62% of Americans would try banking with tech companies, survey says

Dive Brief:

62% of Americans would buy a financial product from an established tech company, according to Bain & Company’s annual retail banking survey published last week. Nearly 132,000 people in 22 countries responded to the survey.
That figure varies greatly by age group and from country to country. About 32% of Americans age 65 and older said they’d bank with a technology company. But 75% of people ages 18 to 24 said they’d be willing to do so. The U.S. lies near the middle of the pack among countries surveyed. About 89% of respondents in China said they’d bank with a tech company. That figure drops to 29% among the French, bucking the enthusiasm held by much of Europe regarding tech companies.
Citi estimated that one-third to half of total payments volumes and investment volumes could go to disruptive models by 2025, Bain said.

Dive Insight:

Loyalty can be somewhat difficult to track because customers may not completely cut ties with their primary bank, Bain wrote: They may maintain a checking account with their primary bank while increasingly exploring tech disruptors’ options for credit cards, mortgages, loans and funds transfers. The survey cited Rocket Mortgage as an example, noting that although 2% of U.S. respondents use the Quicken Loans subsidiary, it enjoys a 17% share of the total mortgage outflow from customers’ primary bank.

“The outflow will only get worse for banks unless they significantly improve and digitalize the customer experience and supporting back office operational processes to drive down cost,” Gerard du Toit, a Bain partner and co-author of the report, said in a press release.

Bain’s research suggests that customers would rather stick to digital channels for simple transactions such as applying for a credit card or opening an account, but they prefer human contact for larger purchases, such as applying for a mortgage. However, loyalty drops when customers are forced to switch between human and digital channels or when an issue is not correctly resolved the first time.

“It has become increasingly clear that consumers would much rather just do their banking digitally than talk to a human being,” Du Toit told CNBC.

The survey comes as a number of tech companies are testing the waters in the banking space. Google is exploring a partnership with Citi on checking accounts. Facebook launched its Facebook Pay platform this month. And Apple rolled out a credit card in August backed by Goldman Sachs. Meanwhile, Amazon recently abandoned its plans to launch a checking account.

Retail banks should plan to partner with tech companies, Du Toit said.

“They wouldn’t want to be left on the sidelines 10 to 15 years from now with no dance partner, and all the big tech names tied up,” he told CNBC.