The Current State of Mobile Banking

We now live in a world where mobile banking is no longer a nice to have, but an expected service of all financial institutions. Further, even advanced features like mobile check deposit are no longer considered forward thinking, but are now the norm. The pace of all this development has been remarkable and many financial institutions have not kept up. This insight piece captures what’s happening in mobile banking today, what this means and what financial institutions can do about it?

At the end of 2015, 87% of all adults in the United States owned at least one mobile phone. More importantly for mobile banking growth, a staggering 77% of these phones were smartphones. This has massive ramifications for mobile banking. First, usage is bound to increase dramatically. Second, this still implies that ~50 million adults still use a basic mobile phone in the United States. As mobile phone carriers further incentivize this smartphone ownership, lower the costs, and the population becomes more comfortable with this technology, further usage of mobile banking will also naturally increase.

Usage is only party of the story. User engagement is perhaps an even better measure of mobile banking’s rise. 75% of Millennials rely upon mobile banking to either deposit checks and/or check balances. Over half of all Millennials receive SMS alerts from their bank or credit union and more would prefer to receive notifications via push notifications. While only 28% of total smartphone users currently use mobile payments, this segment is also expected to rapidly grow.

One of the most important and relevant trends in mobile has occurred by age demographic. While there has always been impressive mobile adoption for the 18-34 year old segment, there is also encouraging data around the baby boomer’s mobile usage. 54% of 60+ year olds have already adopted smartphones, and this number is expected to increase dramatically over the next couple years. Mobile banking usage amongst this demographic has almost quadrupled in the past five years as well.

Looking beyond mobile banking, many technology companies have adopted a mobile first approach. Take it from Facebook CEO Mark Zuckerberg, “I told all of our product teams, when they come in for reviews: Come in with mobile. If you come in and try to show me a desktop product, I’m going to kick you out. You have to come in and show me a mobile product.”

What Does This Mean?

The trends and facts are the easy part. Putting everything in context and implementing an appropriate strategy is the hard part.

We believe mobile is clearly the future and financial institutions will have to adopt a strong mobile approach to serving their customers. And this goes beyond serving Millennials, all generations including baby boomers are relying more on digital channels to interact with their financial institutions. Additionally, we believe the way customers interact with their institutions through mobile will fundamentally change. Currently, the most common mobile banking activities are fairly low engagement:

  1. Checking account balances or recent transactions (94%)
  2. Transferring money between an individual’s own accounts (58%)
  3. Receiving an alert (e.g., a text message, push notification, or e-mail) from their bank (56%)

While mobile banking usage has experienced rapid growth, the engagement has been relatively weak. Checking balances or transferring money internally is very low-engagement. But what if a financial institution was able to keep the customer on their application for a longer period of time (in a good way, of course)? This could lead to increased customer loyalty, upsell opportunities and higher ROI on mobile marketing campaigns.

Consider this, most mobile banking users who received a low balance alert from their financial institution reported taking some action in response, such as transferring money into the account with the low balance (43%), depositing money into the account (36%), or reducing their spending (32%). One of the simplest forms of engagement – sending a notification – can influence how a customer allocates, deposits or spends their money.

Most consumers, especially millennials, have constant access to their mobile devices. This allows for a “just-in-time” delivery of financial information which can influence financial behavior. Take another example that some major credit card companies have implemented. For every purchase, the user receives a push notification with the vendor and amount. Think of the old savings lesson – it’s better to spend in cash than use a credit card so you actually feel the money leaving your pocket. Now this push notification is the 21st Century way of teaching the same lesson. If these notifications were delivered to someone who was trying to cut back on spending, perhaps this may lead to different and more informed financial decisions in the future (or even later that day). As of equal importance, push notifications can limit fraud to a single transaction. This is not only seen as a strong security feature by users, but directly and positively impacts an institution’s bottom line.

User engagement can go far beyond simple push notifications on spending. Customers could potentially manage their finances through their phone, categorize recent purchases and tag special purchases. They could receive targeted offers and rewards based on their spending habit, credit worthiness, life event, and/or geo-location. They could more easily transfer money to friends, family or vendors. They could help your institution curtail fraud. They could apply for a loan. They could consume more content and become more dependent on your institution.

What Should Financial Institutions Do?

We believe that implementing a mobile banking strategy is critical for any financial institution. The trends are very clear that mobile will become the main way customers interact with their financial institution. Important parts of this strategy should include:

1. Adopt best in class technologies

All of the aforementioned points, trends and initiatives can only become reality with the right technology partners. When evaluating who to entrust with the digital face of your financial institution, choose a partner that truly understands what the future of mobile banking looks like and is willing to invest in this future. Too often we see multi-year contracts with expensive termination clauses. This does not incentivize innovation. An effective mobile platform will enable to you grow your institution today more than ever before and picking the wrong partner is not a mistake many institutions can afford to make.

2. Refresh the brand

Bringing a best in class mobile platform is certainly a step forward, but financial institutions should also consider refreshing their brand. There is a reason most technology companies make changes to their brand identities every few years. Consumers expect brands to evolve. Additionally, it is important to keep a consistent experience across all platforms - especially digital. Your mobile app, online banking, website, and any other customer touchpoints should provide a consistently well designed, user friendly experience to instill trust and loyalty.

3. Understand the risks

In pieces like these, it’s often convenient to ignore data that may not support the thesis. For instance, security is a major concern of many customers. Among those with a mobile phone, 42% think that people’s personal information is “very unsafe” or “somewhat unsafe” when they use mobile banking. If almost half of mobile phone users are not satisfied with security measures in place – even if it’s just perception – this poses a major hurdle.

All this said, risks are expected to be managed and addressed. The best technology partners will make mobile banking more convenient for members and ensure there are no security lapses. Financial institutions should be aware of these risks when shaping their mobile banking strategy.

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