offer it to them.
“Banks are reactive. They see one of the other banks with a mobile payment app and so decide they need one too. The app gets rushed out the door. Whereas Apple will spend the time to develop a really good experience – because they know the first impression is the most important impression. Banks are trying to make it ‘good enough’—I don’t think they are trying to be the pioneer. The banks are often the last to the games.”
How much of that technology development should happen in-house? Not much, says our expert. “It’s hard to attract innovative people to banks,” he explains.
Ultimately, he says, in the race to win in mobile, “Service is going to win every time—trust and loyalty.”