Article

Banks struggle to capitalize on mobile customers

Mobile banking is on the rise, but financial institutions have yet to figure out how to connect with consumers on a smaller screen.

August 18, 2015 by Will Hernandez — Editor, NetWorld Media Group

Financial institutions face a dilemma these days when it comes to their mobile banking customers.

Recent data from Digital Insight, which is owned by NCR Corp., reveals that 31 percent of consumers log into their bank's remote services exclusively through a smartphone or tablet. This figure is up from just 7 percent three years ago.

Banks do love the level of engagement from mobile banking users. These consumers average 18 account logins per month compared with 10 logins for online banking users.

But on the down side, financial institutions have trouble enticing mobile-only customers to try additional products and services due to the limited real estate on a small screen. As a result, executives remain cautious about how to view the trend.

"Banks don't quite know if that's a good thing or a bad thing," Jason Weinick, manager of analytics at Digital Insight, told ATM Marketplace sister publication Mobile Payments Today. 

"The jury is still out. When you're logging into your mobile device, you don't see the promotions for a low interest credit card or auto loan. That's where the banks are saying they don’t have the tremendous opportunity to cross-sell profitable products."

And the opportunity will only continue to shrink, judging by recent studies that show continuing growth for mobile banking.

An independent study from American Bankers Association finds that mobile banking is now preferred by 12 percent of consumers, up from just 3 percent five years ago.

Online banking topped the ABA survey; 32 percent still prefer that method compared with 17 percent who prefer a branch visit.

KPMG recently said that by 2020, the number of mobile banking users around the globe is likely to double to 1.8 billion. This figure represents more than 25 percent of the world population.

The question now becomes, "How will banks adjust to an increasingly mobile world and decreasingly branch-oriented customers?"

A mobile focus

Ed O'Brien, director of banking channels service at Mercator Advisory Group, believes that despite banks' trepidation about missed selling opportunities with mobile, the industry is very much invested in the channel.

"No one is actively dragging their feet," he said. "In fact, they're trying to do more. We’re seeing a lot of interest in how best to provide a personal experience even though you're remote."

Still, banks are playing catch-up in some ways, beginning with remote deposit check capture.

O'Brien and Weinick both said that mobile RDC marked the beginning of the mobile banking uprising. What started as a niche feature when USAA first introduced it in 2009 became a must-have for consumers who want to save time and skip a visit to their local branch.

O'Brien believes that many large banks hesitated to add mobile remote deposit capture for a couple of reasons.

A few years ago, much of a bank's discretionary funding was spent on compliance issues. "Even though technology was important, and still is important, relatively fewer dollars were able to go into [product development] for some firms," said O'Brien, who will moderate a panel at next month's ATM & Mobile Innovation Summit in Washington, D.C.

He believes that the balance has changed and that financial institutions now have technology at the top — or close to it — on their priority list.

O'Brien also believes that banks miscalculated the impact of mobile remote deposit capture on branch banking and the role it would play in creating today's mobile customer quandry: How do you sell a customer additional products when they never set foot in the branch?

"I think most banks are trying to use responsive design to be able to [add offers] within a mobile banking app," O'Brien said.

Some large institutions such as Bank of America allow mobile banking users to apply for a credit card or auto loan within the app. Some even let customers schedule an appointment through the app to meet with a specialist at a local branch.

Whether these efforts will catch on with customers is debatable, but does go to show that some banks are doing anything they can to make a connection.

O'Brien and Weineck both expect more mobile banking features in the future.

Weineck believes that banks will start to employ geolocation services to help drive younger demographics into branches.

O'Brien thinks banks could add personal financial management tools within the app.

"Banks are having discussions about these additions," O'Brien said. "A lot of it depends on the banking appetite of consumers."

About Will Hernandez

---

Will Hernandez has 14 years of experience ranging from newspapers to wire services and trade publications. Before becoming Editor of MobilePaymentsToday.com, he spent two years as the content manager for PaymentsJournal.com, a leading payments industry news aggregator and information hub published by Mercator Advisory Group. Will spent four years covering the payments industry as an associate editor for multiple publications in SourceMedia's Payments Group based in Chicago.

Connect with Will: