Mobile Banking: What’s Next?

By Deb Stewart

As the popularity of mobile banking surges, financial institutions are rushing to develop appealing new enhancements.

As consumers increasingly adopt mobile banking, financial institutions are rapidly developing enhancements to mobile services. These innovative offerings are designed both to meet and exceed consumer expectations.

Looking ahead to 2015, here are key areas in which mobile services are expect to evolve further:

  1. Enhancements to existing mobile functions.
  2. Mobile payments.
  3. Person-to-Person (P2P) payments.
  4. Photo bill pay.
  5. Selling and providing financial advice.

ABA Bank Marketing and Sales magazine talked to bankers and industry experts to gather information about the major enhancement trends. Our report follows below.

General Enhancements

Here are just some of the new mobile offerings outside of the payments and sales areas:

Mobile Only Enrollment—untethering online and mobile: “We work with over 300 banks ranging in size from $20 million to $6 billion in assets,” says Robb Gaynor, chief product officer at Malauzai Software Inc., Austin, Texas, a developer of mobile banking software. “Twenty to 30 percent of their mobile customers are mobile-only. Our client banks want their customers to bank the way they want. That may be mobile only, mobile and online or online only.”

BBVA Compass (asset size: $71.7 billion), Houston, was the pioneer in this area and has offered mobile standalone enrollment for several years. The response is described as “fantastic,” by Alex Carriles, executive vice president and director of self-service channels development. “For many millennials, their mobile phone is their Internet connection—so mobile enrollment has gone from a “nice-to-have” to a “requirement” to retain and grow market share.”

Pre-log in—access to account balance and some recent transaction information without entering a password. “This is another widely used mobile feature with 80 percent of our live customers allowing balance checks without login,” says Gaynor of Malauzai. “And 20 percent of the time, their customers access mobile pre-login.”

Southern Bank and Trust Co. (assets: $2.2 billion), Mount Olive, N.C., has taken a middle ground in providing this type of access, which it rolled out in September. The bank requires a PIN login (with opt in at first login) rather than a full password. 

Management of credit and debit cards—card blocking and service requests. “Sixty percent of our client banks offer a card on/off mobile feature with about 18 percent of their customers using the feature each month,” says Gaynor. “Interestingly, many of their customers turn their cards off and turn them on only when they need them. That behavior provides huge fraud mitigation for the customer and for the bank,” he notes.

Appointment Setting—scheduling live appointments or call-backs. Thirteen percent of banks are offering appointment setting through their mobile channel, according to Mary Monahan, executive vice president and director of research for Javelin Strategy & Research, Pleasanton, Calif.

Wells Fargo Bank’s “Make an Appointment” lets customers schedule an in-person meeting with an expert who can specifically address their needs. “Consumers increasingly expect seamless mobile, online and in-store experiences, and Make an Appointment helps us create that experience for our customers and noncustomers alike,” says Jim Smith, head of the bank’s Virtual Channels Group.

Self-service—through secured messaging, live or video chat. “There is a lot more self-service occurring in this channel—change of address, I lost my card, what’s the routing number,” says Gaynor, from Malauzai. “We’re starting to see more of this through secured messaging. Next year, we expect live chat and one-way video chat to become more common.”

Cardless ATM withdrawals—access to cash through the use of an ATM and mobile device with no debit or credit card required. Customers can request cash through their mobile banking app and then enter a code on the ATM to make the transaction. “Many banks are exploring this as a way to leverage mobile in the physical channel,” says Teresa Epperson of AlixPartners, the business consulting company whose headquarters is in New York.

Mobile Payments

More than 1 million credit cards were activated to work with Apple Pay in the 72 hours following its debut earlier this year. Eighty-five percent of all debit and credit cards are eligible for enrollment, with acceptance at 220,000 merchant locations.

“The race is on,” says Epperson of AlixPartners. “Mobile wallet activity is increasing in intensity with the development of partnerships across the payments ecosystem. We expect big announcements to continue over the next six to nine months. The end solution needs to be simple and with open architecture.” Which card will come to the top of the wallet? “The one that provides a near ‘frictionless’ experience and compelling value,” she adds.

Wells Fargo was one of the five banks working with Apple in the development of Apple Pay. “When we review mobile wallet providers, we look for payment safety, quality of service and ease of use for our customers. Apple’s new wallet service is a strong offering in those areas, and we know our customers want and need this option as they live their increasingly digital lives. It is Wells Fargo’s priority to offer innovative technologies to meet customers where they are—and, for many, that’s on a mobile device,” says Smith of Wells Fargo.

Wells Fargo is introducing the service by offering a $10 incentive to make an Apple Pay purchase using a debit or prepaid card.

They are also focused on educating their customers on how the service works.

“Apple Pay is opening the door on mobile payments, but it is not an eWallet solutions for a bank—it is only a part of it,” says Gaynor. “Apple Pay currently cannot be developed inside your mobile banking app—registration needs to happen through Passbook,” says Gaynor. “CurrentC [the mobile payment system sponsored by major retailers such as Wal-Mart]can integrate much more fully into mobile but will also be only a part of a bank’s overall strategy.”

“Consumers say they want to go to their primary bank for their mobile wallet,” says Monahan of Javelin Strategy. “It’s up to us to provide a solution that is simple and addresses their needs now and into the future.”

