Mobile Banking Grows Slowly'We Don't Want to Be Left Behind, But We Don't Want to Be on the Bleeding Edge of It Either.'
Mobile technology - it offers new opportunities for financial institutions to expand banking services and enhance the user experience. But the U.S. financial industry's adoption of mobile has been relatively slow.
Estimates for the number of U.S. banks and credit unions currently offering mobile banking -- via SMS/text, WAP/browser-based, downloadable applications or a "triple-play" combination of the three -- are hard to nail down. IDC Financial Insights in July reported that U.S. consumer adoption of mobile banking nearly doubled from 2008 to 2009, with SMS/text banking being the most popular. The (unspecified) number of institutions offering mobile banking also had increased, according to IDC, which based its data on a 2009 survey of 1,008 U.S. adults.
But those findings don't match survey results released in June by Javelin Strategy & Research, which found that the number of mobile users in the U.S. actually declined from March 2009 to March 2010, adversely impacting mobile banking adoption. The report includes comparative data for the last three years. Javelin surveyed 5,211 U.S. households and collected additional online data from a random sample of 3,000 U.S. mobile users.
Of those U.S. adults who were surveyed, Javelin found that only 74 percent currently own mobile devices. That percentage reflects a marked decrease from 2008 and 2009, when in both years the percentage of mobile ownership was 85. Globally, about two-thirds of the world's population is estimated to use mobile devices.
Further, Javelin says use of mobile banking across the board is dropping. Among those mobile users surveyed, Javelin found that from November 2007 to March 2010, mobile banking only increased 7 percent, and actually decreased from 2009 to 2010.
Banks and credit unions "have not moved the dial much on mobile banking in the past year," either, says Mark Schwanhausser, a senior analyst at Javelin who covers multichannel financial services. "Eighteen banks out of the top 40 offered mobile banking last year. And a year later, it's still at 18."
Blame the Recession
According to Javelin, the economic recession is likely to blame for the crippled growth of mobile banking, as consumers and financial institutions have invested less in mobile technology.
Schwanhausser says the decline in mobile ownership came as a bit of a surprise, but makes sense in light of economic conditions. "Some people are losing company phones -- and younger folks, well, the recession hits them harder than others," he says.
Where the U.S. has seen positive shifts on the mobile front, according to Javelin, is in increasing use of smart phones. According to Javelin's study, 27 percent of U.S. adults now own smart phones, up from 20 percent in 2009. Smart phones offer advanced data services, such as Web access and the ability to download specialized applications. Schwanhausser says that growth in smart-phone use is important, since each of the three mobile banking offers -- SMS, WAP and app banking -- caters to a different segment.
Schwanhausser is quick to note that among those top institutions that have established mobile platforms, innovations in mobile were evident last year, especially in the areas of remote deposit capture, payments, funds transfers and mobile access points. "As an industry, however, we are seeing a flattening in mobile banking."
Where's the ROI?Mobile does offer a handful of avenues for cost savings, such as being a channel for direct marketing and one that promotes paper reduction for "green" banking. In June 2009, Bank of America said shifting customers to mobile services was allowing the bank to close 10 percent of its branches. But the primary benefit banks and credit unions should consider when looking at mobile is user satisfaction and loyalty.
Forrester Research, which in January published a report focused on the ROI of mobile, says banks and credit unions can't focus on the dollars and cents; rather, they need to evaluate the benefit the mobile channel brings to user experience. This is why it's so important, Forrester says, for institutions to offer basic mobile banking, such as SMS/text, to larger pools of their customers and members. Most institutions, however, have limited mobile banking offers to online users.
In "What Financial Functionality U.S. Consumers Want On Mobile Devices," Forrester writes: "Today, one in seven Americans who do not bank online say they are interested in at least one type of mobile-financial-services functionality, and 13 percent use a smart phone." Forrester points to Wells Fargo as being a leader, because of the bank's decision to offer SMS/text-based banking to its entire customer pool.
Schwanhausser agrees that offering more mobile banking options is a good move; but where institutions really need to improve is in their marketing, cross-channel integration and customer/member education efforts. "Consumers do have security concerns, and the banks could improve on sharing more information," he says. "If you know a customer who has a concern about something, don't you address it?"
New PlayersTupelo, Miss.-based Renasant Bank ($4.6 billion in assets) and San Francisco-based Bank of the West ($61 billion in assets) are two examples of banks that until recently had opted for the "wait-and-see" approach.
"It's taken some convincing internally to move toward mobile banking," says Tommy Sanderson, Renasant's electronic delivery manager. "We're a conservative bank."
But leaders within Renasant were convinced to make a move toward mobile two months ago, after channel analytics showed a large percentage of the bank's customers were accessing their online banking accounts via mobile devices. Of the bank's 30,000 online users, 4,500 are now mobile users. Renasant has around 200,000 total customers.
"The focus for now will be looking at what else is being done in the market and how we can compete," Sanderson says. "We don't want to be left behind, but we don't want to be on the bleeding edge of it either."
Renasant offers mobile SMS/text and WAP/browser-based banking. The bank is evaluating a move toward downloadable app banking, but wants to ensure the offer meets customer needs. "It's cool, but is it really useful for our customers?" Sanderson says.
Bank of the West expects this week to go live with its mobile offer, which out of the gate will include SMS/text and WAP/browser-based banking. After several months of SMS piloting, bank executives were convinced of its value, given the immediacy of sending and receiving messages. "Enrollments in the soft launch were well above our expectations, and we think some customers could in the future just want to bank on the mobile channel," says Matt Macomber, head of Internet banking for Bank of the West. "Customers want one place to do it all."
The bank is currently offering its mobile offer only to online users, but soon expects to open enrollment to other channels.
Standard BearersSan Francisco-based Patelco Credit Union is, by Schwanhausser's standards, making strides. The credit union, which has $3.75 billion in assets and 290,000 members, entered the mobile space in 2001. Patelco has definitely been one of the bleeding-edge players in the space. The credit union's goal: To attract tech-savvy members and continue to meet the changing needs of its existing membership, says Anthony Vitale, who oversees Patelco's mobile channel.
"It's mobile, mobile, mobile," Vitale says. Patelco, which already offers SMS/text and WAP browser-based banking, this year expects to add its third mobile access point via a downloadable iPhone app, which is currently in development. About 60 percent of Patelco's members use online banking, while only 3 percent currently use mobile. "I really think the mobile channel will take off," Vitale says. "If it's not this year, it's next year."
Patelco stands out for the way it worked to build mobile comfort among its membership by gradually integrating mobile into the interactions members have with other banking channels. "We are actually using the mobile channel as a way to leverage security," Vitale says.
Since launching its WAP/browser-based banking in 2001, which was followed by SMS/text in 2007, the credit union has used the mobile device as a way to authenticate online-banking transactions. "It's something you have as a multifactor authentication. So, if you want to access your online banking account, you have to request a special token code that is texted to your mobile phone," Vitale says.
Another financial institution that stands out is JPMorgan Chase. "Chase has done a great job of promoting mobile banking, especially the practical side of mobile banking," which includes the ability to remotely deposit checks, Schwanhausser says. Pointing to Chase's multichannel marketing, as well as the bank's savvy and attention-grabbing advertising campaigns, which are dedicated to mobile's anytime, anywhere advantage, Schwanhausser says Chase is making itself stand out. As more consumers desire multichannel relationships that include mobile, Chase is likely to gain a greater percentage of consumer market share.
"To me, it's a mistake to think about mobile banking as one channel of access," Schwanhausser says. "It's not just payments or just checking the account. It's everything integrated, delivering the same message and offering the same experience to the user in a more convenient, real-time way."