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Mobile Banking - Fad, Fiction or Future?
According to a recent Nielsen Survey, nine million people use mobile banking today. Bank of America states they have one million customers using mobile banking; JP Morgan Chase Bank has 460,000 and Boeing Employees Credit Union (now BECU) plans to roll-out mobile banking to over 500,000 members early next year. What are your strategic plans for mobile banking?
Recently, Financial Core Strategies (FCS) surveyed the top 50 Indiana credit union’s web sites. Only one credit union out of the 50 promoted mobile banking on their site? Granted this was not a scientific data gathering exercise. However, it is interesting considering a recent article took credit unions to task for doing a poor job of attracting younger members. By the way, Bank of America had four million mobile banking sessions in May 2008; two-thirds of those customers were under the age of 35.
Gen Y’s and younger folks don’t talk to one another, they text message. Having a cell phone with a keyboard is no longer a luxury for this demographic it’s a requirement. Recently, a small business owner mentioned that her 13 year old daughter was baby sitting to earn money for a new cell phone with a QWERTY keyboard to make texting faster. If this is how the younger generation communicates; are you positioned to attract them to your institution?
So how far behind is the domestic mobile banking market? In May of this year, Sybase Inc. surveyed banking executives in the United States, Asia and Europe. Only 10% of the U.S. executives indicated that they offer mobile banking, compared to 57% in Europe and 43% in Asia. Fifty-three percent of the U.S. execs stated that they plan to offer mobile banking within 12-24 months. The execs listed the anticipated benefits of offering this service as; improved customer service, extending internet banking capabilities and achieving competitive advantage.
While the first two benefits are realistic, it is FCS’s opinion that if you set your expectation on achieving competitive advantage you are already late to the game. To achieve a sustainable competitive advantage your service must be early to market and unable to be replicated by your competition for some period of time. It’s our belief that in the next 12-24 month timeframe mobile banking will be required purely for defensive purposes. Not only will you face your traditional competitors; your competition could include non-financial institutions who can get into the game. In South Korea, a mobile phone company allows its users to make purchases with their cell phone and bills their purchases to their cell phone bill, which cuts out the financial institution entirely.
So why does the U.S. market seem to be lagging behind? In a recent discussion with the EVP of a $1 billion community bank, he indicated that his bank is in the strategic planning process regarding mobile banking, but they have not had any market pressure to date. His opinion is that if the bank does feel market pressure they can have mobile banking up and running in a very short period of time.
The CIO of an $800 (M) credit union on the west coast indicated that they were having a difficult time getting feedback from their membership about the need for mobile banking. His belief is that since they don’t know what they could do with their cell phone – they don’t know how it could benefit them. He would like to implement mobile banking but can’t justify the expense based on the perceived lack of demand.
The Javelin Strategy and Research Group found that this year there are 157 million adults using cell phones. They estimate by 2013 there will be 198 million cell phone users. The study even goes so far to predict that your wallet or purse will someday be replaced by a cell phone. The Javelin Group also found that of those using mobile banking; 64 % used it to check account balances, 33 % to pay bills, 31 % to monitor transactions and 27 % to transfer funds.
So who is going to pay for mobile banking? The answer is you. But there may be some revenue opportunities and cost savings buried in the application. One possibility would be to sell mobile advertisements. Cost savings could come in the same venue as online banking and traditional voice banking, reduced cash and check processing costs and reduced manual intervention in over-the-counter transaction processing. This will be a tough cost savings to quantify as mobile banking users are probably already using other electronic delivery channels for their financial needs.
So what else can be done to attract the younger generations to your institution? Some financial institutions are interfacing to Facebook. Why the interface? Because Facebook is the premier social networking site in which the younger generations spend the bulk of their online time. With the new interface they can scroll down at any time and see balances and recent transactions on their accounts. What a great way to attract the un-banked and under-banked market!
Next time you are waiting in traffic and see a young driver frantically pounding out a message on their cell phone, ask yourself are they texting a friend or transferring money from their savings to checking to pay a bill online? Will you be positioned to compete for his or her business?
So is mobile banking the next greatest service? Do the math, predicted 198 million cell phones in use by 2013 and only 9 million mobile banking customers today. Seems to be an opportunity in there somewhere, but hey - Just a thought………….
Financial Core Strategies