Person to Person (P2P) payments

Is 2015 the year for these to take off? What has caused the delay in consumer adoption? “Customers don’t want to wait three to five days for their money,” says Gaynor. “Real-time solutions work about 70 percent of the time since both the sending and receiving banks need to allow real time. And many of the largest banks do not accept real time.”

BBVA’s Carriles indicates that a lot of effort is going into making real-time availability, but the problem is that most banks and some payment networks don’t operate in real time, and have to simulate real time by memo-posting transactions.

The good news is that there is currently work in the industry to deliver faster, same-day payments. “P2P is quick, easy, safe and simple,” says Carriles. “But consumers expect availability to be immediate. We do run real time for BBVA to BBVA payments, but we need immediate availability regardless of bank in order for this product to take off.”

Perhaps as a result of this availability lag, common transactions on P2P are larger than originally anticipated. “Common uses for P2P include paying rent and providing financial assistance to relatives,” says Monahan. “So banks have to look at daily and monthly P2P limits in addition to these availability issues.”

Mobile Imaging Enhancements, Photo Bill Pay

Mobile deposit has been one of the most popular features of the mobile product. Is this also the year that photo bill pay will start to gain momentum? “Eighty percent of our mobile clients offer remote check capture services to their customers and 5 percent to 7 percent offer photo bill pay,” says Gaynor. “We have been pleasantly surprised to see that 10 to 12 percent of their active mobile customers are using it. This is much higher than the average usage of standard bill pay, where 4 percent of active users take advantage of the feature,” says Gaynor.

“We opted to include photo bill pay in our initial mobile introduction to encourage higher usage of bill pay generally. It captures all of your payee information without input, addressing the most common consumer complaint about the bill pay product,” says Sondra McCorquodale, senior vice president/alternate delivery channel manager at Southern Bank and Trust Co.

Carriles points to some issues with bill image recognition in the past. “Introduction of Mitek’s ‘my snap’ has improved that situation since it coaches the customer to get the right image,” adds Carriles. BBVA has found the product to be of greatest value to customers just initializing bill pay and as part of the on-boarding process.

Providing Advice and Selling through Mobile

“We do offer clients options for in-app advertising,” says Gaynor. “Bank cross-sell ads are informed through CRM. Banks know that clients log in to mobile three or four times a week, and they need to find a way to leverage that behavior. Retail offers focus on local merchants and combine geo-fencing data and transaction analytics. It’s a great way to generate revenue and to demonstrate that you truly are a community bank,” says Gaynor.

Javelin Research points to greater sales activity among European banks, with a focus on creating micro-lending opportunities such as Poland’s mBank “30-second mobile loan.” “Mobile offers are an untapped opportunity for many banks with roughly just one in four banks among the top 30 offering in app cross- selling,” says Monahan. “In the U.S., Bank of the West delivers targeted mobile offers pre-login; BankAmerideals serves up cash-back merchant-funded rewards; and Digital Insight is piloting mobile auto loan alerts that use geo-fencing technology.”

“As more and more bank engagement moves to digital channels, banks will need to shift sales and guidance accordingly,” says Epperson. “In the case of mobile, there will be a high bar to ensure sales engagement is relevant and contextual, meaning providers will need to make sure that mobile sales efforts are reaching the right customer with the right message at the right time and place.”

The Future

So what will define the future of this capability?

“The world is becoming more digital,” Epperson notes. “The way we manage our lives—calendars, communicate, make purchases—have all been transformed with mobile as the accelerant. The expectations that consumers have on ease and convenience are being raised by digital brands like Apple and Amazon. Frictionless customer experiences are expected and banks are being forced to respond. The pace of change and the speed at which consumers are adapting the fastest in history—overnight an app can have millions of users. The appetite for the shiny new toy is tremendous so the cadence of rollout the next new thing has rapidly increased. This fundamentally changes development for banks—the old timelines don’t work and probably won’t ever again,” Epperson adds.

Gaynor sees several areas of focus moving forward. “The first is convergence—running the same experience in online, tablets and phones. Running on a single platform is cooler and offers vastly superior economics for the bank. Second, online account opening is ready to go, enabled by mobile imaging for licenses and other documents. Third, payments and eWallets will be big news including real time P2P, card management, and picture pay. Fourth, mobile will come into the branch with self-service kiosks, enhanced ATM interaction and assisted self-service initiated by either the consumer or the banker. Finally, security, security, security. Fingerprint ID and other biometrics will become more broadly accepted.”

One goal is to help clients and prospective clients feel more in control of their financial lives. “Too often banks think of trying to sell a checking account, a credit card or a loan, and then try to think about how to help the consumer buy a car or house,” says Jeff Dennes, chief digital banking officer for BBVA Compass.

He believes it should be the other way around. “Simple,” the digital banking provider BBVA bought in February, already has a similar mission of helping consumers control their finances by helping them understand their money. It does this by creating statements and alerts that are clear so that people can see their financial picture and start making positive changes if need be.

“The pace of change today is unprecedented, requiring banks to rethink customer adoption curves and behaviors, development cycles and what it means to be relevant with consumers—the old rules of thumb simply no longer apply. As challenging as that sounds, it is also a great opportunity for those banks willing and able to rethink how they engage and deliver value to increasingly digital consumers. Those who do this successfully will build a strong foundation for growth for the next decade,” Epperson adds.

Deb Stewart of Charlotte, N.C., is an independent consultant working for the financial services industry. Telephone: (704) 759-1633; email: debstewart10@gmail.com

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