Actionable Insights From APT's Retail Practice

Introducing “Zelle”: How Banks Can Capitalize on the P2P Trend

July 18th, 2017 | Posted by APT in Financial Services

Millennials’ zeal for peer-to-peer (P2P) payments may go mainstream. Zelle is a P2P payment service that offers the transfer of money directly between customers’ bank accounts. It is the result of a collaboration between over 30 banks, connecting over 86 million U.S. customers and requiring only the recipient’s email address or phone number to transfer funds. Unlike most existing P2P services, which delay deposits by several days, Zelle enables instantaneous deposits into customer’s bank accounts directly from their mobile banking application.

Zelle is just one example of the many new mobile capabilities, such as contactless payment and mobile deposits, which banks are adding to compete with Fintechs. Venmo, a current leader in digital P2P payments, and Stripe, a global online payment service, are two firms that are pushing the industry forward. As Fintech players continue to disrupt traditional financial services models and consumers become more digitally savvy, banks must enhance their digital offerings to remain competitive. Many of them already are: APT research shows that more than 85% of banks are focused on strengthening their mobile capabilities and improving digital onboarding to accelerate channel migration.

Digital P2P is a significant growth lever for retail banks – in addition to cutting paper-related costs, a recent study indicated that having a P2P application can substantially increase customer acquisition, engagement, and retention. But as with any new program, P2P applications require significant upfront investment to drive value. Which strategies should banks use to drive effective adoption of these applications, and how should they adapt their strategies for different customer segments?

Leading banks use smart business experiments to answer these questions. Business experimentation enables banks to evaluate new programs by comparing the performance of test customers who receive the program to that of control customers who do not. This approach allows banks to reliably measure the effectiveness of new programs, understand which customers they impact the most, and determine how they can be improved. As banks continue to evolve their digital programs, these insights will aid in answering questions such as:

  1. How does introducing a P2P offering affect deposits and customer engagement?
  2. As we consolidate our branch network, does our P2P offering encourage channel migration by increasing consumers’ use of digital banking? Does it help prevent customer attrition?
  3. Which customers should we target with which messages and incentives to encourage adoption of our P2P capabilities?

Banks that can effectively design and analyze tests to answer these questions will succeed in their channel migration strategies and gain a competitive edge. To learn more about key considerations for optimizing channel migration, watch this video.

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