According to a panel of bankers at Celent Innovation and Insight Day, mobile banking has moved beyond the hype to the next step in banking’s evolution.
Senior analyst Jacob Jegher moderated a discussion with three bankers and one alternative financial services provider. All agreed with what others in the industry have long been saying—that mobile is where the business is going.
Andy Arshad, mobile channel manager with USAA (San Antonio, Texas; $68.3 billion in assets), said as far as he's concerned, mobile banking is not hype—it's needed for serving his customers. USAA launched mobile banking about a year ago. Its customer base is unique as it consists of military personnel and their families. As such, this is a customer base that is "mobile" in more than one sense of the word. Since the company also has no physical presence, allowing customers to stay connected to the bank no matter where they are is paying huge dividends in terms of stickiness. Therefore, getting USAA's members to connect via mobile phone wasn't too much of a stretch for the diversified financial services company.
"We are seeing great growth in mobile banking," Arshad told attendees. "We have a 12 percent adoption rate with one million unique users. Our mobile activity is double what it was seven months ago."
For Bank of America (Charlotte, N.C.; $2.32 trillion in assets), getting to 2.5 million m-banking customers took a bit more work in terms of conveying the value of m-banking to customers. Douglas Brown, mobile product executive with BofA, said the bank addressed three primary areas: ease of use, cost of use and security. As expected, the early adopters were younger and more tech savvy than BofA's average customer. However, he said the distribution of mobile banking use among the bank's customers is evening out across demographics.
"It's incumbent on the industry to move to mobile," he asserted. "Our customers are moving to lower cost channels. The immediate access and control of one's finances [offered by mobile banking] resonates well in today's economy."
Denver-based Western Union's Matt Dill, SVP, head of digital ventures, agreed that mobile is becoming the channel of choice for consumers. "The industry has to recognize this," he said.
Mobile has been a boon for his company. He said Western Union has been somewhat immune to having to keep up with most of the latest technologies and channels. This was due to the fact that technologies that were available in the industrialized markets were not always available in developing regions. Now, however, there has been a worldwide boom in mobile phone adoption, with about 70 percent of this in the developing world, he noted, adding, "The mobile phone is now equally represented on the send and receive side of our customer base. It's the device of choice for them and is becoming a core part of our business."
Although many people compare the adoption and development of mobile banking to online banking, the biggest difference is the pace. Mobile banking is moving much faster than online banking ever did. And it's the faster pace that presents banks with an almost do or die option.
"The difference between mobile and online banking is the pace of evolution," noted BofA's Brown. "There's a new world of parties who see it as a profitable opportunity."
Added Carl Snyder, president, Zions Internet Bank (Salt Lake City; $54 billion in assets), "Banks need to adopt mobile more quickly [thank online banking]. If they wait, they'll be left behind."
Zions will announce its foray into mobile banking in about two months. He said the bank plans to offer similar services to its competitors such as bill pay. And like other banks, Zions is adopting best practices around multi-factor authentication and device certification as well, since m-banking security is a concern among consumers. That said, Snyder noted there might already be advantages around security for mobile phones in customers' eyes. "Some people feel more secure on their mobile phones than on their PCs because of all the viruses and malware that can infect computers," he commented.
Plus, adds BofA's Brown, the mobile phone is location-sensitive, yet another security advantage it brings to the table.
And as smart phones like the iPhone become more prevalent, the possibilities around security, and even marketing, are something for banks to consider. They certainly are paying more attention to these more advanced devices. USAA recently introduced a mobile banking application tailored to the iPhone. "We saw a third of our customers were using the iPhone to access our mobile banking application," he explained.
Devices like the iPhone may have also helped solve the distribution problem, according to Brown. BofA added an iPhone app at the beginning of the year. "Things like Apple's App Store makes it seamless for customers to download our [mobile banking] applications. And it's not just happening with the phones. Look at the [Amazon] Kindle. It's always on and has a built-in modem."
Celent's Jegher noted that all three banks were offering their m-banking service via downloadable application. He said Celent predicted downloadable apps would be the method of choice for banks' mobile initiatives. Although USAA's Arshad acknowledges that banks can't cater to every device, the fact remains that the mobile channel gives institutions access to metrics they never before had, such as who the person is, where they are and the kinds of transactions they're performing. "It's a powerful tool for the consumer and the bank."