Monday , November 19, 2018

What a Difference a Year Makes: Consumer Sentiment Shifts Substantially Toward Tech Firms

With technology companies increasingly eyeing financial services, a survey from Brookfield, Wis.-based bank processor Fiserv Inc. indicates 55% of consumers feel comfortable using a company like Apple Inc. or Alphabet Inc.’s Google to pay bills, up from 40% in 2017. Thirty-nine percent would take out a loan from a tech-company service, up 10 percentage points, and 52% would use a tech-company service for person-to-person payments, up 14 points.

The results, part of Fiserv’s latest quarterly report on consumer trends and based on a poll of 3,050 consumers by The Harris Poll, comes as payments and e-commerce companies like Square Inc. and Amazon.com Inc. are testing the boundaries of what non-bank, technology-oriented companies can do in financial services.

Square this summer withdrew an application with the Federal Deposit Insurance Corp. for an industrial loan corporation, a type of bank that would support the company’s growing lending business, but said it plans to refile. Also this summer, the Office of the Comptroller of the Currency opened the door for nonbanks with a decision to allow financial-technology firms to apply for national banking charters.

Consumers’ level of comfort with financial services from Amazon and other payments and tech companies is significantly higher than in 2017.

At the same time, other recent research indicates Amazon could find considerable consumer interest in its reputed banking ambitions. Earlier this year, for example, the e-commerce and payments giant was said to be in talks with major banks about a checking-like product for consumers.

Indeed, the Fiserv report found consumers who don’t now use a tech company for financial services are significantly more comfortable with that option across a range of products, compared to their stance only a year earlier. Fully 43% would use such a company to manage their money, up from 34%, while 54% say they’re okay having a tech company track their budget, up 13 percentage points.

Consumer trust varies by type of nonbank company, however. Among technology companies, financial-software firms, retailers, and social-media networks, the tech companies win while the social networks finish last. Only 17% would feel comfortable letting a social network pay their bills, for example. Just 18% like the idea of letting such a firm handle their P2P payments, compared to 34% who are comfortable letting a retailer service do this, the next-lowest category of service provider.

Despite these recent inroads by tech companies and other nonbanks, banking firms remain the entities in which consumers have the most confidence for financial services. Eighty-seven percent feel comfortable letting their bank handle their P2P transfers, for example, while 85% are okay with the bank doing their bill payments.

The Harris poll undergirding the study was conducted Feb. 26 to March 15, so consumer sentiment could have shifted even more since then. Someone in each household held a checking account and had used the account to pay a bill or make a purchase in the previous 30 days.

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