Capturing Mobile Banking ROI for Community Banks

By Evan Sparks

Offering mobile banking is often described as the “price of admission” or “table stakes” for retail banking today. Surveys bear that out—according to a recent survey by the Federal Reserve and the Conference of State Bank Supervisors, 95 percent of community banks offer mobile banking or will do so in the near future.

But while mobile banking is becoming universal, it can still cause heartburn for bankers uncertain about the return on investment. How can bankers quantify the efficiencies, savings, sales and ultimately profits that they hope mobile will bring?

Executives at Bank of Ann Arbor, a $1.2 billion community bank in Ann Arbor, Mich., had the same question about their mobile banking product. So they participated in a study of nine banks conducted by Fiserv, the core processor whose Mobiliti product Bank of Ann Arbor uses to power its mobile banking services, which include bank-branded apps for smartphones and tablets, online bill pay, person-to-person transfers and mobile check deposit.

“We had no way to really tell what that success equaled in profitability,” says Patti Judson, EVP and COO at Bank of Ann Arbor, who presented the study results at ABA’s Annual Convention on Oct. 17 in Nashville, Tenn. “We thought it would identify some areas where we can improve.”

One key lesson—also borne out by the Fed’s latest mobile banking survey—was that “mobile is about everyone,” Judson says. More than half of the bank’s mobile customers were 55 or older. “We thought it was about millennials, but it was baby boomers and Gen Xers who were persistent about having this product available.”

Through the study, the bank was able to pin real ROI on its investments in mobile. Within three months of a customer adopting mobile banking, the bank saw average jumps of 90 percent in point-of-sale transactions, 23 percent in ATM withdrawals, 56 percent in revenue from transaction accounts and 10 percent in products held per customer.

The bank also saw increased loyalty. “Customers with mobile banking are less likely to attrite,” says John Moon, director of consumer adoption marketing at Fiserv. Mobile banking customers were two points less likely to leave the bank than online banking customers—and nearly 8 points less likely to leave than branch-only clients.

Mobile bankers also bank far more frequently, and “the value of mobile bankers who are financially active is substantially higher,” Moon says. Putting a finer point on it, he says that mobile customers generate 66 percent more revenue than branch-only customers and 54 percent more than online banking customers. And due to the higher transaction volumes, interchange revenue from mobile bankers is more than six times that of branch-only customers.

All told, Moon says of the overall study results, each active and engaged mobile banking user represents $200 in incremental annual revenue. “Mobile bankers are your most profitable customers,” he adds.

“We weren’t surprised at the profitability; we expected it to be more profitable,” Judson adds. What did surprise was “The outcome and adoption of our customers…more engaged customers with more products. This gives us multiple reasons to sell mobile to our customers.”