Banks face competition by unlikely new rivals

WASHINGTON — It used to be that the JPMorgans of the world only worried about losing customers to Wells Fargo or Bank of America.

But that universe of competitors has grown to include T-Mobile, Wal-Mart, Google and a host of other retail, tech and telecom companies that are now operating like banks.

These upstarts are gaining footing in the banking world with prepaid debit cards that customers can use to pay bills, make purchases and deposit checks via a smartphone camera — pretty much all the things you can do with your traditional checking account. And they are piquing the interest of a highly coveted group that traditional banks have struggled to attract: young people.

A new survey of nearly 4,000 Americans by Accenture found that 72 percent of people ages 18 to 34 would bank with Wal-Mart, Google or T-Mobile if they offered banking services. Of the nearly two dozen companies that researchers asked about, people were most willing to sign up with Square or PayPal because of the relationships they already have with the companies. Nearly one-third of those polled said the same about T-Mobile, Costco, Apple and Google.

Those companies possess a few things that could really pose a threat to banks: an existing customer base, scale and an ability to adopt new technology quickly.

The biggest game-changer for traditional banks is WalMart’s incremental expansion into consumer banking. WalMart has rolled out everyday low prices on check cashing, money transfers and checking accounts in the past few years. When Wal-Mart teamed with American Express to launch the prepaid Bluebird card as a low-cost alternative to checking accounts, it attracted 1 million customers in less than a year.

These outside threats are coming at a bad time for banks. Slow growth and high regulatory costs continue to put pressure on banks’ return on equity, a measure of the banks’ ability to squeeze profits out of shareholders’ money. And while alternativepayment technology could appeal to the digital unit at a bank, the folks in the card division might worry that it could cannibalize revenue, researchers at Accenture said.