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Expert opinion

Long live the bank account: why the bank account is becoming increasingly relevant

Wednesday 24 May 2017 | 12:20 PM CET

Stefan Backlund, Trustly: The coming years will see life-changing innovations in fintech, but the bank account will increasingly be at the center of it all

One hundred years ago cash was king. People got paid in cash, carried it in their wallets, and bought things with it at the local store. But, today, our salaries are deposited straight into our bank accounts and we shop online from  merchants all around the world. Yet, it is surprisingly difficult to pay straight from our bank accounts. The good news for banks, online merchants and consumers alike is that this is changing thanks to fintech companies like Trustly. And not only is the bank account here to stay, but it is also becoming more relevant because of four factors: a push for financial inclusion, increased safety, an underlying speed of payment and the ability to enable bigger purchases.

1. The European Commission’s push for financial inclusion means more people will have access to bank accounts

In Europe, about 92% of consumers have a bank account, which gives them access not only to many financial services, but also to cheaper online goods domestically and across borders. Still, that leaves 8% who are unbanked. “In today's world, European citizens can not fully participate in society without a basic bank account. Bank accounts have become an essential part of our everyday life, allowing us to make and receive payments, shop online, and pay utility bills (telephone, gas, electricity),” wrote the European Commission in a 2013 press release about its proposal for a Directive allowing access to basic bank accounts. As the percent of banked consumers increases, the bank account will inevitably become more relevant as the hub of all consumers’ financial lives.

2. As new technologies become available, the bank account is becoming safer

Paying with a credit card online does not make much sense these days: It is inconvenient to key in a long string of numbers, not to mention it is rather unsafe for consumers and risky for merchants. Online banking e-payments, on the other hand, are a perfect fit for cross-border ecommerce. In Europe, bank payments are verified using strong two-factor authentication, which consists of something you know (a password, PIN or identifiable picture) and something you have (a token, one-time password or smartphone). Many financial institutions are even beginning to experiment with biometrics as a means of verifying customers. Based on physiological traits like fingerprints, hand geometry and retina scans, companies can confirm that people are who they say they are (anyone who has a newer iPhone is already likely accustomed to using Touch ID to unlock their phone). Some companies are even taking this one step further by analysing user behaviour like speech, signature and keyboard rhythm.

An increasing customer demand for banking security is pushing more banks to offer the safest and most convenient authentication methods available, making paying from a bank account safer and more popular.

3. Alternative payment methods are faster than traditional methods

Speed matters more than you might think. In a culture where instant gratification is making consumers perpetually impatient, people expect payments to happen in real time — and when they do not, unsatisfied consumers will tweet about their disappointment to all their friends. Since Trustly partnered with the Swedish online brokerage firm Avanza Bank in early 2016, the average time for Avanza customers to make a deposit from a bank account to an Avanza share deposit has dramatically dropped from 14,000 seconds to 10 seconds. Two months post launch, Trustly direct deposits account for almost 20% of all Avanza deposits. These numbers suggest that consumers demand speed when it comes to trading and online banking e-payments can meet this demand, resulting in happier customers.

4. Paying directly from the source of funds enables larger purchases

Imagine you are about to make a big purchase online, say for an expensive flight. Rather than topping up your e-wallet or increasing the credit limit on your credit card, would not it be easier to pay directly from the source? Trustly’s service allows consumers to select from which bank account they wish to pay, be it a current account or a savings account with more funds.

This convenience might actually encourage people to buy more, too. One Trustly case study conducted with a leading online travel agency revealed that the average order value doubled when adding online banking e-payments to the checkout, compared to the most popular card and e-wallet schemes.

If you do not already rely heavily on your bank account, prepare for that to change. The coming years will see life-changing innovations in fintech, but the bank account will increasingly be at the center of it all.

For similar stories, please check out our Online Payments and Ecommerce Market Guide 2016 to learn more about the latest trends in ecommerce and e-payment methods developments.

About Stefan Backlund

Stefan has been Head of Marketing and Communications at Trustly since 2014 and, previously, had been leading consumer marketing positions at Klarna and Philips. Stefan is passionate about UX and innovation in fintech and has a background in interaction design.

 

About Trustly

Founded in 2008, Trustly Group AB is a Swedish fintech company providing speedy, simple and safe online payment solutions across Europe. Its B2B payment solutions attract merchants in four main segments: ecommerce, travel, financial services and online gaming. In 2015, the company processed EUR 1.7 billion in transactions.

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