Is This the Kiss of Death for Big Banks?

A recent survey showed banks like Bank of America and Citigroup are poised to face major disruption from firms like Google, eBay, and others in the coming years.

Mar 17, 2014 at 9:48AM


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.

Wall Street Sign

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.

Patrick Morris owns shares of Bank of America. The Motley Fool recommends Bank of America, eBay, and Google. The Motley Fool owns shares of Bank of America, Citigroup, eBay, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.


Compare Brokers