Banks outflanked in online payments
November 4th 2009 02:01
Australian banks are losing the battle for the hearts, minds and wallets of today’s online generation.
Belatedly they are trying to address the problem, but the opportunity may already be lost. A new breed of financial institutions, led by PayPal, have a big headstart and apparently a much better understanding of how young people view and use money.
Traditionally banks use market research to work out what people want and then develop new products and advertising campaigns to meet those needs. However that approach isn’t working so well anymore.
“Young people are a huge challenge for banks,” says Dirk Hofman, Head of Provider Relations at Infochoice. “Talking like a banker to Gen Y simply doesn’t work.”
Gen Y are all those people under about 30 years of age who have grown up online.
“Now there are lots of people in banks and financial companies trying to come to grips with the new social media and how people use it so they can work out how to relate to and sell to these people.”
That is why ANZ Bank has recently decided to go where the young people are and open a ‘branch’ on MySpace. The ANZ MySpace page sells their new prepaid MySpace pre-paid, reloadable Visa card, specially designed for teenagers.
“We are pleased to be the first bank in Australia to offer this kind of card for social networking site users,” said ANZ Managing Director Retail Products, John Harries.
ANZ says their research tells them that parents want to give their teenagers an alternative to cash that will let them spend safely online. The card can carry up to $1,000, has relatively high fees and a fairly complicated application process for people who don’t already have an ANZ bank account.
Other banks are redesigning existing products based on what their market research is telling them about young people.
St George Bank says their research tells them that people under 30 know little about budgeting and saving. Most have never had to save, and if they find themselves caught short of cash, they borrow from friends and family.
So they have launched a product targeted at young people called SENSE that rounds up small change in their transaction account and transfers it to an online savings account.
But it is still old style banking trying to relate to a new kind of customer. A customer that doesn’t want to be told what they need. A customer that doesn’t respond well to traditional market research driven advertising methods.
Meanwhile the internet is spawning its own financial products and services that are destroying the market dominance of traditional banks in some of their most lucrative markets.
Over the next 18 months, hundreds, even thousands, of new banking and payments products and applications will appear, designed by the online generation themselves, for the online generation.
Jason Bryce
Belatedly they are trying to address the problem, but the opportunity may already be lost. A new breed of financial institutions, led by PayPal, have a big headstart and apparently a much better understanding of how young people view and use money.
Traditionally banks use market research to work out what people want and then develop new products and advertising campaigns to meet those needs. However that approach isn’t working so well anymore.
“Young people are a huge challenge for banks,” says Dirk Hofman, Head of Provider Relations at Infochoice. “Talking like a banker to Gen Y simply doesn’t work.”
Gen Y are all those people under about 30 years of age who have grown up online.
“Now there are lots of people in banks and financial companies trying to come to grips with the new social media and how people use it so they can work out how to relate to and sell to these people.”
That is why ANZ Bank has recently decided to go where the young people are and open a ‘branch’ on MySpace. The ANZ MySpace page sells their new prepaid MySpace pre-paid, reloadable Visa card, specially designed for teenagers.
“We are pleased to be the first bank in Australia to offer this kind of card for social networking site users,” said ANZ Managing Director Retail Products, John Harries.
ANZ says their research tells them that parents want to give their teenagers an alternative to cash that will let them spend safely online. The card can carry up to $1,000, has relatively high fees and a fairly complicated application process for people who don’t already have an ANZ bank account.
Other banks are redesigning existing products based on what their market research is telling them about young people.
St George Bank says their research tells them that people under 30 know little about budgeting and saving. Most have never had to save, and if they find themselves caught short of cash, they borrow from friends and family.
So they have launched a product targeted at young people called SENSE that rounds up small change in their transaction account and transfers it to an online savings account.
But it is still old style banking trying to relate to a new kind of customer. A customer that doesn’t want to be told what they need. A customer that doesn’t respond well to traditional market research driven advertising methods.
Meanwhile the internet is spawning its own financial products and services that are destroying the market dominance of traditional banks in some of their most lucrative markets.
Over the next 18 months, hundreds, even thousands, of new banking and payments products and applications will appear, designed by the online generation themselves, for the online generation.
Jason Bryce
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