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BirdsEye View

mobile banking

Is it all it’s cracked out to be?  The vendors are going crazy telling us how important this is.  In fact, you can’t be a successful bank without it!  What’s real and what’s hype?

My first comment is:  MOBILE IS THE DEVICE OF CHOICE IN THE FUTURE.  You can find yourself without your laptop, perhaps even your iPad, but not without your phone.  It has become almost an appendage of our body, regardless to age, but it is even more so for the younger crowd.  Have to ever driven your kids and their buddies to soccer and saw them texting each other feverishly in the back seat even though they’re sitting right next to each other, just to make sure you don’t know what they’re talking about?  This is the power of mobile phones, and they are here to stay.  In fact, they are getting smarter every day.  There are over 100,000 apps for the iPhone.  And iPads are selling faster than any other device in history.  So accept it – phones are IT.

Yet skepticism remains.  It reminds me of the time when my husband brought home the microwave. I thought: what a dumb idea.  What do I need another device to heat food with for?  I have already both a stove top and an oven.  Little did I know that one can’t heat spaghetti or popcorn without that magical staple.

The smart phone follows the same idea.  Just go to any family restaurant and you’ll see those young brats hooked to the life support system (iPhone games or movies) while their parents eat in peace... They are here to stay and only become more powerful.
 
So yes, we need another device to do our banking with.  My personal epiphany was when I received a text from Gil at UCLA telling me he just bought a bunch of books while in a cab.  I immediately transferred the funds to his account from mine so he won’t overdraw the account.  How did I ever survive without this before???

Now, I realize I’m a statistically insignificant sample of one.  So let’s examine the facts:

  • 72% of mobile phone users are generally familiar with mobile banking options
  • Mobile banking adoption reached 10% 2Q09 and stalled there; forecasts call for 40% adoption by 2015
  • Smartphone ownership drives adoption;67% of mobile banking users own a smartphone
  • People who check and send email, access the internet, send and receive text messages and use GPS features are likely to be mobile banking prospects.  Well, who isn’t?  If you have kids, you know the only way to reach them is through text.  If you are a grandparent, you realize this too.  If you ARE a kid, you already know that too.
  • 35-44 year old mobile adopters demonstrate the broadest usage of mobile banking functionality, and they are a coveted segment we are all after.

Why do people use mobile banking?  Because it’s convenient, handy, saves time and gives you low cost web access.  Why should you pay attention to this device?  Because 41% of large bank customers and 40% of credit unions’ customers switched to those banks with mobile functionality in mind and as an important factor.
What features will cause people to switch?

  • Pay bills wherever you are (40% response rate to Mercatus Mobile Survey, 5/10)
  • Balance checking account
  • Check balances of all accounts
  • Account history
  • Funds transfer
  • Recent transactions
  • Alerts (30%)

Who thinks these features are important in make the decision to switch banks? 60% of the surveyed 18-25, 27% of the 26-34 respondents.

Here’s why I think you should take a look at your mobile banking plans.  Today it is not a major factor, but it will be, and faster than we realize.  Mobile banking can reduce the importance of your branch network (or lack thereof) and ATM network (or lack thereof).  It’s a great alternative to physical distribution for some segments.
The competition is somewhat docile right now, but it is changing.  Baseline mobile capabilities will become table stakes among banks regardless to size, much like online banking did.  Banks and non-bank brands with strong brand identity but no national distribution will leverage mobile to expand their franchise.  Your own customers will start asking for it, and by then you might have lost precious opportunities for both retention and customer acquisition.

As you evaluate mobile banking, please don’t get it just to mollify your retail banking executive.  Develop a clear value proposition for your distribution network and be clear what role you expect mobile banking to play in it.  Then by all means forge ahead.  It is the future, and it is here!