The Non-Banks People Want To Bank With (Or Do They?)

Every once in a while, a consumer study is released whose findings are…well, let’s just say “hard to believe.” One of those studies crossed my desk this week.

A survey of 3,800 Americans and Canadians revealed that 50% of respondents said that they would be likely to bank with Square if the company offered banking services.

20141022 AccentureMy take: No way (or there are a helluva lot of Canadians willing to bank with non-banks).

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In a comScore study done about two years ago (November 2012), just 8% of consumers studied said they had heard of Square Wallet (which, granted is not the same as knowing about the company), and just 2% had used it.

In a Q2 2013 study conducted by Aite Group, consumers were asked how well they thought various companies would do at providing mobile shopping features and capabilities (including data privacy, data security, relevance of offers, quality of payment advice, and overall experience). Regarding Square, roughly eight of ten respondents said they didn’t know how Square would do on each of these features. Of those that did have an opinion, about a quarter thought Square would not do a good job at providing these capabilities.

So, as of two years ago, few consumers had heard of Square, and, more recently, the vast majority of consumers had no idea how well Square would do at providing mobile shopping services. But 50% of consumers would be likely to bank with Square if it offered banking services?  Yeah, right.

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The 41% number associated with PayPal seems suspect, as well.

A Bloomberg article titled The Kids Aren’t Into PayPal as Apple Rules Mobile reported:

“If you’re below 30, PayPal’s not relevant,” Gene Munster, an analyst at Piper Jaffray Cos., said in an interview. While PayPal may be a go-to for secure eCommerce transactions online, Davis Meiering, an undergraduate student at NYU, said it’s not what he turns to on his phone, whether it’s for payments between friends or in stores. “I don’t use the PayPal app on my phone,” Meiering, 20, said. Arielle Gurin, a 22-year-old student at the University of Maryland, says PayPal is “outdated already.” “I know you have to have it for like EBay, or you can use it for Amazon,” she said. “But I feel like it’s not big anymore.”

But 41% of North Americans would be “likely” to bank with PayPal if it offered banking services? Yeah, right.

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It seems like everywhere I turn, pundits are warning banks that non-banks–in particular, “technology” companies like Apple, Google, and Amazon–are going to get into banking and steal business away. Rarely do we hear, however, about the threat from firms like Costco, who garnered as many mentions as Apple and Google, and slightly more than Amazon (who I’ve always considered to be the bigger threat).

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Perhaps most amazing to me is that nearly one in five Americans said that they would be likely to bank with Verizon Wireless (at least, according to the Accenture study). The only thing I can conclude from that is that one in five Americans suffer from severe brain damage. VZW is the most incompetent company on this planet.

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The study would seem to be good news for the US Postal Service, who was mentioned by one in five Americans as a provider they’d be likely to bank if it offered banking services (which has been proposed). The USPS can’t run its core business profitably, so getting into banking would be a brilliant move (I’m hoping you smell the sarcasm emanating from the screen).

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For as long as I’ve been doing consumer research in financial services, consumers (younger ones, in particular) have always said that they would consider, or even be likely to use, non-bank providers for their banking needs. Fifteen years ago, it was Microsoft and Sony at the top of the list, today it’s Square and PayPal. Nearly any company that is highly-regarded by its customers will be seen by those customers as possible candidates to provide products and services that aren’t part of the company’s core set of services.

So why don’t these surveys ask “how likely are you to buy a car from Costco if they made or sold cars?” or “how likely are you to get a smartphone from PayPal if it made one?” The inference, when asking “how likely are you to bank with ___ if they offered banking services?”, is that it’s somehow easy for all these non-bank companies to get into banking, or likely that they’ll do so.

But if so many people are seemingly willing to bank with non-banks, why don’t Simple and GoBank have millions of customers already? And if so few Amazon customers are getting a smartphone from Amazon, why would a quarter of all Americans be so willing to bank with the company?

Bottom line: People will tell market researchers anything. When you put a laundry list of companies in front of people, and ask hypothetical questions with no boundaries or constraints, the results won’t be very reliable.

What if the researchers asked: If CostCo were to offer banking services, at the same or higher cost as what existing banks charge today, how likely would you be to bank with CostCo? Do you think nearly three in 10 North Americans would have said “likely” or “very likely”? Maybe they would have, I don’t know.

I imagine that the purpose of these studies is to strike fear into the heart of bankers that someone not on their radar is going to steal their business, and….and do what? Employ the consultants and tech vendors who do these studies to develop strategies and deploy new technologies?

If that strategy works, then I hope blog posts like this don’t stop anyone from publishing studies about the non-bank threat. But I do hope posts like this get you to think a little more critically about the results getting published.

Why CIOs Are Smarter Than CMOs

If I wanted to know how well-managed and successful your company was, I would only need the (honest) answers to three questions:

1) How tolerant of IT risk is your company?
2) How committed is the executive team to using IT as a strategic enabler/differentiator?
3) How well-aligned and coordinated is IT with other business functions?

A number of times over the past six years, I have surveyed executives about those questions and have found–repeatedly and consistently–that high-performing firms demonstrate a relatively high degree of IT risk tolerance, have executives that are committed to using IT as a strategic tool, and enjoy alignment and coordination between IT and the lines of business.

What I’ve concluded from these studies is that how much you spend on IT is not as important as how you manage IT. There’s a reason why the sports team with all the best athletes doesn’t always win the championship: Because they don’t play together as a team.

Clearly, however, there are a lot of CMOs who haven’t seen my research.

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An organization (person?) called Harvey Nash surveyed Chief Information Officers (CIOs) and asked:

“How would you rate the IT department’s relationship with other business functions?”

Just 30% of CIOs surveyed felt that their relationship with marketing is “very strong,” in contrast to 61% who felt the relationship with operations was very strong, and 56% who rated the relationship with finance as very strong. The percentage rating the marketing relationship as “very strong” was slightly more than the percentage rating the relationships with HR and legal as very strong, but who cares about HR and legal? (just kidding)

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So why are CIOs smarter than CMOs?

Because another study–this one conducted by Accenture–found that:

“44% of CMOs surveyed from across the world simply don’t believe there’s any need for alignment with CIOs. By comparison, only 23% of CIOs agree that there’s no need for alignment with CMOs.”

Seriously? Nearly half of CMOs don’t believe that there is a need for alignment?

Here’s another data point from the Accenture study supporting my fear that CIOs are smarter than CMOs:

“While 72% of CIOs surveyed ranked the CMO/marketing relationship as important, only 57% of CMOs concurred with respect to the CIO relationship.”

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Forgetting the question of inherent intelligence between the occupants of the two CXO positions, Accenture’s findings beg the question: Why would fewer CMOs view the CIO/CMO relationship as important than CIOs do?

I have three theories:

1) CIOs better understand the findings of my research. Because their internal relationships are more numerous–and interdependent–than the CMOs’, CIOs get the importance of alignment and coordination across business functions.

2) The remnants of “legacy” CMOs. “Legacy” is my euphemism for “brand bozo” CMOs who still think the world of marketing is all about who creates the best TV commercials. No CMO will admit to believing that, but they’re still out there. Twenty to thirty years of experience is a tough thing to break.

3) CMOs who think that they can go it alone. “IT doesn’t know what it’s doing, doesn’t understand marketing’s needs, and doesn’t put marketing’s needs high enough on its priority list, so we’ll just hire our own marketing technologists, and build our own marketing technology capabilities.” You just know that that view exists out there.

If my theories have any validity, then maybe CIOs really are smarter than CMOs.