Trends Driving Mobile Banking

Trends Driving Mobile Banking

11/01/2016

In comparison with other industries that send high volumes of customer communications, financial services and insurance companies have been leading adopters of mobile technology. Despite this, banks are under pressure to continue to review their mobile operations and business models, checking them against new market realties, and building future-proof platforms that are agile enough to be adapted when the next new big technology hits the market. Three pertinent trends play a role here: 

1. Shifting consumer demographics – the rise of the Millennials and Generation Z

2. Changing consumer expectations – customer experience and brand engagement

3. The rise of FinTech start-ups – emergence of disruptive competitors

Shifting Consumer Demographics

In 2020, half of the U.S. workforce will consist of people born after 19801. This new generation of digital-native workers and consumers has a fundamentally different outlook on how businesses should engage with them. Mobility is a key aspect, as well as social collaboration, easy to use interfaces and real-time interactions.

According to Gemalto (2015) the following percentages of millennials will change banks if they can't bank on their mobile phone:

  • Mexico: 49%
  • Brazil: 42%
  • United States: 32%
  • United Kingdom: 29%
  • Singapore: 28%

Changing Consumer Expectations

Consumer expectations of how brands should engage are shifting as result of high standards set by companies such as Amazon, Apple, eBay, Google and other e-commerce or technology leaders. Organizations that are active in more traditional industries need to raise their game, fully embrace mobility, and enhance their service levels if they want to avoid losing out to companies that do succeed in making the customer experience more streamlined. There are some compelling economics associated with a streamlined customer experience; it leads to better engagement, more up-sell and cross-sell, higher brand advocacy and lower customer attrition rates. In addition, costs are typically reduced too, as a result of fewer complaints, lower service needs, and reduced acquisition costs.

A particular challenge that banks face is that they are increasingly perceived by customers as merely transactional providers – customers are happy to use banks for simple transactions like checking their accounts and paying bills. However, they do not view them as trusted advisors capable of supporting important financial decisions that require a deeper personal understanding. Many banks recognize the need to transform, and aim to offer a value-based, end-to-end service that is backed by a superior customer experience. Mobile, interactive communications form an essential part of this: mobile drives higher engaged traffic and bridges offline and online experiences.

The Rise of FinTech Start-Ups

In the last five years, the global investment community has been ramping up investments in technology start-ups, specifically targeting the financial services industry. With an estimated IT spend of nearly $200 Bn USD and growing2, the financial services industry is a very attractive sector to develop disruptive technologies. While there are many different forms of FinTech innovation (i.e. payments, lending, personal finance management), there two key things that FinTech start-ups typically have in common:

Simplicity (or convenience)

Many FinTech start-ups focus on democratizing complex services by offering an extremely easy-to-use online service at market-beating rates.

For instance, investment management company Nutmeg provides online, easy-to-use personal finance services for tech-savvy investors at a low cost.Unlike traditional banks, they focus on one specific product or service.

Speed

  • Many FinTech companies seek opportunities to dramatically speed up business processes through innovation, digitization, and the cutting out of human involvement where possible.
  • For example, Rocket Mortgage (developed by QuickenLoans) enables customers to upload all their mortgage application data directly to QuickenLoan’s system and removes the need for speaking to a loan officer. It then analyzes the application as an underwriter would do and when accepted, offers real-time rates for the customer to lock in. This enables them to cut down a mortgage application to under 10 minutes, while a traditional application takes weeks or months to complete.

With so much activity happening in the market place, financial institutions have no choice but to follow (or lead) the transformation. FinTech companies threaten to erode margins, yet at the same time, they provide a strong incentive for incumbent players to change. Banks and other financial services providers cannot be complacent. They must radically rethink how they do business with their customers, ensuring that mobile engagement is an outcome, whatever the chosen strategy.

The Future in Mobile Engagement

For financial services providers, mobile engagement takes on different forms. Popular options include mobile banking (whether as a native app or as a mobile-optimized web page), mobile payments, the use of mobile as a security device, or using mobile to push messages through an app. There is a particularly high interest in mobile push messages at the moment – it is expected that virtually all major banks will implement push messaging in the next five years. Mobile push messages drive higher engaged traffic, are instant and should be made interactive, i.e. for when suspicious transactions require a quick response from the customer.

1Bureau of Labor Statisitcs

2Source: Celent, 2015 

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