Does RTP mean RIP for your bank brand?
Positioning Your Brand in the Wallet of the Future
Mike Eaton, Brand+Lever Senior Vice President
Mass production of automobiles essentially ended large scale demand for buggy whips. Streaming music and video services pounded the nail in the coffin of compact disks and players.
Ten years from now, will we say the same thing about real-time payment (RTP) systems and wallets? It’s a possibility, as consumers increasingly expect to pay for goods and services without handling cash, checks and credit cards.
Venmo, Square and Apple Pay among others introduced the potential of real-time transfers of cash. Seeing the “Tap and Go” trend and sensing their role as the clearinghouse for payments eroding, big U.S. banks collaborated to form Zelle, which as of the spring of 2018 connected about half of the traditional checking accounts in the U.S. with an instantaneous payment application.
Rewards, Risks and Relevance
The benefits of RTP to businesses and consumers are significant (despite the risk of fraud, which is a topic for another time). The hated wait to access your funds should disappear for consumers; and, businesses can reconcile transactions and accounts immediately and in a way that improves cash management. No small benefit, especially for smaller firms where cash flow challenges can spell the difference between profitable growth or potential disaster.
All these innovations and the accelerating pace of both adoption and improvement in security and risk management suggest that the U.S. Federal Reserve’s goal of universal access to real-time payments (RTP) by 2020 can be a reality.
But what about the bank, and, especially, the smaller and mid-sized institutions that are as much being swept along in the rising tide of RTP rather than shaping it at a macro level? Consider the following questions:
- If your bank lacks the resources to put an RTP process in place (either through a build or API model), can you credibly be in the business of opening demand deposit accounts with consumers and businesses who expect immediate access to funds and account reconciliation?
- If your RTP solution is integrated into your platform (like Accel from Fiserv) is there room for you to build distinctive features around the service to differentiate your value from that of competing institutions in your market?
- As immediacy becomes an expectation, and data analytics based on payment patterns a critical value-add, can you extend your brand to those value propositions and change your business model to credibly deliver that new brand value?
Your leadership team should be discussing and developing a point of view and plan of action around these questions – and understanding how your answers impact your brand and business strategies.
Connecting on a Human Value
Research shows that the strongest, best-performing brands in the market are those that are organized around a core human value that is shared by customers. They are brands that are relatable and relevant to something that people crave more of or feel is missing from the market.
Real-time payments are not a brand; but they do address a primal emotion for both individuals and businesses to have control over their money because it gives them certainty and confidence that they can resource their wants and needs.
Understanding that emotional “want” and leveraging the resolution of it through an RTP solution gives banks a chance to connect with individuals and businesses on a relational level. If you can bring value beyond the immediacy of the transaction, you can shift RTP from a “must-have” to be in the consideration set for consumers and businesses to a source of competitive advantage that can be leveraged to move market share.
The linchpin of that advantage may be your ability to capture and extend your brand to any derivative value from the real-time payment functionality. That value might include:
- Analytics that allow customers to think differently about use of funds and payment patterns, and in ways that can give them a greater sense of control over their resources. Beyond the analytics, how will you package and give people access to their data on their accounts?
- Open access APIs which allow people to connect third-party applications to the accounts that they have with your bank. While still an emerging (and not a universally agreed to model), a recent McKinsey study found that 73% of U.S. millennials would be more excited about a new financial service from platforms like Google and Amazon than a traditional bank. There is both opportunity and risk in that finding for banks – and it is important to think through what role you may play in an ecosystem with third-party solutions and services.
- Cause-driven solutions, which in a pure technical form can automate charitable transactions, and in a more advanced iteration customize individual engagement in a portfolio of causes which give purpose to people’s lives.
- Real-time Payments are happening, and banks must have a strategy for how they will leverage the RTP reality for brand and business strategy advantage.
- Customer expectations of immediacy will force banks to refine their brand and business strategies as customers rethink how payments are made and what that means for their perception of what is a bank and how they relate to one.
- Brands that connect to a core human value that provides context for RTP innovation and services are more likely to retain relevance and build equity in an immediacy world.