By Tina OremConsider it a sign of the times: A tiny device that fits in your back pocket is fundamentally changing how bank customers behave, as well as how banks invest capital and even how they hire.
By 2014, seven in 10 U.S. adults had smartphones. They’re radically changing how people shop, communicate, consume news, get around, listen to music—and bank. They’re why 39 percent of mobile phone owners with bank accounts use mobile banking, up from 33 percent in 2013 and 29 percent in 2012.
And the mobile banking market’s not only getting bigger, it’s getting more entrenched. The number of people using mobile banking at least once a week climbed to 45 percent from 37 percent two years ago, according to RateWatch.
That’s why “convenience” is as much about technology as it is about branches.
“As this demand increases, it will become even more crucial for banks to offer mobile services, or risk losing customers to competitors,” RateWatch marketing manager Kimberly Myszkewicz says. “The more a person is engaged in the service, the more likely they are to stick with that institution for other services.”
With almost three-fourths of Americans now saying their relationships with banks are primarily transactional, according to Accenture, having the right mobile offering isn’t just trendy—it’s a survival strategy. Here’s what four experts say banks should do to stay relevant in mobile.
1. Don’t design things just for millennials.
Mobile is often regarded as the domain of the twentysomethings, but it’s actually gaining traction in all age groups. “Today, you find everybody pretty much across the board succumbing to the lure of mobile,” says Alex Carriles, director of self-service channels at BBVA Compass. Two or three years ago, the bank’s mobile audience was primarily early adopters, but at the end of last year, mobile use surpassed all other channels. Now between 25 percent and 30 percent of BBVA customers are mobile-only, Carriles notes.
There’s an important caveat though, warns Janine Kasper, a channel operations manager at Q2 Software, which has about 3.1 million end users. “It has to be easy to use, because the millennial group, while they love technology, they are not necessarily the techies. They just know that if they’ve got more than three clicks that they have to do to get anything done, they’re going to bail.” ABA, through its Corporation for American Banking subsidiary, endorses Q2’s virtual banking solutions.
Security is the trigger for baby boomers, she adds. “If you have a digital or a virtual banking solution that is easy to use and is safe—meaning that there is a way to authenticate that person so the individual has the security and peace of mind of knowing what they’re doing is going to be confidential—the older markets and those baby boomers are picking it up even more now,” she explained.
2. Offer mobile deposit.
“One feature that really has exploded recently, and this is one where that process has already taken place and people have realized it, is mobile deposit,” says Rob Morgan, ABA’s director of emerging technologies. “Maybe five years ago, less even, a few banks came out with mobile deposit and it didn’t take long before the rest of the industry realized they needed to catch up.”
“Customers that use those features are growing faster than ones that are logging in to check a balance,” says Don Westermann, EVP and chief information officer at Eastern Bank in Boston. “It’s really designed, I think, to drive engagement with the customer.”
Carriles adds that BBVA is also getting serious traction in mobile deposit. In fact, he says growth in mobile deposits and transactions was so high that he expected to blow through his per-transaction cost budget by the end of the month. That budget was supposed to last until early 2016.
3. Overhaul your tech team—or your provider relationship.
Some banks are growing their tech teams; others are buying them. In April, for example, BBVA acquired San Francisco-based user-experience and design firm Spring Studio. Other banks, such as Eastern Bank, are wresting control from third-party vendors. Its tech team grew by about 50 percent in the last three and a half years, Westermann said.
“Today, we’re tied to release schedules for what our provider thinks is important, which may or may not be important for our customer,” he notes. “We’re putting ourselves in a position where, by running and controlling and licensing all the technologies, having the development staff in-house in order to modify that technology, we can not only get something that’s differentiating for us in the market, but also that we can iterate very quickly.” The bank plans to launch a new mobile platform in September, Westermann adds.
Small banks have bigger challenges, Morgan says. “You’ve got the bigger banks buying design labs, but that’s not feasible for a lot of these small guys. So in that case, I think it’s really about pushing those core providers to offer the services that these banks need, so that they’re able to offer the same level of service and compete in the mobile space,” he said.
4. Make mobile part of an omnichannel plan.
So much of what’s going on in mobile involves creating an integrated “omnichannel” experience, where transactions look, feel and act the same regardless of whether a customer uses a branch, tablet, phone, website or even a smartwatch.
“As a bank, what you want is for your customer to be able to come to your app and get all of their banking needs done, and not have to use five different apps or use some other service. You want to be the face of that person’s financial interactions,” Morgan says. “That’s one of the biggest opportunities, but also the biggest challenges as banks look at developing their mobile apps. The more services they can include like that, the more they can be that core omnichannel provider.”
5. Connect your mobile strategy to your branch strategy.
Branches are not dying, but they are changing because of mobile.
“Think about one of the most tech-forward companies outside of banking—think about Apple, for example,” Morgan says. “Their retail stores are very important to their business. But they only account for 11 percent of their sales. As people start doing more and more on their mobile apps, they won’t need to come into branches as much to do day-to-day transactions, but the branches are still a very important touchpoint.”
Branches also could be a big source of mobile’s ROI. First, they may only need 1,000 square feet instead of 5,000 or 10,000 because customers are using mobile to do things they used to go to the branch for, Kasper explains. Second are the cost savings. Many branch transactions can be done for a fraction of the cost in a virtual environment, she said.
“It’s not like you’re just taking transactions from the branch. You’re really sending traffic to the branch for other reasons,” Carriles says. “You want to transform the branch instead of just a processing center to a truly sales and advice center.”
Tina Orem is a freelance writer in New Mexico.