Consumers Look to Tech Firms for Innovation But Place Their Trust in Banks

Countless news reports have reported or speculated about what Google Inc., Apple Inc., Amazon.com Inc., and Facebook Inc. have done or might do in mobile payments. Consumers, however, don’t rate these four companies as highly as they do their own banks or traditional payment companies in trustworthiness involving their financial information or in protecting their privacy as mobile payments develop, according to new findings from Javelin Strategy & Research.

Javelin details the findings from more than 5,800 consumers in a report introducing what it calls its High Trust-High Innovation-High Privacy (TIP) model for assessing those three factors in relation to each other as payments move into a new era of mobile devices and social networks. Javelin inquired about perceptions of what it calls its “Gang of Four” tech/social-network companies in addition to the nation’s top five banks, four general-purpose card networks and PayPal Inc., and three leading phone companies.

Consumers do consider Apple, Google, Amazon, and Facebook more innovative than most banks, payment networks, or telecommunications companies. None of the 17 companies Javelin surveyed consumers about stood above the rest in all three categories, but the one firm that seemingly does a superior job in earning trust and protecting privacy while still being innovative is PayPal.

Apple ranked No. 1 when survey takers gave respondents a list of the companies and asked them which they believe is most innovative. Some 32% of respondents cited Apple, followed by Google at 27%; Amazon, 19%; PayPal and Facebook, both 14%, and Visa, 13%. The highest-ranked bank was Chase at 9%. Speculation about Apple’s mobile-payments plans grew this week with news that it had been granted yet another patent that could be employed in payments, this one involving near-field communication (NFC) technology.

When consumers were asked who’s the best at protecting private data such as Social Security numbers, passwords, birth dates, and other identifying information, however, the Gang of Four’s ratings slipped precipitously. Amazon fared the best, cited by 13% of respondents to tie for eighth place. Only 7% named Apple, followed by Google, 5%, and Facebook, second to the last at 3%. Privacy advocates have challenged the latter two on a number of issues recently. Visa led with 31% followed by PayPal at 26%.

And asked which of the 17 companies “would you trust most with your financial information?” Visa came in first, cited by 28% of respondents. Next were PayPal, 23%, and American Express, Chase Bank, MasterCard, and Bank of America, all at 17%. Eleven percent of respondents named Amazon; Apple, 5%; Google, 4%, and Facebook tied with Sprint at the bottom with 2% each.

Banks had fairly low scores in some categories; for example only 4% of the main sample listed U.S. Bancorp as the company that would best protect their private information. Part of that may result from respondents outside of the banks’ branch footprints not knowing about them, according to Mary T. Monahan, research director, mobile, at Pleasanton, Calif.-based Javelin. Among respondents who said their primary bank relationship was with one of the five banks, however, the trust factor was high. Some 79% of U.S. Bank customers, for example, said they would trust that bank the most with their financial information. Next were Chase, 75%; Wells Fargo, 71%; BofA, 64%, and Citigroup, 54%. Respondents “have a strong preference for their own financial institution,” says Monahan.

These customers weren’t quite as confident their banks would protect their privacy, but banks still scored high: Chase, 68%; U.S. Bank, 67%; Wells Fargo, 64%; BofA, 60%, and Citi, 53%.

PayPal ranks fairly high in perception of innovation in part because it’s simply younger than the legacy networks and banks, and it’s also done things such as open its platform to outside software developers, according to Monahan. “They’ve managed that process really well, because of that they’re able to bring out new features relatively rapidly,” she says. PayPal also has carefully cultivated its reputation for trustworthiness, she adds. “It took a while for PayPal to get that trust,” she says. “They had some issues, they overcame them, they developed a trust.”

The overall lesson from the results may be that companies weak in one area probably will need to pair with stronger ones if they want to roll out a successful mobile-payments service. Monahan cites the recent privacy travails of Google and Facebook. “You can’t build models built on openness and say, ‘We’re really great on privacy and trust,’” she says. “It’s going to be difficult to make that argument. You’re going to have to make an alignment with a brand that’s known for privacy and trust, or you got to develop it yourself. It takes time to develop.”

The findings are based on data collected online in December through a random sample of 5,878 consumers supplemented by data from an October survey of 5,211 consumers. The December and October surveys had margins of error of plus or minus 1.28% and 1.73%, respectively, at the 95% confidence level.