These days, credit unions and community banks face a number of competitors in payments and lending – from both in and outside the financial industry. There are a number of contenders to which community financial institutions (FIs) should pay particular attention in 2015:
Lending Club — Lending Club uses the Internet to match investors with individual borrowers, most of whom are looking to refinance their credit card debt or other personal loans. Lending Club has facilitated more than $6 billion in loans and is the largest company performing this sort of service. Remaining competitive as a lender is more critical than ever for community FIs. Consider innovative ways to encourage consumers to seek loans in-house, and use your data to determine whether or not you can confidently assume a higher level of risk with greater credit lines. Community FIs are traditionally very conservative underwriters; are there opportunities to serve more consumers with less stringent policies?
Walmart — This retail giant recently rolled out a new checking account product. Walmart’s GoBank checking accounts are linked to a debit card and charge a steep $8.95 monthly fee unless the user has at least $500 direct-deposited each month. However, the accounts have no overdraft fees, no non-sufficient funds penalties, no minimum balance requirements and a significant network of ATMs. Community FIs still have a strong competitive edge here. Consumers who don’t own a smartphone or who aren’t comfortable going fully digital will likely have no interest in GoBank. The fact that community FIs offer a physical branch to visit, along with low- or no-fee checking accounts, will remain a draw for this segment of consumers.
Samsung Pay — Samsung recently threw its hat in the digital payment ring with its announcement of a planned summer 2015 launch of Samsung Pay. Samsung Pay is designed to work alongside 90 percent of mag stripe payments terminals, as well as NFC terminals (whereas Apple Pay is only NFC compatible). This will likely give Samsung Pay an advantage and help it avoid some of the technical difficulties Apple initially faced.
Competition in the payments space is likely to get more aggressive and complex in the coming years. Perhaps some level of healthy competition helps us stay diligent, alert and proactive, spurring creativity and innovation.
A rapidly changing marketplace functioning in the Age of the Consumer makes this an ideal time to reimagine banking. I explore what FI leaders can do to inspire teams to think in new ways in a recently released white paper, Reimagined Banking in the Age of the Consumer.