Banking On Mobile

12 Jul 2010, 6:00 a.m.

Here's some news from the banking and credit union industry. At the recent American Banker Mobile Banking Summit, Bob Hedges of Mercatus revealed the following amazing statistics:

• Banks with mobile capture twice their normal share of customers switching banks - 16% vs the typical 8%
• Attrition is 12% lower for customers that use mobile banking
• 60% of younger consumers use mobile as a deciding factor when selecting a new bank

This paints a clear picture. Demand for quality mobile access has passed an important threshold among the banking public. The bottom-line benefits for banks and credit unions are so great, supporting mobile access is now extremely important.

To quote Mr. Hedges:

Making the business case for mobile banking is like making the business case for oxygen.

For banks that want to stay competitive, mobile really isn't an option anymore.

Many Ways To Go Mobile

The only question is what mobile services to provide. There many ways to “go mobile,” ranging from “apps” (think iPhone apps), to mobile websites, to text message based services. The best choice depends on the budget available, and what kind of customers the bank has.

For banks and credit unions with smaller budgets, the greatest ROI with come from the mobile browser. Updating the bank's website for mobile phones allows you to offer mobile banking to all internet phones. (Check your bank website's mobile readiness.)

It's also worth considering “Text Message banking”, which means letting customers get account information via text message (also known as SMS messaging). Over 63% of Americans with cell phones do text messaging, so this has an even wider reach than the mobile internet.

What About Mobile Apps?

For organizations with larger budgets, the next priority is platform-specific apps, such as iPhone apps and Blackberry apps. These so-called “native applications” - apps that are installed directly on the phone from the iPhone, Android and Blackberry app stores - require a larger investment. Expect to spend over $70,000 per platform to develop these secure banking apps. If you do have the capital to invest, however, it can be quite worthwhile in retaining customers. A smaller percentage of your clients will use these, but they tend to be more affluent and influential in their social circle.

In 2010, which platform matters most? Either iPhone or Blackberry, depending on who your clients are. For many business professionals, Blackberry will be used more often. When Wells Fargo offered mobile banking for its commercial treasury services customers, they found the iPhone accounts for 30% of mobile access to their treasury services mobile app, with the majority of access (50%) coming from BlackBerrys.

For the more common consumer, iPhones are going to be more popular, and so an iPhone app will make a better first target.

Android is important - earlier this year, mobile web browsing on Android phones surpassed that of the iPhone. However, there are still security issues for Android phones that banks need to be concerned about. The greater openness of that platform, while in many ways an important advantage, has made it easier for criminals to create “phishing” apps for Android, compared to iPhone and Blackberry (whose app stores are more tightly controlled). This problem will get fixed at some point in the near future; I'd just encourage banks to be careful with Android apps in 2010.

The iPad And Tablet Computing

For larger banks and credit unions with substantial IT budgets, it is worthwhile to create an iPad app. An iPad app will increase recruitment and retention among those clients who own the device. Since the percentage is significant, but still a minority, the costs may not be worthwhile for banks with a smaller number of customers.

In many cases, small modifications to the regular banking website will cause it to perform very well on the iPad. Unlike iPad apps, which will have to be remade from scratch for other tablets, an iPad-compatible website is likely to work well with new tablets coming out in the next few years, too. (Competitive models based on the Android platform are expected to reach consumers over the next few quarters.) For any but the largest institutions, this is likely the best option.

Can You Afford To Wait?

If your institution does not yet offer mobile banking, I'd like to repeat some statistics from the recent Banking Summit:

• Banks with mobile capture twice their normal share of customers switching banks 16% vs the typical 8%
• Attrition is 12% lower for customers that use mobile banking
• 60% of younger consumers use mobile as a deciding factor when selecting a new bank

To quote Bob Hedges of Mercatus: “Making the business case for mobile banking is like making the business case for oxygen.” It really isn't an option anymore.

Start with a mobile website and text message banking. A mobile website will cost significantly less than even a basic iPhone app, and provide mobile banking to almost all your customers with internet phones. Your ROI will be biggest there. Look carefully at the costs and estimated ROI before investing in an iPhone, Android or Blackberry app. And if you'd like some help, contact Mobile Web Up for a free consultation.