From big box to tax brands, disruption is coming fast and furious into the banking sector
There has been no shortage of news about competition coming from all corners into the banking sector. No longer the exclusive purview of fintech, challenges to banks and credit unions include those from a wide range of non-financial brands entering a crowded field of competitors – all looking to make their mark. So heated is the interest in banking, even retail brands like big box and drug stores are now getting in on the action. These moves come with unique offerings that leverage their brands’ vast retail presence, even as pressure continues to mount for banking to make critical cuts to their own branch networks.
Known for its robust rewards program, Walgreens announced the intention to expand its financial offerings earlier this year with a new credit and debit card. The second-largest drugstore chain in the U.S. took that a step further at the end of March with an announcement that it will introduce a bank account product for customers linked to its membership rewards program. Partnering with a payments company, the drugstore and pharmacy chain is banking on convenience for its customers, leaning on its 9,000 locations to provide it with a “level of density” since “78% of the US population lives within 5 miles” from a store, according to Business Insider.
This announcement comes after major news released from Walmart in January that the big box giant would create a fintech startup to win greater share of wallet from their vast pool of customers. According to their statement about the new venture, Walmart created a partnership with Ribbit Capital, a premiere investor in stock-trader Robinhood, to “bring together Walmart’s retail knowledge and scale with Ribbit’s fintech expertise to deliver tech-driven financial experiences tailored to Walmart’s customers and associates.” The retail giant is hoping to leverage their expansive retail network and considerable consumer influence into a strong competitive position as a player in financial services.
Now, another brand that’s no stranger to financial services is entering the playing field, also leveraging its healthy network of 10,000+ locations to make a mark in banking. “[L]ooking to reinvent itself amid its struggles to adapt in the age of do-it-yourself tax prep services” H&R Block has announced its entrance “a crowded field of firms that offer mobile-centric accounts aimed at those who are unhappy with the fees charged by traditional banks. Chime, Varo and Green Dot are among the top competitors,” according to American Banker. The digital-only banking service is expected to launch in October of 2021, just “in time for a launch in next year’s tax season.”
So what can community banks and credit unions do in the face of these new challengers? If the trends and themes in these announcements are any indication, banking should explore partnerships with companies that can provide expertise that FIs may not have resources in-house or an ability to successfully scale. Most importantly, though, community banks and credit unions should better leverage their physical network of branches. This means optimizing and upgrading your existing network, introducing new efficient formats and expanding into the right areas, with an eye for opportunity in growth markets.