By Bluepoint Solutions

Originally published on CU Insight on October 6, 2014

Why? Because they can live — at least, they can bank — without you.
The smartphone has already revolutionized how we communicate and how we find and consume information. Now, it is upending traditional banking models at an accelerating pace. Like it or not, we live in a world defined by utter phone dependence, and financial services are not exempt.

Phone dependence directly translates into mobile banking usage, as 72% of Millennials are active users of mobile banking (Accenture, The Digital Disruption in Banking). For credit unions that have yet to take their mobile channel seriously, this is a sobering reminder of the quickly shifting landscape of consumer preference.

Given these trends, it is clear that mobile banking is now an integral part of daily life for U.S. consumers, particularly Millennials. Moreover, its importance relative to other channels is only set to increase.  As the industry decidedly shifts to mobile, new categories of non-traditional financial services providers have emerged that threaten the historical dominance of banks and credit unions in the payments and banking arenas.

Three-quarters of Millennials are willing to leave their financial institution altogether and bank with non-traditional companies, including Square, PayPal, and Apple (Accenture). Additionally, more than 25% of consumers — especially Millennials — would consider switching to a branchless digital bank due to a greater interest in access to digital and mobile services in lieu of expansive branch networks.

According to one recent report from Accenture:

Customers want a bank that’s nimble and proactive, one that can be a part of their daily lives. The idea of “convenience” in banking is undergoing a shift away from branch locations and toward digital products and services that mesh with consumer’s “smart” mobile-empowered lives.

(Click here to download the complete survey)

By now, you’re probably thinking, “Is it really feasible to bypass banks and credit unions altogether and use non-traditional financial services companies as a primary banking provider?”

The answer is simple: yes.

The mass exodus away from traditional financial institutions is not a certainty (yet), but the longer banks and credit unions sit on the sidelines of innovation, the more likely it becomes.  There are already signs that this paradigm shift has begun.  For instance, virtually all of the day-to-day banking functions that people use are available from non-banks, including buying things, storing money and moving it between different types of accounts, sending money to people (p2p), paying bills, depositing checks, and more. Deploying a mobile solution that is on par with the user-friendly, feature-rich apps that these non-banks offer their users is not enough. Credit unions need to prove to their members — and potential members — that there is value in a banking relationship with a credit union that extends much deeper than simple payment transactions.

Where does this value lie? It lies in the trust you have with your members, in your expertise, in the financial education you can provide, and in the access to credit, lending, and asset management products your members can’t easily get from non-traditional companies. Credit unions need to compete today with compelling, omni-channel offerings (especially mobile) so that they can continue to expand their relationships tomorrow as their members mature and their banking needs increase.