Is This the Kiss of Death for Big Banks?

Many have noted the biggest banks are facing major change -- but that change will be here sooner than you can imagine.

Scratch, a division of Viacom, recently revealed its Millennial Disruption Index (MDI) which surveyed the opinion of more than 10,000 individuals born between 1981 and 2000 and their opinions on 73 companies across 15 different industries.

The survey noted, "the results paint a clear picture of which brands are loved, which are meeting consumer needs, and which are poised on the brink of disruption," and it turns out executives at Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  )  and other banks have significant reason to be concerned. On the other hand, those in charge of Google (NASDAQ: GOOGL  ) , and eBay (NASDAQ: EBAY  ) all have reason to celebrate.

The banking disruption
The MDI painted the banking industry in a shocking light. It noted one in three millennials would be open to changing banks in just 90 days, and a little more than half believed their bank didn't offering anything that differentiated it from its competitors.

Of all industries, "banking is at the highest risk of disruption."

Wells Fargo's own Millennial Survey revealed 57% of respondents believed financial institutions didn't act in the best interest of their customers, and highlighted only "11% believe banks are best positioned to provide them with the financial services they need."

While the reasons behind this lack of trust and willingness to transition could be a result of generational characteristics, certainly the financial crisis played a role. The Millennials and Money survey by the Merrill Lynch noted the financial crisis "merely confirmed the doubts that young people already had of Wall Street and financial services firms." Stacy Allred, a director and wealth strategist at Merrill Lynch added, "I think it's going to be a long road to recovery for them, as far as regaining their trust."

This realization was evident in the survey results from the MDI, as it highlighted, "all 4 of the leading Banks are among the ten least loved brands by millennials."

A combined willingness to change, a lack of trust, questions of service and value, and a general displeasure directed toward the industry, Millennials -- and perhaps all Americans -- are clearly ready for major shifts in banking.

New things are ahead for Wall Street.

The means of change
It's easy to think the change in the banking industry may result in customers switching from megabanks to smaller and more localized ones, but it turns out the changes will be more significant than that.

Almost 70% of Millennials believed in five years both the way money is accessed and how things are paid for will be totally different. Yet the change wasn't expected to come from the banks themselves, but instead from firms that are currently entirely outside of the industry.

Half of the millennials were looking for technology firms to "overhaul the way banks work," and 73% noted they "would be would be more excited about a new offering in financial services from Google, Amazon, Apple, PayPal, or Square than from their own nationwide bank."

Ultimately, Millennials expect the change to be significant and the hope is it will come not from the firms they distrust and dislike, but instead from those they admire in other industries.

What it all means to individuals and investors
Less than four months ago, Google announced it was expanding its Google Wallet services by allowing individuals to make purchases with the Google Wallet Card, a physical MasterCard linked to the Google Wallet account.

Source: @googlewallet on Twitter

That announcement came one month after CNBC declared, "Retail banks' worst nightmare? Google."

A survey of 148 retail banks in 66 countries revealed "traditional retail lenders saw web portal and Internet search companies like Google as the most significant threat to the way they do business." In May of last year, American Banker ran the story entitled "Google Presents Biggest Threat to Banking."

Then there's PayPal, eBay's already entrenched financial services provider, which saw its mobile payment volume nearly double from $14 billion in 2012 to $27 billion in 2013. In total, it also saw the revenue from its Payments business increase by nearly 50% from $4.1 billion in 2011 to $6.1 billion in 2013.

This success is one of the many reasons why billionaire Carl Icahn has so vehemently pushed for a separation of eBay and PayPal into two distinct and separate companies.

Bank of America and Citigroup have had success in adapting to change -- after all Bank of America added 2.4 million active mobile banking accounts in 2013 to now stand at 14.4 million in total -- however, the two banks were ranked among the lowest on the most recent survey of reputation from American Banker :

One would think the banks with the lowest reputational scores are the ones most vulnerable to threats.

Looking forward
At JPMorgan Chase's annual meeting, CEO Jaimie Dimon said plainly; "[technology companies] all want to eat our lunch. I mean every single one of them, and they're going to try."

Change is coming. And the banking industry clearly understands that. While it's too early to tell who the ultimate winners and losers will be, the threat from Google, eBay, and others is real, and the banks that respond to this threat most appropriately will be those poised to be both the leaders in their industry, and to their shareholders.

With every major change, there is major opportunity
Clearly major change is ahead in the banking industry, and the entire landscape will be shifting. Disruption will occur in the future from Google and eBay, but one little known firm is poised to be one of the biggest beneficiaries. In fact it is a brand-new company that's revolutionizing banking, and it's poised to kill the hated traditional brick-and-mortar banking model as we know it. And amazingly, despite its rapid growth, this company is still flying under the radar of Wall Street. For the name and details on this company, click here to access our new special free report.


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  • Report this Comment On March 18, 2014, at 6:52 PM, The1MAGE wrote:

    I can't say I have a negative opinion of my bank, but I can't say I have a positive one either. I'd switch in a moment if they did something to annoy me, or I found a bank that I would prefer.

    I generally try to do banking from my computer, not at the brick and morter locations if I can avoid it. Why wait in line when you can deposit a check with your phone? I have been using bill pay to send checks to anything I don't, or can't pay online.

    As far as the negativity, the banking industry received the brunt of the blame for the economic collapse in 2008, and while they were involved, they were only part of the problem, the cause. But the idea that they were the cause has become such a foregone conclusion that many have begun to hate the banks, and younger people are very susceptible to these beliefs.

    But I don't see this negativity having as much of an affect on the banking industry as much as the evolution to internet, and virtual banking.

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